US federal small-business set-asides explained: 8(a), HUBZone, WOSB…

What a set-aside is

A set-aside restricts competition for a federal contract to small businesses: all of them, or one group, such as 8(a), HUBZone, women-owned or service-disabled veteran-owned firms. Set-asides are how most small firms win federal work. In fiscal 2025, small businesses won about $179 billion in prime contracts, nearly 28% of the total, plus $273 billion counting subcontracts.

The rule of two and the thresholds

The rule of two: a contracting officer must set a contract aside when two or more responsible small businesses are reasonably expected to bid at fair market prices.

Between $15,000 and $350,000, the micro-purchase and simplified acquisition thresholds since 1 October 2025 (up from $10,000 and $250,000), this is required by law.
Above $350,000, the rewritten FAR Part 19 keeps the rule of two as policy. Agencies have adopted the rewrite through class deviations since late 2025, while formal rulemaking continues.
No longer for multiple-award orders. Under the rewrite, the rule of two no longer applies to orders under multiple-award contracts, such as GSA schedules, GWACs and IDIQs. Setting those orders aside is now discretionary and can’t be protested.

There’s no order of precedence among the 8(a), HUBZone, women-owned and service-disabled veteran programs. Above $350,000 they are considered before a general small-business set-aside.

The government-wide goals

Goal	Target
Small business (prime contracts)	23%
Small disadvantaged business	5%
Women-owned small business	5%
Service-disabled veteran-owned	5% (raised from 3% by the FY2024 NDAA)
HUBZone	3%

The disadvantaged-business goal had been raised step by step toward 15% (13% for fiscal 2024). In January 2025 it was set back to the 5% statutory floor. In fiscal 2025, agencies reached:

Small business overall: nearly 28%.
Disadvantaged businesses: 11.6%, the first fall in ten years.
8(a): 3.7%.
Service-disabled veteran-owned: just over 5%.
Women-owned: 4.52%, missing the goal.
HUBZone: 2.66%, missing the goal.

The government as a whole earned an A.

Are you small? Size standards

The standard: each industry (NAICS code) has a size standard, either average annual receipts (over the last five completed fiscal years) or average employees (over the last 24 months).
Affiliates count: your size includes all affiliates, domestic and foreign. Owning 50% or more of a company’s voting stock means control, and economic dependence (70% or more of receipts from one firm) creates affiliation. Joint venture partners aren’t treated as affiliated for two years from the venture’s first award.
When size is fixed: size is set when you submit your initial offer including price, and you generally stay small for that contract.

SBA proposed a major overhaul of size standards in August 2026, moving most industries to employee-based standards and lowering none. Comments run to 20 November 2026; it isn’t in force yet.

The programs

8(a) Business Development

Eligibility: a small business at least 51% owned and controlled by socially and economically disadvantaged US citizens, or by a tribe, Alaska Native Corporation, Native Hawaiian Organization or Community Development Corporation.
Economic limits: net worth under $850,000, average adjusted income of $400,000 or less, and assets of $6.5 million or less.
Term: one 9-year term.
Sole-source awards: up to $5.5 million, or $8.5 million for manufacturing, since October 2025; above that, competition is required. Tribal and ANC-owned firms are exempt from that limit.
2025–2026 changes:
- SBA began a program-wide audit in June 2025.
- In January 2026 it suspended 1,091 firms, about a quarter of participants, for not submitting financial records, and it has since opened termination proceedings against hundreds more.
- From 10 September 2026, individual applicants no longer benefit from a presumption of social disadvantage based on race. They must show evidence that a group they belong to faced discrimination, and certify the material harm it caused them. Firms owned by tribes, Alaska Native Corporations, Native Hawaiian Organizations and Community Development Corporations are unaffected.

HUBZone

Eligibility: at least 51% owned by US citizens (or by tribes and similar entities), with the principal office (where most employees work) in a HUBZone, and at least 35% of employees living in a HUBZone.
Recertification: every three years.
Advantages: HUBZone firms get a 10% price evaluation preference in full-and-open competitions, and sole-source awards up to $5.5 million ($8.5 million for manufacturing).

Women-owned (WOSB) and economically disadvantaged women-owned (EDWOSB)

Eligibility: at least 51% owned and controlled by women who are US citizens living in the US. EDWOSB adds the same economic limits as 8(a).
Certification: SBA certification is required for set-asides and sole-source awards.
Industries: these set-asides are allowed only in industries SBA designates as underrepresented.

Service-disabled veteran-owned (SDVOSB)

Eligibility: at least 51% owned and controlled by service-disabled veterans living in the US.
Certification: SBA certification (VetCert) has been required for set-asides and sole-source awards government-wide since 1 January 2024, and since December 2024 for counting toward the goal.
VA: the Department of Veterans Affairs runs its own veteran-first rule of two.

Small disadvantaged business (SDB) has no set-aside program. Firms self-represent, and SDB status counts toward goals and subcontracting credit. Every 8(a) firm is an SDB.

Registering

SAM.gov: register your entity and make your size and status representations.
SBA Certifications (certifications.sba.gov): apply for 8(a), HUBZone, WOSB/EDWOSB or VetCert.
SBA Small Business Search (formerly the Dynamic Small Business Search): where buyers and large primes look for small firms. Keep your profile complete.

