Business owners often ask me, "Which set aside program is my best bet, especially for sole source?"
When "Sole Source" Can Mean "Risk"
Once a Federal buyer knows they want you, the FARS require them to purchase via competition, "...to the maximum practicable extent." However much you might LIKE them to sole source to you, sole source often also represents a great deal more work to justify. Furthermore, how well do they know you? If they've never met you, honestly, sole source is not going to happen on a first date. An unknown contractor represents TOO MUCH RISK.
When she chooses a set-aside for which you’re eligible, along with enough ostensibly qualified competitors that they feel comfortable, that lets them document their effort to compete the requirement, but among fewer companies than a competition “without exclusion of sources” and still have very high likelihood of awarding the work to you.
If your CO knows you, likes you, and trusts you, she can competes the requirement under one of your set-asides. That shows a good faith effort to work with small business, demonstrates that she ran a competition…and, because she's expert at getting the contractor she wants, ALSO justifies her choosing you.
All Set-Asides Are Equal (except)
As of April 2, 2012, the FAR gives socioeconomic parity among the four set-aside programs, and may sole-source under any of them. Contracting officers may exercise discretion when determining whether an acquisition will be restricted to small businesses participating in the 8(a) Business Development Program (8(a)), Historically Underutilized Business Zones (HUBZone) Program, Service-Disabled Veteran-Owned Small Business (SDVOSB) Program, or the Women-Owned Small Business (WOSB) Program. They have to give first consideration to meeting the requirement through competition within a small business program before any decision to proceed with a sole source award through that program. The individual small business programs take precedence over a more general “all small business” set aside.
What Big Advantage Did Veterans Get This Year?
On June 16th, 2016, the Supreme Court ruled that the Department of Veterans Affairs shall give preference, when filling a requirement, to competing the work among veteran-owned or service-disabled veteran-owned businesses if two or more are determined to be able to do the work at a fair and reasonable price.
Veteran-owned and Service-disabled veteran owned businesses have the option to have their certification VERIFIED by the VA’s Center for Verification and Evaluation (CVE). VA requires this of its VOSB and SDOVSB contractors; no other agency does. But a Contracting officer who wants to minimize her risk and has an option to award to a SDOVSB might choose this program rather than WOSB because she can give some consideration in evaluation criteria to CVE-verified companies if she wishes to do so.
Why don't more CO's use that new WOSB Sole Source?
The WOSB program gained practical sole-source authority in 2016. Business owners may self-certify their WOSB eligibility for the program, or may do so through one of four third-party organizations authorized by the Small Business Administration to do so. While Congress passed a law requiring that ALL WOSB certification be conducted and verified by third parties, the Administration is still in the process of implementing that law. Therefore, a Contracting Officer might feel a greater sense of risk that a self-certified company might be fraudulently representing its status, and might not want to take that risk. So...that may be part of the reason that the total value of the Army's total WOSB sole-source awards was less than $3M -- well under the maximum permitted for ANY ONE sole source award through this program.
Why A Good HUBZone Can Be Hard To Find
HUBZone set-asides can be attractive because agencies often have difficulty meeting their HUBZone goals. But they’re also risky: A strongly-performing HUBZone contractor can lose HUBZone status suddenly, including due to factors beyond their control: for example, if the economic health of their geographic location improves beyond “underutilized” or when the company grows and the percentage of their employees that live outside the HUBZone grows large enough to disqualify the company from HUBZone status.
What's So Hot About 8(a)?
The 8(a) program hasn’t been around the longest…but it has the best guarantees. In practical terms, it may be a contracting officer’s first choice if the CO likes you and wants to work Twith you. Contracting Officers generally have more comfort with a program that is more established, and they’ve had a chance to use successfully for longer. Of the four set aside programs, the 8(a) program represents the least risk. Here’s why, at FAR Subpart 19.8:
19.800 General (a) – (c)
Section 8(a) of the Small Business Act (15 U.S.C. 637(a)(link is external)) established a program that authorizes the Small Business Administration (SBA) to enter into all types of contracts with other agencies and award subcontracts for performing those contracts to firms eligible for program participation. The SBA’s subcontractors are referred to as “8(a) contractors.”
Contracts may be awarded to the SBA for performance by eligible 8(a) firms on either a sole source or competitive basis.
When, acting under the authority of the program, the SBA certifies to an agency that the SBA is competent and responsible to perform a specific contract, the contracting officer is authorized, in the contracting officer’s discretion, to award the contract to the SBA based upon mutually agreeable terms and conditions.
Here's what that means: When a Contracting Officer awards a contract under the 8(a) program, SBA guarantees that she’s going to get what she contracts for, whether from that 8(a) subcontractor or, in case of performance difficulty, from another source that SBA has to find to perform instead. That drastically lowers the risk of doing business with a small business.
Why do some companies win such big 8(a) awards? Check this out: there’s no upper financial limit on the value of such contracts that they can award to 8(a)’s owned by Tribally-Owned Corporations or Alaskan Native-Owned Corporations. You can see the appeal to that, from a contracting officer's point of view. None of the other small business programs have that kind of guarantee, whether sole source or competitive award. To be sure, there have been misuses of the ANC/TRIBAL program in some agencies. Most CO's that use the program do so with confidence and integrity on acquisitions worth millions of dollars.
What's the BEST set aside?
YOUR TIME, to make sure your buyers are tuned in far in advance to your Past Performance & Best Values. That's far and away your super-power. Past Performance and Best Value enable your buyer to justify choosing you, and at your price. Set-asides alone don't sell.
Once you've established Past Performance and Best Values, inside Veterans Affairs (VA), SDVOSB and VOSB first, by law. Likely practical precedence after that might be 8(a), WOSB, and HUBZone.
Outside VA, CO’s discretion and risk threshold are the rule! While 8(a) can be the trump card, and other set aside programs can help your CO pick a smaller pool from which to show she “shopped”, your Past Performance & Best Values are your unique super-powers: they enable your buyer to justify choosing you, and at your price.