What is a set-aside?

US federal set-aside programs

The US federal government aims to award roughly 23% of prime contract dollars to small businesses, enforced through set-asides under FAR Part 19. The Rule of Two requires contracting officers to restrict a competition to small businesses whenever at least two capable small firms are expected to bid at fair prices.

Beyond the general small business set-aside, sub-programs reserve work for specific groups: 8(a) (firms owned by socially and economically disadvantaged individuals), SDVOSB (service-disabled veteran-owned), WOSB/EDWOSB (women-owned), and HUBZone (firms in historically underutilized business zones). Eligibility for "small" is defined per NAICS code by SBA size standards — a revenue or employee cap that varies by industry.

Canadian set-asides

Canada's principal set-aside program is the PSIB (Procurement Strategy for Indigenous Business), which reserves designated federal contracts for businesses at least 51% Indigenous owned and controlled, supporting a government-wide target of at least 5% of federal contract value to Indigenous businesses.

Canada does not run a general small-business set-aside equivalent to the US system, but procurement obligations under modern treaties (Comprehensive Land Claims Agreements) can restrict competitions in certain regions, and some provinces operate their own preference programs.

What set-asides mean for your bidding

If you qualify, set-asides are the friendliest entry point into government work: the bidder pool is smaller and the largest competitors are excluded. Verify your eligibility formally — SAM.gov self-certification or SBA certification in the US, the Indigenous Business Directory in Canada — before relying on it.

Misrepresenting eligibility carries severe penalties, including contract termination, debarment, and prosecution. When eligibility is checked at both bid and award time, keep your registrations current.

Frequently asked questions

How do I know if a contract is set aside?

The notice says so. SAM.gov listings carry a set-aside field (e.g. "Total Small Business Set-Aside"); CanadaBuys notices flag PSIB set-asides in the tender description and procurement strategy fields.

What makes a business "small" for US set-asides?

The SBA size standard attached to the contract's NAICS code — a cap on average annual receipts or employee count that varies by industry. A firm can be small under one NAICS code and large under another.

Can a large business bid on a set-aside contract?

Not as a prime. Large firms can participate as subcontractors, and set-aside primes often must meet limitations on subcontracting that cap how much of the work they can pass to large subs.