Kate M. Manuel
Legislative Attorney
Erika K. Lunder
Legislative Attorney
In government contracting law, a “set-aside” is a procurement in which only certain businesses may compete. Set-asides can be total or partial, depending upon whether the entire procurement, or just a severable segment of it, is so restricted. Eligibility for set-asides is typically based on business size, as well as demographic characteristics of the business owners. Currently, under the Small Business Act, there are set-aside programs for (1) small disadvantaged businesses participating in the 8(a) Minority Small Business and Capital Ownership Development Program (8(a) small businesses); (2) Historically Underutilized Business Zone (HUBZone) small businesses; (3) women-owned small businesses; (4) service-disabled veteran-owned small businesses; and (5) small businesses not belonging to any of the prior four categories.
These programs differ in their eligibility requirements and the types of contracting preferences they provide for participating small businesses. For example, there are some significant differences among the programs’ requirements for using set-asides, including variation in the threshold amounts for qualifying contracts. Additionally, whereas the Small Business Act provides special authority for agencies to make sole-source awards to 8(a), HUBZone, and service-disabled veteran-owned small businesses, sole-source awards to women-owned and other small businesses are generally possible only under the authority of the Competition in Contracting Act (CICA). CICA authorizes noncompetitive awards, or awards made after soliciting and negotiating with only one source, to any size firm when certain conditions exist (e.g., single source; urgent and compelling circumstances; brand-name items for commercial resale). Another difference among the programs is that only HUBZone small businesses qualify for price evaluation preferences, allowing agencies to subtract up to 10% of the price of bids or offers from HUBZone small businesses in unrestricted competitions. However, while they differ in important respects, all these programs are government-wide and could potentially be used by any agency.
In addition, the Veterans Benefits, Health Care, and Information Technology Act of 2006 (P.L. 109-461) provides the Department of Veterans Affairs with additional authority to award set-aside or sole-source contracts to veteran-owned and service-disabled veteran-owned small businesses. Contracts with a value of less than $150,000 may be awarded on a set-aside or sole-source basis at the contracting officer’s discretion. Contracts valued in excess of $150,000 must generally be awarded via a set-aside. However, sole-source awards of up to $5 million may be made in certain circumstances.
The 111th Congress enacted legislation (P.L. 111-240) that amended the statutory language which the Government Accountability Office (GAO) and U.S. Court of Federal Claims had construed, in a series of decisions issued in 2008-2010, as requiring agencies to give set-asides for HUBZone small businesses “precedence” over those for 8(a) and service-disabled veteran-owned small businesses. However, in 2010-2011, GAO and the Court of Federal Claims issued several other decisions interpreting the statutes and regulations governing the set-aside programs that could also affect the number of awards to such businesses. Among other things, these decisions grant contracting officers broad discretion in conducting market research to determine whether to use a small business set-aside, as well as in determining whether to procure through the Federal Supply Schedules a requirement formerly performed through the 8(a) Program or move a requirement from a competitive 8(a) award to a sole-source 8(a) award.
Date of Report: August 2, 2011
Number of Pages: 30
Order Number: R41945
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Legislative Attorney
Erika K. Lunder
Legislative Attorney
In government contracting law, a “set-aside” is a procurement in which only certain businesses may compete. Set-asides can be total or partial, depending upon whether the entire procurement, or just a severable segment of it, is so restricted. Eligibility for set-asides is typically based on business size, as well as demographic characteristics of the business owners. Currently, under the Small Business Act, there are set-aside programs for (1) small disadvantaged businesses participating in the 8(a) Minority Small Business and Capital Ownership Development Program (8(a) small businesses); (2) Historically Underutilized Business Zone (HUBZone) small businesses; (3) women-owned small businesses; (4) service-disabled veteran-owned small businesses; and (5) small businesses not belonging to any of the prior four categories.
These programs differ in their eligibility requirements and the types of contracting preferences they provide for participating small businesses. For example, there are some significant differences among the programs’ requirements for using set-asides, including variation in the threshold amounts for qualifying contracts. Additionally, whereas the Small Business Act provides special authority for agencies to make sole-source awards to 8(a), HUBZone, and service-disabled veteran-owned small businesses, sole-source awards to women-owned and other small businesses are generally possible only under the authority of the Competition in Contracting Act (CICA). CICA authorizes noncompetitive awards, or awards made after soliciting and negotiating with only one source, to any size firm when certain conditions exist (e.g., single source; urgent and compelling circumstances; brand-name items for commercial resale). Another difference among the programs is that only HUBZone small businesses qualify for price evaluation preferences, allowing agencies to subtract up to 10% of the price of bids or offers from HUBZone small businesses in unrestricted competitions. However, while they differ in important respects, all these programs are government-wide and could potentially be used by any agency.
In addition, the Veterans Benefits, Health Care, and Information Technology Act of 2006 (P.L. 109-461) provides the Department of Veterans Affairs with additional authority to award set-aside or sole-source contracts to veteran-owned and service-disabled veteran-owned small businesses. Contracts with a value of less than $150,000 may be awarded on a set-aside or sole-source basis at the contracting officer’s discretion. Contracts valued in excess of $150,000 must generally be awarded via a set-aside. However, sole-source awards of up to $5 million may be made in certain circumstances.
The 111th Congress enacted legislation (P.L. 111-240) that amended the statutory language which the Government Accountability Office (GAO) and U.S. Court of Federal Claims had construed, in a series of decisions issued in 2008-2010, as requiring agencies to give set-asides for HUBZone small businesses “precedence” over those for 8(a) and service-disabled veteran-owned small businesses. However, in 2010-2011, GAO and the Court of Federal Claims issued several other decisions interpreting the statutes and regulations governing the set-aside programs that could also affect the number of awards to such businesses. Among other things, these decisions grant contracting officers broad discretion in conducting market research to determine whether to use a small business set-aside, as well as in determining whether to procure through the Federal Supply Schedules a requirement formerly performed through the 8(a) Program or move a requirement from a competitive 8(a) award to a sole-source 8(a) award.
Date of Report: August 2, 2011
Number of Pages: 30
Order Number: R41945
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
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