SMALL BUSINESS SET - ASIDE FACT SHEET
- Contracting Officers (CO) are responsible for ensuring acquisitions are set-aside for HUBZone Small Business Concerns (SBCs) and small business, when regulatory requirements are met. Agency small business personnel and the Small Business Administration (SBA) representatives, if assigned, are responsible for reviewing acquisitions to make set-aside recommendations.
- The purpose of a small business set-aside is to award certain acquisitions exclusively to eligible small business concerns. A set-aside for small business is the reserving of an acquisition exclusively for participation by small business concerns. A set-aside may be open to all small businesses. A set-aside of a single acquisition or a class of acquisitions may be total or partial.
TOTAL HUBZone SMALL BUSINESS SET-ASIDES
- Acquisitions exceeding $2,500, but not more than $100,000, is automatically reserved exclusively for small business concerns unless the CO determines there is not a reasonable expectation of obtaining offers from two or more responsible small businesses.
- Acquisitions exceeding the statutory small business set-aside threshold or $100,000 are set-aside for small business, if the rule of two is met. The rule of two is met when there are two or more responsible small businesses located in a designated HUBZone geographic (http://www.sba.gov/hubzone/) locations that can provide the products of U.S. small businesses or any U.S. firm when it has been determined that there is no small U.S. manufacturer.
- If the CO does not proceed with the HUBZone small business set-aside and purchases on an unrestricted basis, the CO must include in the contract file the reason for this action.
- If the CO receives only one acceptable offer from a responsible small business in response to a set-aside, the CO may make an award to that firm, if award can be made at a fair and reasonable price. Except as authorized by law, a contract may not be awarded as a result of a set-aside if the cost to the awarding agency exceeds the fair market price. If the CO receives NO acceptable offers from a eligible HUBZone SBCs, the set-aside should be withdrawn and the requirement, if still valid, will be resolicited in order of precedence established by the FAR.
- In making R&D small business set-asides, there must also be a reasonable expectation of obtaining from small businesses the best scientific and technological sources consistent with the demands of the proposed acquisition for the best mix of cost, performances, and schedules.
TOTAL SMALL BUSINESS SET-ASIDES
- Acquisitions exceeding $2,500, but not more than $100,000, is automatically reserved exclusively for small business concerns unless the CO determines there is not a reasonable expectation of obtaining offers from two or more responsible small businesses.
- Acquisitions exceeding the statutory small business set-aside threshold or $100,000 are set-aside for small business, if the rule of two is met. The rule of two is met when there are two or more responsible small businesses that can provide the products of U.S. small businesses or any U.S. firm when it has been determined that there is no small U.S. manufacturer.
- If the CO does not proceed with the small business set-aside and purchases on an unrestricted basis, the CO must include in the contract file the reason for this action.
- If the CO receives only one acceptable offer from a responsible small business in response to a set-aside, the CO may make an award to that firm, if award can be made at a fair and reasonable price. Except as authorized by law, a contract may not be awarded as a result of a set-aside if the cost to the awarding agency exceeds the fair market price. If the CO receives NO acceptable offers from a small business, the set-aside should be withdrawn and the requirement, if still valid, will be resolicited on an unrestricted basis.
- In making R&D small business set-asides, there must also be a reasonable expectation of obtaining from small businesses the best scientific and technological sources consistent with the demands of the proposed acquisition for the best mix of cost, performances, and schedules.
- For set-asides other than for construction or services, any small business proposing to furnish a product which it did not itself manufacture must furnish the product of a small business manufacturer unless the SBA has granted either a waiver or exception to the A nonmanufacturer rule:
- A waiver - permits small businesses to provide any domestic firms product.
- Nonmanufacturer rule - any small business that submits a bid or offer in its own name, other than on a construction or service contract, but which proposes to furnish a product which it did not itself manufacture, is deemed to be a small business when it has no more than 500 employees. For a specific solicitation, a CO may request a waiver of that part of the nonmanufacturer rule which requires that the actual manufacturer or processor be a small business concern if no known domestic small business manufacturers or processors can reasonably be expected to offer a product meeting the requirements of the solicitation.
