Small Business Set-Asides Explained: How They Work in 2026

Set-asides are the main reason small business status matters in federal contracting. They reserve contracts for small businesses, or for firms in specific SBA programs, and take the largest companies out of the competition entirely.

The rules behind set-asides changed meaningfully in 2025 and 2026. This guide covers how they work today.

What a set-aside is

A set-aside reserves a contract for a group of eligible businesses:

• Total small business set-aside: any small business under the solicitation's size standard can compete
• Program set-asides: reserved for 8(a), HUBZone, SDVOSB or WOSB firms
• Partial set-aside: part of a requirement is reserved for small businesses
• Reserves: a share of awards on a multiple-award contract held for small businesses

The government's goal is to award at least 23% of prime contract dollars to small businesses, with specific goals for each program.

The Rule of Two

The core test is the Rule of Two: when the contracting officer reasonably expects offers from at least two responsible small businesses that are competitive on price, quality and delivery, the contract is generally set aside.

That's why market research matters. Contracting officers rely on it, including responses to sources sought notices, to decide whether two capable small businesses exist. See How to Respond to a Sources Sought Notice.

Key thresholds

As of October 1, 2025:

• Micro-purchase threshold: $15,000
• Simplified acquisition threshold: $350,000

Acquisitions between these two amounts are generally reserved for small businesses.

What changed with the FAR overhaul

Most agencies now follow deviation versions of the FAR's small business rules while formal rulemaking continues. Key changes include:

• The Rule of Two now applies to acquisitions above the micro-purchase threshold under a single standard.
• Order set-asides are discretionary. Setting aside orders under multiple-award contracts, including the GSA Schedule, is at the contracting officer's discretion and can't be protested.
• Program priority changed. Contracting officers are no longer required to consider the 8(a), HUBZone, SDVOSB and WOSB programs before a general small business set-aside.

The FAR and SBA's own regulations don't fully match yet, so some details differ depending on which applies. The solicitation's clauses control for any specific opportunity.

How size is determined

Your size isn't a single label. It's measured against the size standard for the NAICS code assigned to each solicitation, usually in annual receipts or number of employees. A company can be small for one contract and other than small for another.

• You represent your size in SAM.gov.
• Competitors can protest your size, generally within a few business days of being notified of the award.
• Size is generally measured as of the date you submit your initial offer with price.

This is one of the most common problems we see, including in GSA MAS offers, where the SIN carrying most of your proposed work sets your size. See Why GSA Rejects MAS Offers.

Recertification

Small business status doesn't last forever on a contract:

• Mergers and acquisitions. Since January 17, 2026, a firm must recertify within 30 days after a merger, acquisition or sale. If it's no longer small, it generally loses eligibility for future set-aside orders and options under multiple-award contracts.
• Long contracts. Contracts longer than five years generally require recertification before the end of year five.

What's coming

SBA proposed a major overhaul of size standards in August 2026 that would change many standards and simplify the structure. It isn't final, and until it is, current standards apply. If your business is near a size threshold, watch it closely.

Where to go from here

Set-asides are one of the biggest advantages a small business has. If you want to know which ones you can pursue, and how to be found by the contracting officers who set them aside, we can help.