What happens when a federal agency designed to streamline procurement begins phasing out key protections for small businesses? In 2025, the conflict over the GSA set-aside policy has evolved beyond mere bureaucratic fine print—it has become a full-blown standoff between efficiency and equity, consolidation and competition. Federal contracting has always been a delicate balancing act between streamlining government procurement and ensuring that America’s 33 million small businesses have a fair chance at lucrative projects. At the center of that balance sits the GSA set-aside policy, a regulatory framework that directs when and how work should be reserved exclusively for small firms. In 2025, the tug-of-war between efficiency advocates within the General Services Administration (GSA) and champions of small-business participation has reached a crescendo.

This comprehensive guide demystifies the history, legal foundation, current controversies, and future outlook of this policy—and, most importantly, explains what entrepreneurs can do right now to win contracts.

The Origins of the GSA set-aside policy

When Congress created the Small Business Administration (SBA) in 1953, lawmakers insisted that the federal marketplace could not become the exclusive playground of large defense contractors. The first generation of set‑aside statutes required agencies to award “a fair proportion” of spending to small entities, but the language was vague. It wasn’t until 1984, with the Competition in Contracting Act, that a clear operational test emerged: the Rule of Two—if at least two responsible small businesses can perform the work at a fair market price, the contracting officer shall set the requirement aside.

The GSA (founded in 1949) administers thousands of schedule contracts and government-wide acquisition contracts (GWACs). Because these vehicles aggregate demand across dozens of agencies, critics long feared that small firms could be squeezed out. Over time, Congress leaned on GSA to incorporate the Rule of Two in its vehicles, cementing what we now call the GSA set-aside policy.

Key take‑away: The policy is not a “favor” but a statutory mandate designed to stop monopoly-like consolidation and to fuel innovation through small‑business dynamism.

Legal Pillars: FAR, SBA Regulations, and Case Law

  1. Federal Acquisition Regulation § 19 – codifies the Rule of Two, socioeconomic programs (8(a), HUBZone, WOSB), and thresholds.
  2. 13 CFR § 125 – implements SBA size‑standards and protest procedures.
  3. Court of Federal Claims decisions – especially Analytic Strategies v. United States (2023), which clarified that task‑order set‑asides inside GWACs must still obey the Rule of Two.
  4. FAR Case 2023‑011 – the pending rule that would explicitly require contracting officers to document any decision not to reserve an order for small business.

Together, these authorities make the GSA set-aside policy legally enforceable. Failure to comply can trigger bid protests, SBA size challenges, or GAO oversight.

The Evolution of the GSA set-aside policy Since 2000

Era 1 (2000‑2012) – Growing Through Schedules

GSA’s Multiple Award Schedule (MAS) program exploded, but schedule clauses were silent on order‑level set‑asides. Agencies either conducted separate set‑aside competitions or went unrestricted and justified it under “best value.”

Era 2 (2012‑2019) – Task‑Order Flexibility

Regulatory updates finally allowed set‑asides at the task‑order level. Yet the change was discretionary. Many contracting officers, focused on speed, skipped market research and defaulted to open competition, undermining the spirit of the set-aside policy.

Era 3 (2020‑Present) – Category Management vs. Inclusion

Category management initiatives pushed agencies toward fewer, larger contracts. At the same time, SBA set aggressive goals: by 2024 the government hit $178 billion in small‑business awards—a record. But in January 2025, the new administration slashed the Small Disadvantaged Business target from 15 % to the statutory 5 %, and GSA sunset its separate Small‑Business Special Item Numbers (SINs). Small vendors saw the moves as a retreat.

GSA set-aside policy and Category Management

Category management’s mantra—“buy once, use many times”—drives efficiency. GSA’s flagship vehicles, like Alliant 3, Polaris, and OASIS+, exemplify this. Each has dedicated small‑business pools, yet contracting officers can still issue unrestricted orders if they deem it advantageous.

  • Pros for agencies: less redundancy, economies of scale, simplified contract administration.
  • Cons for small firms: higher barriers to entry, lengthy on‑ramp cycles, and risk that agency‑level goals get met through subcontracting rather than prime awards.

The pending FAR Case 2023‑011 is a direct response: it would obligate market research at the order level and elevate the set-aside policy from guidance to enforceable rule.

