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What is a small business set-aside, and does my firm qualify?

Source last checked: 1 September 2026. Quoted from FAR Part 19 as published in FAC 2026-01, effective 13 March 2026.

What a set-aside actually does

It removes your competitors. FAR 19.501(a)(1) defines a set-aside for small business as “the limiting of an acquisition exclusively for participation by small business concerns”. On a total set-aside, an offer from a firm that is not small is rejected; on a partial set-aside, FAR 19.502-3(d) says such an offer is nonresponsive on the set-aside portion. FAR 19.501(a)(1) and 19.502-3(d), FAR Part 19

A set-aside can cover a single acquisition or a whole class of them, and it can be total or partial. It is the contracting officer who decides, not the SBA; the SBA procurement center representative may only recommend. FAR 19.501(a)(1) and 19.501(b), FAR Part 19

When a buyer must set an acquisition aside

The trigger is a reasonable expectation of two offers, not a quota. FAR 19.502-2(a) makes the set-aside automatic between the micro-purchase threshold and the simplified acquisition threshold unless the contracting officer determines there is no reasonable expectation of two responsible small business offers at fair market prices. Above the simplified acquisition threshold, FAR 19.502-2(b) requires the same expectation of two offers plus award at fair market prices.

Each acquisition of supplies or services that has an anticipated dollar value above the micro-purchase threshold, but not over the simplified acquisition threshold, shall be set aside for small business unless the contracting officer determines there is not a reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of fair market prices, quality, and delivery.

FAR 19.502-2(a)

Two consequences are worth reading twice. If only one acceptable small business offer arrives, FAR 19.502-2(a) says the contracting officer should award to that firm — a single bidder does not kill the set-aside. If none arrives, the set-aside is withdrawn and the requirement is resolicited unrestricted. And under FAR 19.502-10, an unawarded set-aside dissolves automatically for the unawarded portion. FAR 19.502-2(a), 19.502-2(b) and 19.502-10(a), FAR Part 19

Does your firm qualify? Size is a moment, not a status

You qualify by representing in good faith that you meet the size standard for the NAICS code in the solicitation, under FAR 19.301-1(a). The representation is made in writing at the time of initial offer, whether or not that offer includes price, under FAR 19.301-1(b). The SBA determines size as of that same date, under FAR 19.102(a)(3). FAR 19.301-1(a), 19.301-1(b) and 19.102(a)(3), FAR Part 19

Three things follow that firms routinely get wrong:

• Your representation binds the contracting officer, not the SBA. FAR 19.301-1(g) says the SBA will evaluate a challenged concern and its determination binds the contracting officer.
• You cannot cure afterwards. The same paragraph states that a concern cannot become eligible for a specific award by taking action to meet the definition after the SBA has determined that it is not small.
• Size travels with the contract, but not forever. FAR 19.301-2(b) requires rerepresentation within 30 days of a novation or of a merger or acquisition, and again within 60 to 120 days before the end of the fifth year and before each option exercised thereafter.

A joint venture can qualify if each party is small under the solicitation’s size standard, or if the protege is small in an approved SBA mentor-protege joint venture, under FAR 19.301-1(a). FAR 19.301-1(g), 19.301-2(b) and 19.301-1(a), FAR Part 19

The NAICS code decides who counts as small, and you can appeal it

Size standards are set industry by industry at 13 CFR 121.201, and the contracting officer assigns one NAICS code and its size standard to the solicitation by classifying the product or service in the one industry that best describes the principal purpose of what is being bought. A procurement is usually classified according to the component that accounts for the greatest percentage of contract value. FAR 19.102(a)(1) and 19.102(b)(1), FAR Part 19

That designation is appealable, and the clock is short. An appeal of the NAICS code or the applicable size standard must be served and filed within 10 calendar days after the initial solicitation or any amendment affecting the code, and it goes to the SBA Office of Hearings and Appeals. The SBA itself may appeal at any time before offers are due. An untimely appeal is dismissed summarily. That procedure sits at FAR 19.103, which FAR 19.102(b)(4) points to. Two details decide whether an appeal is worth filing at all: on receipt of the docketing notice the contracting officer must withhold award unless withholding is not in the Government’s best interests, and a decision that arrives after initial offers are due does not apply to the pending solicitation — only to future ones. FAR 19.102(b)(4) and 19.103, FAR Part 19

