Set-aside contracts
Overview
- If the government “sets a contract aside” then only companies that set-aside can win
- Companies that do not have that set-aside can be sub-contractors to a prime that does have the set-aside
- The winner has to be a small business in the contract’s NAICS code (e.g. a company could be Woman Owned, but if they make too much money they might not be a small business for that NAICS code, so they couldn’t win)
What this means for you
- Less competition: There are about 700,000 registered government contractors. But there are 10-20,000 small businesses with each set-aside. So if a contract is set-aside, in theory there is less competition
- Not competing with bigs: Large businesses tend to have excellent government relationships, extraordinary pricing power, and deep technical and proposal resources. If a contract is set-aside you don’t have to compete with them
- A hook to build partner relationships: Most prime vendors don’t want to work with new subcontractors, they’d rather do all the work and keep all the revenue. But:
- If a contract is set-aside for Veteran Owned Small Businesses
- There is a company that wants to chase that contract but who is not veteran owned
- And you have the Veteran Owned Set-aside
- Then they are more likely to take a meeting with you and potentially subcontract to you
A note on spending data
- The data isn’t as clean as we’d like: If you download all the data on set-aside contracts, and total up the spending by set-aside you will find that the totals are significantly below the federal targets. But most agencies hit their targets and this is for a couple reasons:
- There are spending targets, not set-aside targets: Companies with set-aside can win non-set-aside contracts, and that money counts towards the government’s goals. For example, a Disadvantaged Small Business wins a $1M Full-and-open contract (so not set-aside). That $1M counts towards the Disadvantaged Small Business spending target
- Double dipping: When the government assesses their spending with small businesses and companies with set-asides there is a lot of double counting. For example if a company with the woman owned and the disadvantaged set-asides win $1 million contract then that million dollars counts toward both of those set aside categories
Rants and Reflections
My unscripted thoughts after coaching hundreds of small government contractors over the last 10 years
Other resources
List of further reading
Video Transcript(s):
Odds are that your first contract will be as a sub to another small business, so you need to find small businesses you could work with, and start building relationships with them.
And, FedScout makes this easy. Click on the partner button below and FedScout will show you all the small businesses in your industry that have won work at one of your selected sub-agencies.
And if you’ve uploaded your linkedin connections we'll do our best to identify people you know at each small business.
And like with customers, select the companies and the people that you want to target and we’ll add them to your relationship manager.