2025 Policy Flashpoints

  • Removal of Small‑Business SINs (Status: Complete) – Small contractors must migrate to consolidated SINs, reducing visibility and making targeted marketing more difficult.
  • SDB Goal Cut to 5 % (Status: In effect FY 2025) – Lower SDB targets mean fewer 8(a) or minority‑owned competitions, shrinking the pipeline for disadvantaged firms.
  • FAR Case 2023‑011 (Status: Awaiting FAR Council action) – If finalized, could mandate task‑order set‑asides within GWACs; timing remains uncertain.
  • CO Protest Immunity (Status: Supported by industry coalition) – Would likely curb legal options when contracting officers bypass set‑asides, increasing risk for small bidders.
  • SBIR/STTR Reauthorization (Status: Pending in Congress) – Renewal could expand non‑dilutive R&D grants, partially offsetting lost set‑aside opportunities.

Stay current with our Small Business Resources Center for real‑time alerts on these developments.

Quantifying the Stakes

According to FY 2024 Federal Procurement Data System reports:

  • Total obligations on GSA schedules: $45 billion
  • Share to small businesses: 29 % (down from 31 % in FY 2023)
  • Average small‑business prime award size: $2.3 million
  • Typical proposal cost: $25 000–$60 000 in labor for a midsize IT firm

A mere 2‑point decline in small‑business share equals $900 million in lost prime revenue. Those dollars tend to concentrate in tech hubs like Huntsville, AL, and Austin, TX—ecosystems that rely on federal spend to fuel job growth.

For deeper data slices, visit our Federal Contracting Glossary where we break down NAICS codes, size standards, and obligation trends.

How Small Businesses Can Leverage the GSA set-aside policy

  1. Master Pre‑Award Intelligence

Conduct order‑level market research the same way contracting officers should. Use eBuy, SAM.gov “Interested Vendors” lists, and FOIA request histories to anticipate set‑aside decisions. Embed that intel into your Capability Statements.

  1. Optimize Your MAS Presence

After the retirement of small‑business SINs, it is vital to:

  • Align offerings with consolidated SINs.
  • Highlight socioeconomic statuses (8(a), WOSB, HUBZone) in the GSA Advantage catalog.
  • Keep pricing competitive but sustainable—contracting officers still judge “fair and reasonable.”

  1. Form Strategic Teams

Joint ventures and mentor‑protégé agreements can mitigate bandwidth issues and meet past‑performance thresholds. Under SBA rules, a mentor’s experience can count toward the JV—a huge boost under the GSA set-aside policy when higher‑value orders pop up.

  1. Perfect Proposal Storytelling

Answer engines and evaluators skim hundreds of pages. Use the AEO principle—write with clear headings, bulleted benefits, and structured data so both humans and AI scorers see your value rapidly.

  1. Guard Against Goal Reductions

If SDB and other targets fall, agencies may turn to unrestricted orders. Monitor Brookings Institution research on procurement equity trends (Brookings) and cite their findings in capability briefings to remind buyers of the policy’s socioeconomic intent.

Compliance Checklist for GSA set-aside policy Success

Step Action Frequency
Size Recertification Verify SBA profile & SAM annual reps/certs Annually or at option year
Market Research Capture Document at least two set‑aside‑eligible peers per target order 30 days before RFP
Pricing Review Benchmark rates to MAS CALC tool Quarterly
Joint Venture Ethics File JV agreement & Workshare calculation with SBA Before offer submission
Past Performance Refresh Collect CPARS and private testimonials Post‑project closeout

The Future of the GSA set-aside policy

Policy insiders suggest three possible scenarios for the remainder of 2025:

  1. Full Adoption of FAR Case 2023‑011 – would institutionalize order‑level set‑aside documentation; small‑business participation likely rises 2‑3 %.
  2. Partial Adoption with Opt‑Outs – COs can waive justification during “urgent mission” situations; gains muted.
  3. Stalled Rulemaking – the administration shelves the case citing paperwork reduction; small‑business share may dip further.

GSA, for its part, continues to tout category management efficiencies. A July 2025 blog post on GSA Federal Schedules (GSA) reaffirmed that program managers “retain full discretion” to pick the best vehicle—a phrase that worries many entrepreneurs.

Why Vigilance Matters

The GSA set-aside policy is more than a regulatory footnote—it is a lifeline that injects billions into America’s small‑business economy. While recent shifts create headwinds, savvy firms that align offerings, lobby early, and team smartly can still surf the wave. Stay informed, adapt, and remember: every email to a contracting officer, every line in a proposal, and every strategic partnership is a vote for a more inclusive federal marketplace.