Small businesses pursuing government contracts often hear about “set-asides”—opportunities reserved specifically for them. However, not every contract is set aside, and not every small business can automatically benefit. To navigate these opportunities effectively, companies must have a clear understanding of set-aside thresholds and how they shape federal procurement decisions.

In this blog, we’ll explain what set-aside thresholds are, when they apply, and how small businesses can position themselves to take advantage of them.

For active small business set-aside opportunities, visit SAM.gov.

1. What Are Set-Aside Thresholds?

Set-aside thresholds refer to the minimum dollar amounts and criteria under which a federal agency must reserve a contracting opportunity exclusively for small businesses. These thresholds are designed to support small business participation in federal procurement, ensuring they have access to a fair share of government contracts.

When an opportunity falls within or above certain dollar amounts—and small businesses are capable of performing the work—agencies are often required or encouraged to set aside the competition.

2. Key Set-Aside Thresholds for Federal Contracts

Understanding the basic thresholds is critical for small business strategy. Here are the most important categories:

a. Micro-Purchase Threshold

• Definition: Purchases below a small dollar limit (typically $10,000)
• Set-Aside Requirement: Not applicable—agencies can purchase directly using a government purchase card without competition.

b. Simplified Acquisition Threshold (SAT)

• Definition: Procurements valued between $10,000 and $250,000 (general guideline)
• Set-Aside Requirement: For contracts above $10,000 but below the SAT, agencies must set aside the acquisition for small businesses if there are two or more capable small businesses (known as the “Rule of Two”).

c. Above the Simplified Acquisition Threshold

• Definition: Contracts valued over $250,000
• Set-Aside Requirement: Agencies must consider a small business set-aside when there is a reasonable expectation that at least two responsible small businesses will submit offers and the award can be made at fair market prices.

The “Rule of Two” applies both below and above the SAT when conditions are met.

Note: Thresholds can vary depending on agency-specific policies, inflation adjustments, or emergency procurement conditions.

3. Types of Small Business Set-Asides

When set-asides occur, they can be designated for specific categories, such as:

• Small Business (General)
• 8(a) Program Participants
• Service-Disabled Veteran-Owned Small Businesses (SDVOSB)
• Woman-Owned Small Businesses (WOSB)
• Historically Underutilized Business Zone (HUBZone) firms

Each set-aside type has specific eligibility requirements and certification processes.

4. How Set-Aside Thresholds Impact Procurement Strategy

Understanding set-aside thresholds shapes how small businesses:

• Prioritize Opportunities: Focus on bids more likely to be reserved for small business competition.
• Build Relationships: Engage with contracting officers who are tasked with meeting small business participation goals.
• Pursue Certifications: Gain eligibility for socioeconomic set-asides that can further limit competition.
• Position for Teaming: Partner with larger firms when opportunities fall outside set-aside requirements.

A smart small business monitors procurement forecasts and upcoming acquisitions to identify likely set-aside targets early.

5. Special Cases and Exceptions

Certain conditions can affect set-aside thresholds:

• Mandatory Sources: Some procurements must go through mandatory sources (e.g., AbilityOne) before being set aside.
• Multiple-Award Contracts (MACs): Some contracts allow for set-aside task orders even if the original contract wasn’t fully set aside.
• Full and Open with Small Business Subcontracting Goals: For very large contracts, full and open competitions may still require robust small business participation through subcontracting plans.
• Emergency Procurement: In emergencies (e.g., disaster recovery), traditional thresholds and procedures may be modified.

Always read the solicitation carefully and ask clarifying questions if needed.

6. Best Practices for Small Businesses Navigating Set-Aside Thresholds

• Register in SAM.gov: Ensure your small business status is accurate and up to date.
• Pursue certifications early: 8(a), HUBZone, WOSB, and SDVOSB certifications open additional set-aside categories.
• Monitor agency forecasts: Identify procurements likely to fall within set-aside thresholds before the RFP is released.
• Network with Small Business Offices: Each federal agency has a Small Business Office (OSDBU) that can guide you.
• Respond to Sources Sought Notices and RFIs: This helps agencies confirm that the “Rule of Two” is satisfied and may lead to set-aside determinations.

7. Common Mistakes to Avoid

a. Assuming All Opportunities Are Set Aside

Not every procurement qualifies, especially those involving specialized products or urgent acquisitions.
Fix: Check solicitation language carefully.

b. Overlooking Certification Requirements

Being a small business alone may not qualify you for every set-aside.
Fix: Ensure you have the correct certifications for targeted opportunities.

c. Ignoring Changes to Thresholds

Thresholds are updated periodically based on inflation and regulatory changes.
Fix: Stay informed through official sources like SBA and FAR updates.

d. Underestimating Competition

Set-asides limit competition but don’t eliminate it.
Fix: Still present a strong, compliant, and compelling offer.

8. Conclusion

Understanding set-aside thresholds gives small businesses a major advantage in federal contracting. By recognizing when agencies must reserve opportunities and how thresholds apply, you can target bids more strategically, improve your win rate, and grow your government portfolio.

Looking to improve your government contracting strategy and better position your small business for success? Hinz Consulting offers capture planning, proposal development, and small business consulting services tailored to the federal market.