Beacon Federal Partners is an affiliated government contracting firm and an independent sister company within the Boston Made, Inc. group, and one of the most common paths into federal work for smaller firms runs through someone else’s contract. Many government contracts are too large or complex for a single small company to perform alone. At the same time, larger contractors often need specialized skills, regional presence or small business participation. Teaming arrangements connect the two. This explainer covers the main structures, what agreements typically include and how smaller firms find partners. It is general education, not legal advice; firms should consult qualified counsel before signing agreements.

Why Teaming Exists

Federal agencies often want a single point of accountability for a contract, but they also want access to the best capabilities available. Teaming lets companies combine strengths:

• A large firm may bring past performance, management systems and capacity.
• A small firm may bring specialized expertise, innovative technology, local knowledge or a small business designation.
• Together, they can propose a stronger solution than either could alone.

Federal acquisition rules expressly recognize contractor team arrangements, and agencies generally evaluate them on their merits.

The Main Structures

Prime-Subcontractor Relationships

The most common arrangement. One company, the prime contractor, holds the contract with the government and is responsible for performance. It hires one or more subcontractors to perform portions of the work. The subcontractor’s contract is with the prime, not with the government.

Teaming Agreements

A teaming agreement is typically signed before a proposal is submitted. It sets out how companies will work together to pursue an opportunity and what will happen if they win. Often, the agreement anticipates that one company will be the prime and the other a subcontractor, with a subcontract to be negotiated after award.

Joint Ventures

In a joint venture, two or more companies form a combined entity, or a formal partnership, to pursue and perform a contract together. Joint ventures can be useful for certain small business set-aside contracts, and special rules apply to small business joint ventures, including those formed under the Small Business Administration’s mentor-protégé program.

Mentor-Protégé Relationships

The SBA’s mentor-protégé program allows an established company to help a small business develop capabilities. Approved mentor-protégé pairs may form joint ventures that can compete for certain small business contracts. Some agencies run their own mentor-protégé programs as well.

What a Teaming Agreement Usually Covers

Agreements vary, but common provisions include:

1. The opportunity. Which solicitation or program the team is pursuing.
2. Roles. Who will serve as prime and who will be subcontractor.
3. Workshare. The scope or percentage of work each party expects to perform if the team wins. Smaller firms often focus on making this as specific as possible.
4. Proposal responsibilities. Who writes which sections, provides pricing or supplies résumés, and on what schedule.
5. Exclusivity. Whether the parties may join competing teams for the same opportunity.
6. Confidentiality. How proprietary information shared during the proposal will be protected.
7. Costs. Typically, each party bears its own proposal costs.
8. Termination. When the agreement ends, such as if the team loses, the solicitation is canceled or a subcontract is signed.
9. Non-solicitation. Restrictions on hiring each other’s employees.

A common frustration for subcontractors is an agreement that promises workshare only vaguely. Courts in different jurisdictions have treated the enforceability of teaming agreements differently, which is one reason careful drafting matters.

Rules That Shape Small Business Teaming

Several federal rules influence how teams are structured:

• Subcontracting plans. Large prime contractors on contracts above certain dollar thresholds are generally required to submit plans with goals for subcontracting to small businesses, including various socioeconomic categories. These plans create real demand for capable small subcontractors.
• Limitations on subcontracting. When a small business wins a set-aside contract as prime, it must generally perform a certain share of the work itself or through similarly situated firms. The specific percentage depends on the type of contract.
• Affiliation and the ostensible subcontractor rule. If a small prime relies too heavily on a large subcontractor to perform primary and vital work, the SBA may treat them as affiliated, which can jeopardize small business status for that contract.

These rules are detailed and change periodically, so current regulations and professional guidance should be consulted.

How Smaller Firms Find Teaming Partners

• Industry days and pre-solicitation conferences, where agencies describe upcoming needs and companies network.
• Interested vendor lists on some SAM.gov notices, which show which companies are tracking an opportunity.
• The SBA’s SubNet database, where primes may post subcontracting opportunities.
• Supplier diversity or small business liaison offices at large prime contractors.
• Past award data, which shows who has won similar contracts.
• APEX Accelerators and industry associations, which offer matchmaking events and counseling.

Making a Small Firm an Attractive Partner

1. Be specific about capabilities. A focused capability statement describing core competencies, differentiators, past performance and relevant codes is more useful than a broad list of services.
2. Keep registrations current, including SAM.gov and any small business certifications.
3. Know the customer. Familiarity with an agency’s mission and challenges is valuable to a prime.
4. Be responsive. Proposal deadlines are tight, and reliability during the proposal stage signals reliability during performance.
5. Understand pricing. Primes need realistic, well-supported rates.

Protecting the Smaller Firm’s Interests

• Seek defined workshare rather than vague promises.
• Understand exclusivity terms before agreeing to them.
• Mark proprietary information and rely on confidentiality provisions.
• Clarify payment terms that will flow into the eventual subcontract.
• Have agreements reviewed by an attorney familiar with government contracting.

Subcontracting is often where small firms build the past performance that later allows them to compete as primes. A well-structured team can be the first step in that progression.

Beacon Federal Partners is a government contracting firm affiliated with Boston Made, Inc., and set-aside programs are among the first topics newcomers to federal contracting need to understand. The federal government is one of the largest buyers of goods and services in the world, and by law a meaningful share of that spending is directed toward small businesses. This overview explains how set-asides work and summarizes the four best-known socioeconomic programs. It is general education, not legal advice; program rules change, and businesses should confirm current requirements with the U.S. Small Business Administration (SBA).

