Small Business Set-Asides: 8(a), SDVOSB, HUBZone Overview
The federal government reserves roughly 23% of contract dollars for small businesses through set-aside programs. Understanding 8(a), SDVOSB, HUBZone, and WOSB designations is essential for positioning your company to capture restricted competition opportunities.
Cabrillo Club
Editorial Team · February 7, 2026

The federal government is the largest buyer of goods and services in the world, and Congress has mandated that small businesses receive a fair share of those dollars. The current government-wide goal is 23% of all prime contract dollars to small businesses, with sub-goals for specific socioeconomic categories. In fiscal year 2023, federal agencies awarded over $178 billion in prime contracts to small businesses, exceeding that 23% target for the tenth consecutive year. For small businesses competing in the GovCon space, understanding set-aside programs is not optional. It is foundational to your growth strategy.
Set-aside programs restrict competition on certain contracts to businesses that hold specific socioeconomic designations. Instead of competing against large primes with decades of past performance and thousands of employees, you compete against other small businesses in your category. This dramatically changes win probability. A small business competing on a full-and-open contract might face 30 or more competitors, including large incumbents. That same business on a set-aside might face 5 to 8 competitors, all of similar size and capability.
This article is part of our Winning Federal Contracts guide, which covers the full competitive strategy for GovCon professionals from pipeline building through proposal submission.
How Set-Asides Work
Federal Acquisition Regulation (FAR) Part 19 governs the small business set-aside process. The core mechanism is the Rule of Two: if a contracting officer determines that there are at least two responsible small businesses that can perform the work at a fair market price, the contract must be set aside for small business competition. This is not discretionary. It is a regulatory requirement.
Set-asides come in two forms. A total set-aside reserves the entire contract for small businesses. A partial set-aside splits the requirement, with some portions open to full competition and others restricted to small businesses. Partial set-asides are common on large, multi-award IDIQ contracts where agencies need both large and small business participation.
Every set-aside is tied to a NAICS code and corresponding size standard. The North American Industry Classification System assigns a six-digit code to every type of work, and the SBA sets a size standard for each code. Size standards are measured in either annual revenue or number of employees, depending on the industry. For example, NAICS 541512 (Computer Systems Design Services) has a $34 million revenue threshold, while NAICS 541330 (Engineering Services) uses a $25.5 million threshold. You must be under the size standard for the specific NAICS code assigned to the solicitation, not just any NAICS code you use.
One critical nuance: size status is determined at the time of initial offer, including price. If you grow beyond the size standard after award, you generally retain your small business status for the life of that contract, including option years. However, you must recertify for new task orders on multiple-award contracts and when mergers or acquisitions occur.
8(a) Business Development Program
The 8(a) Business Development Program is arguably the most powerful set-aside designation in federal contracting. Administered by the SBA, it is designed for small businesses owned and controlled by socially and economically disadvantaged individuals. The program runs for nine years: a four-year developmental stage followed by a five-year transitional stage. During this period, 8(a) firms have access to sole-source contracts, competitive set-asides, and mentoring support that can transform a startup into a mature government contractor.
Eligibility requirements
- The business must be at least 51% unconditionally owned and controlled by one or more socially and economically disadvantaged individuals
- The owner must have a personal net worth below $850,000 (excluding ownership in the business and primary residence), with total assets under $6.5 million
- The business must be in operation for at least two years (though an SBA waiver is possible for firms with revenue and strong business plans)
- The owner must demonstrate good character and have management experience relevant to the business
The sole-source advantage is the program's most valuable feature. Federal agencies can award contracts directly to 8(a) firms without competition up to $4.5 million for services and $7 million for manufacturing. This means a contracting officer who has a requirement and a capable 8(a) firm can bypass the entire competitive solicitation process. For the 8(a) firm, this translates to faster awards, no proposal competition, and the ability to build past performance rapidly.
Beyond sole-source, 8(a) firms compete against each other on 8(a) competitive set-asides, which further restricts the competitive field. The program also includes business development assistance, access to surplus government property, and SBA-facilitated introductions to federal buyers. The nine-year clock is absolute. Plan your program years strategically, building past performance and customer relationships early so you can compete effectively after graduation.
Service-Disabled Veteran-Owned Small Business (SDVOSB)
The SDVOSB program provides set-aside and sole-source opportunities for small businesses owned by veterans with service-connected disabilities. The government-wide goal is 3% of all prime contract dollars to SDVOSBs. In recent years, agencies have consistently met or exceeded this target, and the Department of Veterans Affairs in particular allocates a significant percentage of its procurement to SDVOSBs through the Veterans First Contracting Program.
Key requirements and recent changes
- The business must be at least 51% owned and controlled by one or more service-disabled veterans. The disability must be documented by the VA with a service-connected disability rating.
- As of January 2023, the SBA became the sole authority for SDVOSB certification under the Veterans Small Business Certification Act. Previously, self-certification was permitted for non-VA contracts, leading to eligibility challenges and protests. Now, all SDVOSBs must be certified through the SBA's VetCert system.
- SDVOSB sole-source awards are permitted up to $4.5 million for services and $7 million for manufacturing, matching the 8(a) thresholds.
- VA contracts have higher thresholds and additional preferences under the Veterans First program, making the VA one of the most accessible agencies for SDVOSB firms.
The shift from self-certification to SBA certification was significant. If you were relying on self-certification, ensure your VetCert application is submitted and approved. The process can take several months, and without active certification, you cannot compete for SDVOSB set-asides. The certification must be renewed every three years through the SBA portal.
HUBZone Program
The Historically Underutilized Business Zone (HUBZone) program encourages economic development in distressed communities by directing federal contract dollars to businesses located in and hiring from those areas. The government-wide goal is 3% of prime contract dollars to HUBZone-certified firms. Unlike other designations that focus on owner demographics, HUBZone is fundamentally about geography and workforce.
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