Winning is the start of a second set of rules

The limitations on subcontracting apply to small business set-asides above the simplified acquisition threshold, and — regardless of dollar value — to sole-source awards and set-aside orders under the 8(a), HUBZone, SDVOSB and WOSB programs. FAR 19.505(a). The cap is on what you pay out to firms that are not similarly situated entities:

A similarly situated entity is a first-tier subcontractor with the same small business program status that qualified you for the award, and which is small under the size standard for the NAICS code you assigned to the subcontract, per FAR 19.001. Work that such a subcontractor further subcontracts counts against your cap, so the exemption does not survive a second hop. Compliance is measured by the end of the base term and each option period, or by the end of each order’s performance period at the contracting officer’s discretion, under FAR 19.505(b)(2). FAR 19.505(a), 19.505(b) and 19.001, FAR Part 19

If you did not make what you are selling

A supply set-aside is not a license to resell anything. Under FAR 19.505(c)(1) a nonmanufacturer must provide an end item that a small business manufactured, processed or produced in the United States or its outlying areas; must not exceed 500 employees, or 150 employees for information technology value-added resellers under NAICS code 541519; must be primarily engaged in the retail or wholesale trade and normally sell the type of item supplied; and must take ownership or possession of the item with its own personnel, equipment or facilities.

The domestic small-manufacturer requirement can be waived, by class for a product or class of products, or individually where market research shows no small manufacturer can reasonably be expected to offer a conforming end item. On a multiple-item acquisition, FAR 19.505(c) sets the line at half: if at least 50 percent of the estimated contract value is made up of items produced by small business concerns, no waiver is needed, and there is no requirement that every item come from a small manufacturer. FAR 19.505(c), FAR Part 19

Above the simplified acquisition threshold, a small business set-aside is not first in line

This is the ordering rule most firms miss. FAR 19.203(c) requires the contracting officer to consider the socioeconomic programs — 8(a), HUBZone, SDVOSB, WOSB — before considering a general small business set-aside, for acquisitions above the simplified acquisition threshold. There is no order of precedence among those four programs themselves, per FAR 19.203(a). At or below that threshold the sequence relaxes: FAR 19.203(b) says the duty to set aside does not stop the contracting officer awarding under any of the four programs. And once the SBA has accepted a requirement into the 8(a) program, it stays there unless the SBA agrees to release it. FAR 19.203(a) to 19.203(c), FAR Part 19

Two further routes exist when neither a total nor a partial set-aside is feasible. Under FAR 19.503 the contracting officer may reserve one or more awards on a multiple-award procurement conducted under full and open competition; the limitations on subcontracting do not apply to the reserve at contract level, only to orders. Under FAR 19.504 orders under multiple-award contracts may themselves be set aside, and where only one contract award went to a given type of small business, an order may be issued directly to that firm. FAR 19.503 and 19.504, FAR Part 19

What will not get an acquisition out of a set-aside

FAR 19.502-5 lists reasons that are not, in themselves, sufficient cause to skip a set-aside. If a buyer offers you one of these as an explanation, it does not stand on its own.

None of the following is, in itself, sufficient cause for not setting aside an acquisition: (a) A large percentage of previous contracts for the required item(s) has been placed with small business concerns. … (d) A period of less than 30 days is available for receipt of offers. … (f) Small business concerns are already receiving a fair proportion of the agency’s contracts for supplies and services. … (h) A “brand name or equal” product description will be used in the solicitation.

FAR 19.502-5, abridged

Note item (d). A short response window is a reason to complain about the schedule, not a lawful reason to open the work to everyone. FAR 19.502-5, FAR Part 19

The two thresholds Part 19 never names

Everything above turns on two figures — the micro-purchase threshold and the simplified acquisition threshold — and Part 19 states neither. Both are defined at FAR 2.101 and are adjusted for inflation, which is exactly why the set-aside rules refer to them by name. Any page that quotes a dollar amount as if it came from Part 19 is quoting something else.