The CO inserts the clause at Federal Acquisition Regulations (FAR) 52-219-6, Notice of Total Small Business Set-Aside, in solicitations and contracts involving total small business set-asides.
PARTIAL SET-ASIDES
- The CO should set aside a portion of an acquisition, except for construction, for exclusive small business participation when-
- A total set-aside is not appropriate
- The requirement is severable into two or more economic production runs or reasonable lots;
- One or more small businesses are expected to have technical competence and productive capacity to satisfy the set-aside portion of the requirement at a fair market price;
- The acquisition is not subject to simplified acquisition procedures; and
- A partial set-aside should not be made if there is a reasonable expectation that only two concerns (one large and one small) with capacity will respond with offers unless authorized by the Head of a contracting activity on a case-by-case basis. Similarly, a class of acquisitions, not including construction, may be partially set-aside. Under certain specified conditions, partial set-asides may be used in conjunction with multi-year contracting procedures.
The CO inserts the clause at FAR 52.219-7, Notice of Partial Small Business Set-Aside, in solicitations and contracts involving partial small business set-asides.SIZE STANDARDS
- The CO shall insert the provision FAR 52.219.-1. This provision requires the CO to include in the solicitation, the North Industrial Classification System (NAICS).
- Size standards - The SBA establishes small business size standards against industry classification that have been established by the Office of Management and Budget (OMB) and set forth by the NAICS manual. The NAICS classification and associated size standard are set forth by the FAR Part 19. When putting together a solicitation, the CO should accomplish the following.
- Classifying the product or service being acquired in the industry whose definition, as found in the North Industrial Classification System Manual, best describes the principal nature of the product or service being acquired;
- Identifying the size standard SBA established for that industry and;
- Specifying the size standard in the solicitation so that offerors can appropriately represent themselves as a small or large business for that acquisition.
UNILATERAL OR JOINT DETERMINATION
- The determination to make a set-side may be unilateral or joint.
- Unilateral determination - one which is made by the CO.
The CO reviews acquisitions to determine if they can be set-aside for small business. Also, the CO considers the recommendations of the agency small business program personnel and documents why a set-aside is inappropriate when the acquisition is not set-aside. If the acquisition is set-aside based on this review, it is a unilateral set-aside by the CO.
- Joint determination - one which is made by the SBA, Procurement Center Representative (PCR) and concurred with by the CO.
The CO should make all proposed acquisitions in excess of the micropurchase threshold, or the threshold agreed upon by both agencies, available for SBA PCR review. At the NIH, the threshold for review by the SBA PCR is $100,000 as of October 1, 1998.METHODS OF CONDUCTING SET-ASIDES
- Total set-asides may be conducted by using simplified acquisition procedures, sealed bids, or competitive proposals. Partial small business set-asides may be conducted using sealed bids or competitive proposals.
WITHDRAWING OR MODIFYING SET-ASIDES
- The CO may withdraw a set-aside whether it was joint or unilateral if the CO considers that award would be detrimental to the public interest, or if a small business set-aside was not successful. The CO must initiate a withdrawal of an individual set-aside by giving written notice to the agency Small Business Specialist and the SBA PCR stating the reasons.
AUTOMATIC DISSOLUTION OF A SET-ASIDE
- If a set-aside acquisition or portion of an acquisition in not awarded, the unilateral or joint determination to set the acquisition aside is automatically dissolved. The required supplies and/or services for which no award was made may be acquired by sealed bidding or negotiation, as appropriate.
- Before issuing a solicitation for items called for in a small business set-aside that was dissolved, the CO shall ensure that the delivery schedule is realistic in the light of all relevant factors, including the capabilities of small business concerns.
For additional information on the set-aside programs see FAR Part 19, http://www.arnet.gov/far or visit SBA's web site at http://www.sba.gov/size/.