A small business set-aside, often referred to as a set-aside contract, is a federal contract within an anticipated dollar value that is automatically reserved, or set-aside, for bids from small businesses.
These types of contracts were formed to help level the playing field and provide additionally contracting opportunities for small businesses. Within set-aside contracts, there are two different types: competitive and sole-source.
Competitive set-aside contracts are government contracts in which at least two small business concerns are able to perform the work or provide the products being purchased. In such instances, the contract is set aside exclusively for small businesses.
Sole-source set-aside contracts are contracts that can be awarded to a business without a competitive bidding process. While most contracts are competitive, this usually occurs when only a single business can fulfill the requirements of a contract.