Set-Asides Reset: What FY2025's Federal Contracting Goals Mean for Small Businesses
If you’re a small business trying to break into—or stay in—the federal contracting world, FY2025 is going to be a pivotal year. New SBA rules, a strategic goal reset, and evolving compliance requirements are shaking up the landscape. Whether you're newly 8(a)-certified or running a veteran-owned firm navigating VetCert, this isn’t just bureaucratic noise—it’s your roadmap (or roadblock) to millions in potential revenue.
Let’s start with the headline: for FY2025, the government is dialing back its elevated small business contracting goals. After a record-setting FY2023 and FY2024—where small businesses received nearly 29% of federal contract dollars—the Office of Management and Budget (OMB) and SBA have hit reset.
Agencies are now being directed to the statutory minimums:
23% overall to small businesses
5% each to WOSB, SDB, and SDVOSB
3% to HUBZone firms
This change ends the Biden-era push to hit 15% for small disadvantaged businesses (SDBs), even though FY2024 nearly achieved it at 12.26%. The signal here? Agencies need to redirect energy toward consistently underperforming targets—HUBZone, WOSB, and newer entrants.
But this isn’t just a paper shuffle. The SBA is pairing this “goal reset” with real policy teeth, like mandatory SBA certifications for SDVOSBs (no more self-certifying), stricter HUBZone employee hour requirements, and new rules that automatically kick out ineligible firms from IDIQs if their size status changes.
Program Rule Changes You Can’t Ignore
Each major certification program got a regulatory tune-up. Here are the ones you need on your radar:
8(a): If you relied on the old “presumed disadvantage” rule, you must now submit a social disadvantage narrative. No narrative, no eligibility. Also, any size or ownership change (merger, sale) can now automatically decertify you from ongoing multiple-award contracts.
SDVOSB: As of late 2024, all service-disabled veteran firms must certify through SBA’s VetCert system. Self-certification is dead. If you didn’t file by December 2024, your firm won’t count toward SDVOSB goals anymore.
HUBZone: Work-hour compliance is now stricter (minimum 10 hours/week for qualifying employees), and firms must scale up to 35% HUBZone-resident staff within a year of contract award. Plus, recertification now happens every three years.
WOSB/EDWOSB: Recertification deadlines have been temporarily extended, but don’t sleep on your paperwork. Any ownership or management change still has to be reported within 30 days or you risk decertification.
Mentor-Protégé & JVs: SBA is scrutinizing these arrangements. If your firm wins too many contracts as a JV with a large business, expect future rule changes. SBA wants solo small businesses to get their fair share, too.
So What? Why You Should Care
Here’s the bottom line for government contracting businesses:
More scrutiny, less leniency: Expect tighter enforcement of certification requirements, especially around size standards and ownership control.
Shifting competitive dynamics: With 8(a) eligibility under the microscope and SDVOSBs having to go through VetCert, your odds of winning can change overnight if a competitor falls out of compliance—or if you do.
Opportunity in compliance: If your certifications are buttoned-up and you’re in a HUBZone or qualify as a woman-owned small business, FY2025 could be your breakout year. Agencies are under pressure to meet those goals.
Set-asides aren’t automatic wins: Large incumbent players still dominate IDIQs. But SBA is pushing agencies to create more “on-ramps” and reserve task orders for certified small businesses. That’s your opening—if you're ready.
What to Do Next
Here’s a strategic checklist to stay ahead:
Verify your certifications: Go to the SBA’s new MySBA Certifications portal. Make sure everything from 8(a) narratives to HUBZone employee records are up to date.
If you’re SDVOSB: If you missed the December 2024 deadline, apply to VetCert immediately—or you’re out of the running.
Build teaming strategies: Mentor-protégé relationships and joint ventures remain powerful tools—but watch for overuse. Diversify your past performance.
Review your NAICS codes: Choose the best NAICS codes for small business that match your growth area. You may be large under one code but small under another. This matters, especially with new recertification triggers tied to mergers and acquisitions.
Stay engaged with SBIR: Use SBIR Grant Assistance and related programs to break into R&D-heavy contracts, especially in emerging sectors like AI, clean energy, or defense tech.
Track opportunities smarter: Use SBA’s GovCon Match tool and agency procurement forecasts to identify lower-competition bids or upcoming “on-ramps.”
This year isn’t about expanding goals—it’s about enforcing them. For some firms, that means the door is narrowing. For others—especially those with tight compliance, diverse certifications, and a readiness to pivot—FY2025 could be a record year.
Certifications aren’t just badges. They’re your ticket to real money in federal markets. But only if you understand the game—and play by the new rules.
Want more insight on how to stay competitive despite these regulatory shifts? Check out "Your Step-by-Step Guide to Federal Government Contracting for Small Businesses in 2025" for a deep dive into maintaining your eligibility the smart way.
If you aren't a Squared Compass partner, what are you waiting for? From getting your business set up with specific government set aside programs at both the State and Federal level, to being empowered by a Fractional Capture team to win government contracts, to receiving tailored government contract opportunities Squared Compass delivers immense value which helps propel our partners to success. Schedule a chat with our team today.