The dollar figures that do appear in Part 19 belong to other mechanisms, and it is worth knowing which: the sole-source ceilings under the HUBZone, SDVOSB and WOSB programs, stated as 8.5 million dollars for manufacturing NAICS codes and 5 to 5.5 million dollars elsewhere; the 900,000 dollar trigger (2 million dollars for construction) for a small business subcontracting plan under FAR 19.702; and the 100,000 and 25,000,000 dollar bands that govern appeals over a Certificate of Competency under FAR 19.602-2 and 19.602-3. None of these decides whether an acquisition is set aside. FAR 19.1306, 19.1406, 19.1506, 19.702, 19.602-2 and 19.602-3, FAR Part 19

What this page does not cover

• Only US federal buying. FAR Part 19 has no counterpart in the EU or the UK. Neither Directive 2014/24/EU nor the UK regime reserves contracts by firm size in this way, so nothing here transfers to a TED or Find a Tender notice.
• Only the general small business set-aside. Eligibility for the 8(a), HUBZone, SDVOSB and WOSB programs is decided under their own subparts and under SBA regulations at 13 CFR parts 124, 126, 127 and 128. Being small is necessary for those and nowhere near sufficient.
• Not the size standards themselves. The employee and revenue thresholds live at 13 CFR 121.201, not in the FAR, and change on their own schedule.
• Not agency deviations. See the note on the current FAR rewrite below.

Nor does it cover the rest of Part 19. For what the part as a whole sets up — the eight subparts, which programs exist, who decides your status, and the order a contracting officer must consider them in — see FAR Part 19: what it covers and who it binds. That page maps the whole regulation; this one answers a single question inside subpart 19.5.

Common questions

Does a small business set-aside apply to every federal contract?

No. FAR 19.502-1(b) exempts purchases at or below the micro-purchase threshold and purchases from required sources under FAR part 8. Above that threshold the duty to consider a set-aside applies, but the contracting officer must still find a reasonable expectation of two responsible small business offers before setting the acquisition aside.

Who decides whether my firm is small?

You represent your own size, but the representation is not the last word. FAR 19.301-1(f) says the contracting officer accepts it unless another offeror challenges it or the officer has reason to question it. FAR 19.301-1(g) adds that your representation is not binding on the SBA, and that a determination by the SBA binds the contracting officer.

Can I fix my size after the SBA says I am too big?

No. FAR 19.301-1(g) is explicit: a concern cannot become eligible for a specific award by taking action to meet the definition of a small business concern after the SBA has determined that it is not a small business. Size is judged as of the date of your initial offer, under FAR 19.102(a)(3).

How much of a set-aside contract can I subcontract out?

For services other than construction, FAR 19.505(b)(1) caps payments to subcontractors that are not similarly situated entities at 50 percent of what the Government pays you. For supplies the same 50 percent cap applies, excluding the cost of materials. General construction is capped at 85 percent and special trade construction at 75 percent. Work that a similarly situated subcontractor further subcontracts counts against your cap.

Can I win a supply set-aside for a product I do not manufacture?

Only under the nonmanufacturer rule. FAR 19.505(c)(1) requires you to supply an end item made in the United States or its outlying areas by a small business, to have no more than 500 employees (150 for information technology value-added resellers under NAICS 541519), to be primarily engaged in retail or wholesale trade, and to take ownership or possession of the item. The SBA can waive the domestic small-manufacturer requirement by class or individual waiver.

What happens if the contracting officer decides my firm is not responsible?

The award does not simply go elsewhere. Under FAR 19.602-1(a) the contracting officer must withhold award and refer the matter to the SBA Area Office, and under FAR 19.602-1(e) award is withheld for 15 business days after the SBA receives a complete referral. The SBA may then issue a Certificate of Competency.

Source: FAR Part 19, Small Business Programs, acquisition.gov/far/part-19. Corpus last fetched 1 September 2026; edition verified 4 September 2026 as FAC 2026-01, effective 13 March 2026. The FAR is being rewritten under Executive Order 14275. Agencies may be operating under class deviations that differ from the codified text quoted here. Section numbers are given as they appear on acquisition.gov; this page quotes the regulation and does not give legal advice.