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Understanding the Rules of Government Contracting, Set-Asides

Austin, TX
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Understanding Rules Govt Contracting Wide

It is important to get your business certified if you fall into one or more of the categories that could benefit from programs like contract set-asides. The main categories include: small business, woman-owned small business, service disabled veteran owned small business or 8(a) HUBZone business.  As with other aspects of contracting with the government, you should educate yourself on the rules so you can act strategically and make the most of opportunities like set-asides and other benefits.

The SBA has a number of self-directed online courses that can help you understand Federal government contracting. While you may want to concentrate your efforts on local or regional government opportunities, these free courses can give you a strategic understanding of programs that may have a counterpart in the local and regional realm.

Here’s an example of what you will learn: According to the SBA, in the Federal realm set-asides are influenced by The Rule of Two, the Non-manufacture Rule, and Subcontracting Limitations. Contracts can also be set-aside for small businesses certified in the 8(a) Business Development Program or the HUBZone Program. Or, they can be set-aside for qualified women-owned small businesses or service disabled veteran owned small businesses.

The Rule of Two states that there should be set-asides for acquisitions over $150K when there is a reasonable expectation that offers will be obtained from at least two responsible small businesses and the award can be made at a fair market price. Higher considerations will be given for awards to businesses that are certified under the 8(a), HUBZone, Service Disabled Veteran Owned Small Business or Woman Owned Small Business programs before a general small business set-aside.

The Non-Manufacturer Rule says that for small business set-asides, other than for construction or service contracts, the prime contractor must utilize a small business manufacturer – if the firm itself, is not doing the manufacturing to complete the work. In industries where the SBA determines there are no or very limited small business manufacturers, it may issue individual or class waivers to the non-manufacture rule. With small business set-asides for supplies, the prime contractor must either qualify as a manufacturer or supply the product of a domestic small business manufacturer. For acquisitions that are under $25,000, the rule does not apply.

Subcontracting Limitations apply to contracts for supplies, services, and construction, if any portion of the requirement is set-aside for small business and the contract amount exceeds $150,000. It states that at least 50 percent of the contract cost for personnel must be used for employees of the small business. For supply contracts, the business must perform work for at least 50% of the cost of manufacturing the supplies, not including the cost of materials. And finally for general construction contracts, the business must perform at least 15% of the cost of the contract, not including the cost of the materials, with its own employees. For construction by special trade contractors, the business must perform at least 25% of the cost of the contract, not including the cost of the materials, with its own employees.

The courses are a great way to acquaint yourself on the nuances of set-asides. It’s a free resource and you can take the courses at your own pace.

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