Understand Both the Value and Limitations of the “Set-Aside” Designation

by Zack Larson, Contributing Editor
Small Business Development Group

“Lead with your skills, not your set-asides”. Dan Sturdivant, Assistant to the Director for Outreach & SDVOB Coordinator, US Department of Homeland Security

The federal government’s socio-economic set-aside (“set-aside”) program may be the single most influential factor in ensuring minority-owned, woman-owned and other types of disadvantaged businesses receive a significant portion of federal contracting dollars each year. Every agency has goals (very public goals) established and overseen by the Small Business Administration, laying out minimum participation percentages for these business types.

Today, the U.S. Small Business Administration announced that the federal government exceeded its small business federal contracting goal, awarding 26.01 percent or $145.7 billion in federal contract dollars to small businesses, a $13 billion increase from the previous fiscal year. 

However, the success of this program has led to an unintended consequence – disadvantaged business owners over-valuing the role of set-asides as an evaluation criteria by federal agencies. A business that is eligible for the federal set-aside program is not guaranteed a federal contract. Far from it.

Just like in the commercial market, the federal market is a competition. There are many factors that determine success and failure in the federal arena. 

Skill…Experience…Price…and yes, in some instances “who” or “what you know”. And one of those factors may indeed be what set-aside your business qualifies for. It can certainly help – but it doesn’t replace or supercede the other criteria.

So take Mr. Sturdivant’s advice, and the next time you introduce yourself or your business to a potential federal customer, lead with your skills, not your set-asides.

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