Subcontracting, mentors and joint ventures

Limits on subcontracting: on set-asides above $350,000 and all program awards, you may pay no more than 50% of the contract amount to firms that aren’t similarly situated (services and supplies), 85% for general construction and 75% for special trades, excluding materials.
Subcontracting plans: large primes must have a small-business subcontracting plan for contracts over $900,000 ($2 million for construction). That makes small firms valuable partners for large ones.
Mentor-protégé: any for-profit firm, including a large one, can mentor a small business, for up to six years, with at most three protégés at a time. A mentor-protégé joint venture can bid as small on any set-aside the protégé qualifies for.

Protests

Size protests: file with the contracting officer by the fifth business day after notice of the apparent winner. SBA’s area office decides, usually within 15 business days, and its decision can be appealed within 15 calendar days.
HUBZone and women-owned status protests: also 5 business days. Service-disabled veteran status protests go to SBA’s Office of Hearings and Appeals.
8(a): a competitor can’t challenge another firm’s 8(a) eligibility, only its size on competitive 8(a) awards.

Foreign companies and set-asides

A foreign company can’t use set-asides directly:

Who counts as a small business: a for-profit entity with a place of business in the US that operates primarily in the US or contributes significantly to the US economy.
Size includes foreign affiliates, so a US subsidiary of a large foreign group will usually be large.
The programs require US-citizen owners, or service-disabled veterans living in the US.

What foreign companies can do instead:

Subcontract to US primes. Large primes with subcontracting plans need suppliers, and work done entirely outside the US doesn’t need a plan.
Join a joint venture as a minority partner. Foreign participation in a joint venture is capped at 49%.
Compete on full-and-open contracts, where the rule of two doesn’t apply, subject to US trade rules on where goods come from.

What changed in 2025–2026

January 2025: the disadvantaged-business goal was set back to 5%.
June 2025: SBA began its first program-wide 8(a) audit.
1 October 2025: the thresholds rose to $15,000 and $350,000; sole-source limits rose to $5.5 million ($8.5 million manufacturing); subcontracting-plan thresholds rose to $900,000 ($2 million construction).
Late 2025 – early 2026: agencies adopted the rewritten FAR Part 19 through class deviations. It keeps the rule of two, but makes set-asides of multiple-award orders discretionary.
28 January 2026: SBA suspended 1,091 firms from 8(a).
August 2026: SBA proposed a size-standards overhaul (comments to 20 November 2026).
10 September 2026: the race-based presumption of social disadvantage for individually owned 8(a) applicants was removed.
Coming: the formal FAR Part 19 rule hasn’t been proposed yet. Until it is, the multiple-award order changes rest on each agency’s deviation.

Questions

What is the rule of two?

A contracting officer must set a contract aside for small businesses when two or more responsible small businesses are reasonably expected to offer at fair market prices. Between $15,000 and $350,000 this is required by law. Above $350,000 the rewritten FAR Part 19 keeps it as policy, but it no longer applies to orders under multiple-award contracts such as GSA schedules and GWACs, where setting orders aside is at the buyer’s discretion.

Can a foreign company qualify as a US small business?

Not on its own. A small business must be a for-profit entity with a place of business in the US that operates primarily in the US or contributes significantly to the US economy, and its size counts all affiliates, including foreign ones. A US subsidiary of a large foreign group will usually be large. The socioeconomic programs also require US-citizen or US-resident veteran owners. Foreign firms can still subcontract to US primes or take a minority share (up to 49%) in a joint venture.

What changed in the 8(a) program in 2025 and 2026?

SBA ran its first program-wide audit from June 2025, suspended 1,091 firms (about a quarter of participants) in January 2026 for not submitting financial records, and began terminating hundreds more. From 10 September 2026, individual applicants no longer benefit from a presumption of social disadvantage based on race; they must show evidence of discrimination against a group they belong to and the material harm it caused. Firms owned by tribes, Alaska Native Corporations, Native Hawaiian Organizations and Community Development Corporations are unaffected.

How do I get certified as a women-owned or veteran-owned small business?

Through SBA’s certification portal (certifications.sba.gov). SBA certification is required for women-owned set-asides and sole-source awards, and, since 1 January 2024, for service-disabled veteran-owned set-asides government-wide. Women-owned set-asides are only allowed in industries SBA has designated as underrepresented.

How much can a small business subcontract on a set-aside?

On set-asides above $350,000 and all program awards, a small business may pay no more than 50% of the contract amount to firms that aren’t similarly situated for services and supplies, 85% for general construction and 75% for special trades, excluding materials.

How do I protest a competitor’s small-business size?

File with the contracting officer by close of business on the fifth business day after being told who the apparent winner is. SBA’s area office decides, usually within 15 business days, and its decision can be appealed to SBA’s Office of Hearings and Appeals within 15 calendar days.

Sources

This guide explains the rules in plain English; it isn’t legal advice. Procurement rules change, and each tender document sets its own conditions — it always prevails.

US small-business set-asides explained.