What a Set-Aside Is

A set-aside is a contract, or a portion of one, that an agency reserves for a particular category of business. Instead of competing against companies of every size, eligible firms compete only against each other, or in some cases may receive an award without competition, known as a sole-source award.

Set-asides exist because Congress established government-wide goals for contracting with small businesses. The statutory goal for small business prime contracts is 23 percent of federal contracting dollars, with additional goals for specific groups, including 5 percent for small disadvantaged businesses, 5 percent for women-owned small businesses, 3 percent for HUBZone businesses and 3 percent for service-disabled veteran-owned small businesses. Agencies track their performance against these goals each year.

First, Being “Small”

Every program below starts with one requirement: the business must qualify as small. The SBA sets size standards by industry, using North American Industry Classification System (NAICS) codes. Depending on the industry, the standard is usually based on average annual revenue or number of employees. A company may be small in one industry and not in another, so it is important to check the size standard for the specific NAICS code listed in each solicitation.

Small Business Set-Asides in General

Before considering the specialized programs, it helps to know that many contracts are simply set aside for small businesses of any kind. Under a principle often called the “rule of two,” a contracting officer generally sets aside an acquisition when there is a reasonable expectation that at least two responsible small businesses will submit offers at fair market prices. Many lower-dollar purchases are also reserved for small businesses by default.

The 8(a) Business Development Program

Who it is for: Small businesses that are at least 51 percent unconditionally owned and controlled by one or more U.S. citizens who are socially and economically disadvantaged, as defined by SBA rules. Economic disadvantage is assessed using limits on personal net worth, income and assets.

How it works: Participation lasts up to nine years, divided into a developmental stage and a transitional stage. Participants receive business development support and become eligible for set-aside contracts and, below certain dollar thresholds, sole-source awards. The program also emphasizes building capacity so firms can eventually compete without it.

Worth knowing: Court decisions and policy changes in recent years have affected how social disadvantage is established for applicants, so prospective participants should review the SBA’s current guidance carefully before applying.

HUBZone

Who it is for: Small businesses located in and employing people from Historically Underutilized Business Zones, areas designated based on factors such as income levels and unemployment. Key requirements include having the principal office in a HUBZone and having at least 35 percent of employees living in a HUBZone, along with ownership requirements.

How it works: Certified firms can compete for HUBZone set-asides and sole-source awards. In full and open competitions, they may also receive a price evaluation preference, which makes their offers more competitive relative to larger firms.

Worth knowing: HUBZone maps are updated periodically, and areas can gain or lose designation. Firms must also maintain the employee residency requirement over time, which takes careful tracking.

Women-Owned Small Business (WOSB) and EDWOSB

Who it is for: Small businesses at least 51 percent owned and controlled by one or more women who are U.S. citizens. An economically disadvantaged women-owned small business (EDWOSB) must also meet economic criteria.

How it works: The Women-Owned Small Business Federal Contract Program allows agencies to set aside contracts in specific industries, identified by NAICS codes, where women-owned businesses are underrepresented (for WOSBs) or substantially underrepresented (for EDWOSBs). Sole-source awards are possible below certain thresholds.

Worth knowing: Firms must be certified, either by the SBA or an SBA-approved third-party certifier, to compete for these set-asides. Self-certification is no longer sufficient for program set-asides.

Service-Disabled Veteran-Owned Small Business (SDVOSB)

Who it is for: Small businesses at least 51 percent owned and controlled by one or more veterans with a service-connected disability. In some circumstances, a spouse or caregiver may control the business on a veteran’s behalf, subject to specific rules.

How it works: Agencies can set aside contracts for SDVOSBs and make sole-source awards below certain thresholds. The Department of Veterans Affairs operates its own program that prioritizes service-disabled veteran-owned and veteran-owned small businesses in VA purchasing.

Worth knowing: Certification for SDVOSBs and veteran-owned small businesses moved to the SBA in 2023 through its veteran certification program. Firms should confirm current certification requirements for both VA and government-wide set-asides.

Comparing the Programs at a Glance

• 8(a): Ownership by socially and economically disadvantaged individuals; nine-year program; business development plus set-asides and sole-source awards.
• HUBZone: Location-based; principal office and 35 percent of employees in HUBZones; set-asides, sole-source awards and price preference.
• WOSB/EDWOSB: Ownership by women; set-asides in eligible industries; certification required.
• SDVOSB: Ownership by service-disabled veterans; government-wide set-asides plus VA priority; certification through SBA.

A business may qualify for more than one program. Holding multiple certifications can broaden the range of opportunities a firm can pursue.

Practical First Steps

1. Identify your NAICS codes and confirm you meet the size standards.
2. Register in SAM.gov, the government’s System for Award Management, which is required for most federal contracting.
3. Review eligibility for each program on the SBA’s website and its certification portal.
4. Gather documents, such as ownership records, tax returns and governing documents, before applying.
5. Keep certifications current and track ongoing requirements.

A Realistic Perspective

A certification is a door, not a guarantee. Set-aside contracts are still competitive, and agencies expect strong past performance, capable staff and well-written proposals. Many small businesses also gain experience through subcontracting and teaming with established contractors before winning prime awards on their own. Understanding the programs is the first step; building the capability to deliver is what turns eligibility into contracts.