Construction Set-Aside Programs

Disadvantaged business enterprises (DBEs), including Women-Owned Business Enterprises (WBEs), Minority-Owned Business Enterprises (MBEs), and Veteran-Owned Businesses (VOBs), can benefit significantly from set-aside programs. These initiatives are crucial for businesses that face barriers to accessing government contracts due to systemic challenges or resource limitations.

There are many diverse set-aside programs at the federal level by the Small Business Administration (SBA). They mandate participation goals for small businesses, including those owned by women, minorities, veterans, and other disadvantaged groups. Some are:

Women-Owned Small Business (WOSB) and Economically Disadvantaged WOSB (EDWOSB) Programs

The WOSB Program allows businesses that are at least 51% owned and controlled by women to access federal contracts. To qualify, the business must:

• Be small according to the industry’s SBA size standards.
• Have women managing day-to-day operations and making long-term decisions.
• For EDWOSB, the business must meet the economic disadvantage criteria which is a net worth of under $850,000, a three-year average income below $400,000, and assets under $6.5 million.

Minority-Owned Business Enterprise (MBE) Program

The MBE program supports businesses that are 51% owned and controlled by SBA-recognized minorities. Some categories this encompasses are: African Americans, Hispanic Americans, Asian Americans, and Native Americans. The business must also procure certifications for participation in federal and state-level contracts. The certification process may vary by jurisdiction and require specific documentation.

Disadvantaged Business Enterprise (DBE) Program

The DBE Program helps businesses owned by socially and economically disadvantaged individuals. The certification process may vary by jurisdiction and require specific documentation. This program allows for fair access to federally funded transportation-related contracts. To qualify, the business must:

• Be at least 51% owned by socially and economically disadvantaged individuals.
• The owner’s net worth must not exceed $1.32 million.
• The firm must meet the industry’s SBA small business size standards.

8(a) Business Development Program

The 8(a) Business Development Program helps businesses that are socially and economically disadvantaged compete for federal contracts. The business must be small according to its industry standard and show a potential to succeed. The development program helps by:

• Providing managerial and technical assistance.
• Giving exclusive contracting opportunities with federal agencies.
• Providing mentorship programs through joint ventures.

Service-Disabled Veteran-Owned Small Business (SDVOSB) Program

The SDVOSB Program provides federal contracting advantages to businesses owned by service-disabled veterans. This program ensures that a portion of government contracts is set aside specifically for SDVOSBs.

To qualify, a business must:

• Be at least 51% owned and controlled by one or more service-disabled veterans.
• Have day-to-day operations and long-term decision-making controlled by a service-disabled veteran.
• Meet the SBA small business size standards for its industry.

HUBZone Program

The Historically Underutilized Business Zone or HUBZone Program provides federal contracting advantages to businesses that choose to develop within HUBZones. To qualify, 35% of employees must also reside in the HUBZone.

To participate in set-aside programs, contractors often need to meet specific bonding requirements, which might include bid bonds, performance bonds, and payment bonds. Assistance programs are available to help these businesses meet these requirements, offering education, financial aid, and referrals to bonding companies that specialize in supporting small and disadvantaged businesses.

The Small Business Administration (SBA) has a set of size standards based on annual revenue or number of employees. It uses a size standard tool that can help determine if a business will qualify for set-aside programs. Some standards the company will need to procure to determine eligibility include Industry Classification (NAICS code), employee count or annual revenue, or independence from large corporations (following affiliation rules). These requirements can be found under SBA’s Size Regulations (13 CFR Part 121).

Understanding Affiliation Rules

Affiliation is when a small business has ties to another business that influences its controls and operations. The SBA considers a business affiliated if another entity owns at least 50% of the small business, there is a shared management or common ownership, or the businesses operate under joint ventures or economic dependence. Affiliation is not just about the current control but also about the power to control. The SBA will look at whether the potential for control exists, even if it’s not being actively exercised. Once a business is deemed to be affiliated with a larger company, it may lose its small business status–as the SBA will look at all employees and revenue for both companies.

Set-aside programs offer a wealth of opportunities and benefits to companies that need them, but some limitations and restrictions may apply. 

1. A limit to the dollar cap on a contract restricts the amount of contracts available to the small business. 
2. Sole-source contracts are available but capped at $4.5 million or $7 million for manufacturing contracts.
3. Once the business no longer meets the requirements for a small business, it cannot participate in set-aside programs, even if it used this method to grow. 
4. Businesses in the 8(a) program have a nine-year limit for using the program. 
5. The business must comply with SBA regulations, which can lead to disqualification from future set-aside contracts.