FAR 8.405-5—Small business.
Plain-English Summary
FAR 8.405-5 explains how small business policy applies when ordering under the Federal Supply Schedules. It covers four main topics: discretionary set-asides for orders and blanket purchase agreements (BPAs), how those set-asides must be conducted using the schedule ordering procedures in FAR 8.405-1, 8.405-2, and 8.405-3, how orders under schedule contracts may be counted toward an agency’s small business goals, how ordering activities may consider socioeconomic status when selecting contractors for an order or BPA, and a special preference rule for small business items when two or more items are available at the same delivered price and the requirement exceeds the micro-purchase threshold. In practice, this section gives ordering officials flexibility to use small business programs within the schedules program, but it also ties that flexibility to part 19 eligibility rules and size-status requirements. It matters because agencies often assume schedule buys are exempt from small business considerations; this section shows they are not. Contractors should understand that schedule-level representations can affect order-level credit and competition, while contracting officers must document their market research, eligibility checks, and ordering decisions carefully.
Key Rules
Discretionary set-asides allowed
Ordering activity contracting officers may, at their discretion, set aside orders and BPAs for the small business concerns identified in FAR 19.000(a)(3). This is permissive, not mandatory, but it allows agencies to reserve schedule opportunities for eligible small businesses.
Use schedule ordering procedures
When setting aside an order or BPA, the contracting officer must still follow the applicable schedule ordering procedures in FAR 8.405-1, 8.405-2, and 8.405-3. The set-aside does not replace the normal ordering framework; it operates within it.
Part 19 eligibility applies
The specific small business program eligibility requirements in FAR part 19 apply to these set-asides. That means the ordering activity must ensure the selected contractor actually qualifies for the applicable small business program, such as small business, SDVOSB, HUBZone, WOSB, or SDB, as relevant.
Orders may count toward goals
Orders placed under schedule contracts may be credited toward the ordering activity’s small business goals. However, for reporting credit on an order placed with a small business schedule contractor, the awardee must meet the size standard corresponding to the NAICS code assigned to the order under FAR 19.102(b)(3).
Rely on contract-level reps
Ordering activities should rely on the small business representations made by schedule contractors at the contract level, but they must also consider rerepresentation rules in FAR 19.301-2(b)(3) when placing an order. This means contract-level status is important, but it is not always the final word.
Socioeconomic status may guide competition
Ordering activities may consider socioeconomic status when identifying contractors for consideration or competition for an order or BPA. At a minimum, if available, they should consider at least one small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, women-owned small business, or small disadvantaged business schedule contractor.
Preference for small business items
For orders above the micro-purchase threshold, ordering activities should give preference to items of small business concerns when two or more items at the same delivered price will satisfy the requirement. This is a tie-breaker style preference that applies when price is equal and the items are otherwise acceptable.
Responsibilities
Contracting Officer / Ordering Activity
Decide whether to set aside an order or BPA for an eligible small business program; follow the applicable schedule ordering procedures; verify that part 19 eligibility requirements are met; consider socioeconomic status when selecting contractors; and apply the small business item preference when two or more acceptable items are offered at the same delivered price above the micro-purchase threshold.
Ordering Activity
Track and report small business credit for schedule orders when appropriate; use the correct NAICS code and size standard for the order; and maintain market research and documentation supporting any set-aside, competition, or preference decision.
Schedule Contractor
Maintain accurate small business representations at the contract level; ensure continued eligibility for any claimed socioeconomic status; and, when applicable, respond to rerepresentation requirements that may affect order-level status or reporting.
Agency Small Business Program Officials
Support market research, advise on small business program eligibility, and help the ordering activity identify available small business schedule contractors and applicable socioeconomic categories.
GSA / Schedule Program Administration
Maintain GSA Advantage! and Schedules e-Library information that shows contractors’ small business representations so ordering activities can identify eligible sources and make informed competition decisions.
Practical Implications
This section gives ordering officials real flexibility, but it is not a blanket exemption from small business policy. If you are placing a schedule order, you still need to think about set-asides, socioeconomic targeting, and goal credit.
A common mistake is assuming any order to a small business schedule contractor automatically counts toward small business goals. Credit depends on the contractor meeting the size standard tied to the NAICS code assigned to the order.
Another pitfall is forgetting that part 19 eligibility rules still apply when you set aside a schedule order or BPA. You cannot use the schedule program to bypass the normal small business qualification requirements.
Ordering officials should document why they did or did not set aside an order, especially when market research shows capable small business schedule holders are available. That documentation helps defend the acquisition strategy and supports goal reporting.
When two or more acceptable items are offered at the same delivered price, the small business preference can affect award selection. Buyers should check this rule before making a best-value or lowest-price decision to avoid overlooking a required preference.
Official Regulatory Text
(a) Although the preference programs of part 19 are not mandatory in this subpart, in accordance with section 1331 of Public Law 111-240 ( 15 U.S.C. 644(r) )- (1) Ordering activity contracting officers may, at their discretion- (i) Set aside orders for any of the small business concerns identified in 19.000 (a)(3); and (ii) Set aside BPAs for any of the small business concerns identified in 19.000 (a)(3). (2) When setting aside orders and BPAs- (i) Follow the ordering procedures for Federal Supply Schedules at 8.405-1 , 8.405-2 , and 8.405-3 ; and (ii) The specific small business program eligibility requirements identified in part 19 apply. (b) Orders placed under schedule contracts may be credited toward the ordering activity’s small business goals. For purposes of reporting an order placed with a small business schedule contractor, an ordering agency may only take credit if the awardee meets a size standard that corresponds to the North American Industry Classification System code assigned to the order in accordance with 19.102 (b)(3). Ordering activities should rely on the small business representations made by schedule contractors at the contract level (but see 19.301-2 (b)(3) concerning rerepresentation for an order). (c) Ordering activities may consider socio-economic status when identifying contractor(s) for consideration or competition for award of an order or BPA. At a minimum, ordering activities should consider, if available, at least one small business, veteran-owned small business, service disabled veteran-owned small business, HUBZone small business, women-owned small business, or small disadvantaged business schedule contractor(s). GSA Advantage! and Schedules e-Library at http://www.gsa.gov/fas contain information on the small business representations of Schedule contractors. (d) For orders exceeding the micro-purchase threshold, ordering activities should give preference to the items of small business concerns when two or more items at the same delivered price will satisfy the requirement.