Small Business Set Aside Subcontracting Rules: What You Need to Know

If you own a small business, you may have heard about the set aside subcontracting rules. These rules were created to help small businesses win government contracts and be able to subcontract some of the work to other small businesses.

Here`s what you need to know about the small business set aside subcontracting rules.

What is a set aside?

A set aside is when the government reserves a contract exclusively for small businesses. This means that only small businesses are allowed to bid on the contract. The set aside can be for a specific category, such as women-owned businesses or service-disabled veteran-owned businesses.

What is a subcontract?

When a small business wins a government contract, they may need to subcontract some of the work to other small businesses. This is where the set aside subcontracting rules come into play.

What are the set aside subcontracting rules?

The set aside subcontracting rules require the small business prime contractor to use a certain percentage of the contract dollars to subcontract to other small businesses. The percentage varies depending on the type of contract and the set aside category.

For example, if the contract is set aside for small businesses, the prime contractor must use at least 50 percent of the contract dollars to subcontract to other small businesses. If the contract is set aside for women-owned small businesses, the prime contractor must use at least 5 percent of the contract dollars to subcontract to other women-owned small businesses.

Why were these rules created?

The set aside subcontracting rules were created to help small businesses compete for and win government contracts. By requiring prime contractors to subcontract some of the work to other small businesses, the rules ensure that small businesses have a fair opportunity to participate in government contracting.

How do I comply with the set aside subcontracting rules?

To comply with the set aside subcontracting rules, you must identify the subcontracting opportunities early in the process and make a good faith effort to meet the subcontracting goals. This means that the prime contractor must actively seek out small businesses to subcontract the work to and document their efforts.

If the prime contractor cannot meet the subcontracting goals, they must notify the government and provide a valid reason for not being able to meet the goals.

In conclusion, the set aside subcontracting rules are an important tool for small businesses to compete for and win government contracts. By understanding and complying with these rules, small businesses can increase their chances of success in the government contracting arena.