States Are Expanding Small Business Set-Asides: What It Means for Federal Contractors
If your business has been focused on federal contracting, you’ve probably noticed the slowdown in grants and delayed solicitations lately. But here’s a positive shift that hasn’t gotten enough attention: state and local agencies are doubling down on set-aside programs, creating fresh opportunities for certified small businesses to win contracts — often with faster timelines than federal work.
What’s Changing
In the first half of 2025, states like New York, Texas, and California have expanded their Minority Business Enterprise (MBE), Women Business Enterprise (WBE), and Disadvantaged Business Enterprise (DBE) programs. At least 12 states added new contracting goals for disabled veteran small business certification holders. Many local governments are increasing direct awards to small, minority, and women-owned businesses — in some cases raising micro-purchase thresholds to $100,000.
In addition, we’ve seen an uptick in cooperative purchasing contracts that include small business set-aside components, particularly in sectors like public safety, K–12 services, and IT modernization.
Why It Matters to Small Federal Contractors
If you’ve already gone through the government contracting certification process for 8a certification assistance, women business certification, or disabled veteran government contracts, you can leverage those certifications at the state and local level — but you may need to apply for state-level recognition.
States aren’t just offering contracts, they’re pushing for broader participation:
More women owned small business certification goals in education and social services
Expanded SBIR grant assistance equivalents at the state level (like NYSTAR in New York or the Texas SBIR Matching Fund)
Simpler, quicker government contracting opportunities with less red tape compared to federal FAR-based procurements
Here’s How to Take Advantage
Audit your certifications: Check if your federal sba 8a certification or disabled veteran small business certification is recognized by your target state. Many have reciprocity programs — some require separate applications.
Look up the best local portals: States don’t use SAM.gov. Register on sites like Cal eProcure, Texas ESBD, or BidNet Direct for access to 8a contracts services and general government procurement.
Review your contractor NAICS code alignment: States sometimes use different commodity code systems, but you should start by aligning your offerings with the best NAICS codes for small business.
Focus on local relationships: State and local contracting is more relationship-driven. Engage with procurement officers early, attend “How to Do Business” webinars, and leverage your government contracting business presence locally.
Use your federal past performance: State and local agencies view federal performance as a positive. Mention it in your proposals — especially for high-demand sectors like healthcare staffing, school safety technology, and IT modernization.
Final Thought
Federal cycles are going through a slowdown, but state and local markets remain stable — in fact, they’re expanding set-aside goals. If you’ve been feeling squeezed by the long federal procurement timelines, SLED markets offer a smart and immediate way to keep your government contracting certification working for you. Don’t wait for the next continuing resolution crisis to diversify.
Next up: Check out our in-depth guide on pivoting from federal to SLED contracting, with tips on portals, procurement cycles, and top growth sectors. Read the full guide here.
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.
