To provide greater opportunity in government contracting for smaller companies, the Small Business Set-Aside Program requires each federal government purchase that is anticipated to be valued from $2,500 to $100,000 to be set-aside for small businesses. If the contract is anticipated to be greater than $100,000, the program may be reserved when there are enough small businesses to complete the task. Also, contracts greater than $500,000 are required to include a sub-contracting plan to ensure that small businesses are afforded the opportunity to work on larger programs.

The Small Business Set-Aside Program provides great opportunities for small to mid-size companies because it allows access to government contracts that were not afforded in past years. As long as the company qualifies as a small business, there is no limit of the number of contracts that can be acquired. However, companies must understand the different divisions to utilize the program at full capacity.

HUB Zone

In response to the Historically Underutilized Business Zone act of 1998, the HUB Zone program allows priority to small business located in high unemployment, low-income areas to certain contracts. These small businesses must also fit a list of requirements. To qualify, a company must be categorized as a small business by the North American Industry Classification System, be at least 51% owned and controlled by U.S. citizens, be located in a HUB zone, and have a workforce with 35% of employees living in a HUB zone.

To be considered for HUB zone status, the small business must submit an application to the United States Small Business Administration (SBA). Once categorized as a HUB zone business, companies are permitted a 10% price preference allowing them to give prices that are 10% higher but still considered competitive. As a goal, the Government aims to award 3% of all prime contract dollars to HUB zone businesses. In 2007, close to 2 billion dollars was spent on HUB zone contracts.

SBIR/STTR

The Small Business Innovation Development act of 1982 established the SBIR program. This program creates an opportunity for small companies to develop products through research grants. Ultimately, the SBIR program was created to promote technological innovation while supporting smaller businesses to create a strong economy. U.S. federal agencies provided over 2 billion dollars in grant and contract awards to small businesses in 2010.

SBIR is composed of three different phases. The first phase provides initial support funds of up to $150,000 for the exploration of an idea or technology. Phase two awards funds of up to $1,000,000 to expand upon the results from the first phase. The last phase is when the small business transfers the product to the marketplace. In this last phase, SBIR doesn’t grant any awards to the small business but promotes partnerships with private sectors and/or non-SBIR federal agencies. Similar to SBIR, the Small Business Technology Transfer Program (STTR) promotes partnerships between small businesses and United States universities conducting similar research.

8(a)

Named for the Small Business Act, 8(a) was created to assist small disadvantaged businesses in the marketplace. A business that is owned by an economically disadvantaged person, has a net worth less that $250,000, and has been in operation for at least 2 years qualifies to be a SBA 8(a) business. Once certified, 8(a) companies are provided business development support including mentoring, training, and financial assistance. Also, 8(a) companies have priority over certain set-aside contracts.

Women-Owned (WOSB)

In 2011, the Small Business Administration created a federal contracting set-aside for women-owned businesses. Representing one of the fastest growing segments in the economy, women-owned businesses were previously under-represented in the government-contracting realm. The Women-Owned Small Business (WOSB) Federal Contract program sanctions contracting officers to allot certain contracts for small businesses operated by women. The Government currently aims to allot 5% of prime contracting funds to WOSBs.

Service Disabled Veteran Owned (SDVO)

When a disabled veteran owns at least 51% of a small business, the SBA may designate the company as Service Disabled Veteran Owned (SDVO). There is no formal SBA certification process for SDVO businesses. The veteran may attain papers from the Veteran’s Administration then become a self-certified SDVO. This program allows contracting officers to set-aside contracts to business that are SDVO certified.