Partial Small Business Set-Aside

A partial small business set-aside is a procurement strategy in which the contracting officer divides a requirement into two or more portions: one portion restricted exclusively to small businesses and the remaining portion open to full and open competition. This approach is used when the total requirement exceeds what small businesses can feasibly supply but a meaningful portion can be reserved to meet small business participation goals.

What is a Partial Small Business Set-Aside?

FAR 19.502-3 authorizes partial set-asides when a contracting officer determines it is not practical to set aside the entire acquisition but a definite portion can reasonably be awarded to small businesses. The contracting officer must evaluate both portions separately. The set-aside portion follows all the same eligibility rules as a total small business set-aside: only firms meeting the applicable SBA size standard for the assigned NAICS code may compete for it.

Partial set-asides are common on large construction projects, major supply contracts, and certain services acquisitions where no single small business can handle the entire volume but multiple small firms can absorb portions. The set-aside amount and criteria are specified in the solicitation. Offerors for the reserved portion must certify small business status, and competitors may challenge eligibility through a size protest.

The government tracks partial set-aside awards under a separate type-of-set-aside code in FPDS and USAspending, distinguishing them from total set-asides. Agencies use partial set-asides as one tool to reach the 23% statutory goal for small business prime contracting and to avoid triggering bundling concerns when the full requirement exceeds small business capacity.

Why Partial Small Business Set-Asides Matter for Government Contractors

For small businesses, a partial set-aside creates a carved-out lane with less competition than full and open procurement. Large businesses competing for the unreserved portion should be aware that their subcontracting plans must address the small business goals associated with the overall contract value. Understanding how an agency structures partial set-asides helps both small and large businesses anticipate bid strategy before solicitations are released.

Example

A Department of Veterans Affairs supply contract for medical equipment is valued at $12M. The contracting officer determines that small businesses can competitively supply $4M of the requirement but cannot handle the full volume. She issues one solicitation with a $4M partial set-aside for small businesses and an $8M unreserved portion. Small businesses compete only for the $4M portion; all offerors may compete for the $8M portion.

Frequently Asked Questions

When will a contracting officer choose a partial set-aside over a total set-aside?

A partial set-aside is used when the market research reveals that small businesses can supply only part of the requirement at competitive prices, making a total set-aside impractical. This often occurs on large-dollar supply contracts, construction requirements with specialized components, or services where one small firm cannot staff the full requirement but several can handle defined task areas.

Can a small business bid on both the set-aside and unreserved portions of a partial set-aside?

Yes. A small business may submit separate offers for both portions. The set-aside portion is evaluated only against other small business offers. For the unreserved portion, the small business competes against all offerors including large businesses. Award of one portion does not prevent the same firm from winning the other, though contracting officers evaluate them independently.

Does a partial set-aside count toward an agency's small business contracting goals?

Yes. Awards made under the small business portion of a partial set-aside count as small business prime contract awards toward the agency's 23% statutory goal and applicable sub-goals. The unreserved portion does not count as a small business award unless it is separately won by a small business.

How is the split between set-aside and unreserved portions determined?

The contracting officer determines the split based on market research, including an analysis of small business capacity, pricing data, and the scope of work. There is no mandatory formula. The officer documents the rationale in the acquisition plan and may consult with the agency's Office of Small and Disadvantaged Business Utilization (OSDBU) for guidance on maximizing small business participation.