Set-asides for federal contracts have been a lifeline for small and diverse contractors. By insisting that small/certified contractors receive a share of a contract, the federal government enabled firms that might not have received consideration for a job to gain an opportunity.
The Trump–Vance administration has vowed to end set-asides, and some federal agencies are taking steps in that direction. The General Services Administration (GSA) and the U.S. Department of Transportation (U.S. DOT) have already implemented changes that affect supplier diversity.
Consider the U.S. DOT’s recent instruction to state DOTs and highway administrations (SHAs) that they are "prohibited from engaging in discriminatory actions through their own policies, programs, and activities, including the administration of contracts and their employment practices."
The notice adds that "…policies, programs, or activities that discriminate on the basis of race, color, national origin, sex, or religion… violate federal law and violate the terms of the DOT grant agreements." Personnel practices, including hiring, fall under this umbrella.
Similar changes are in motion at GSA.
If you're a certified subcontractor, these developments may feel unsettling. But like most shifts, they bring both challenges and opportunities — and it’s worth noting that not all government entities are moving in the same direction. Many state and local agencies are actively revisiting how they support small businesses, creating new openings in other parts of the market.
Opportunity 1: Skilled, not just Diverse
The new normal puts the emphasis squarely on skill level and bid price. Every subcontractor is competing on the same criteria.
That means when a subcontractor wins the job, it’s based on merit — not just certification status. This can clear away past doubts about whether a certified sub was the “best choice,” and can help build respect for your capabilities on the job site.
Challenge 1: End/Reduction of Special Consideration
There’s no way to ignore it — some government contracts will no longer require the inclusion of certified subcontractors. The diversity-driven opportunities that once came to you more easily will take more effort to secure.
The old model is shifting. You’ll need to be proactive about increasing your visibility, promoting your skills, and marketing your services effectively. The upside? Doing so now builds a stronger, more resilient pipeline for the future.
Opportunity 2: Relationship Building Based on Skills
In 2024, the Federal Government awarded over $773 billion in contracts. That spend isn’t disappearing — and agencies still need talented subcontractors.
The shortage of skilled labor in the U.S. means general contractors are actively looking for subs they can trust. If you have in-demand expertise, you’ll remain in high demand. Attend industry days, join matchmaking events, and stay close to your network so your name comes up when those opportunities appear.
Many small business programs — especially at the state level — are retooling to fit within new guidelines. Position yourself now to be part of those evolving opportunities.
Challenge 2: Getting to the Next Step
Government jobs have long been a stepping stone for small, certified firms to grow their portfolio and move into larger private-sector work. Losing some of those set-aside opportunities can make that leap harder.
But by targeting the right jobs and building a reputation for delivering quality work, you can still create that bridge — even if it takes more intentional effort to get there.
Opportunity 3: Emphasize Value, Control Costs
Small firms often have lower overhead and can price competitively without sacrificing profit. With the focus shifting to price and performance, this is a clear advantage.
If you can show you’re the most cost-effective choice for a job while still meeting quality standards, you can win bids against larger competitors.
Challenge 3: Harder to Secure Capital
Banks like stability, and government contracts have historically made it easier for small businesses to secure loans on favorable terms. With fewer set-asides, that track record may take longer to build.
This makes it all the more important to diversify your pipeline and seek both public and private opportunities — something Tough Leaf helps businesses do every day.
Conclusion
The removal of carve-outs and reduced emphasis on diversity in some federal agencies makes securing certain government contracts more competitive. But it’s not the end of the story. Billions in contracts are still awarded annually, and many agencies are adapting their programs to continue engaging small businesses.
By focusing on your skills, building strong relationships, keeping costs in check, and seeking opportunities in both the public and private sectors, you can continue to thrive.
If you’re a government team looking for ways to adapt your program to these changes while still engaging small businesses — Tough Leaf can help you navigate that transition.
If you’re a subcontractor searching for the right projects and the right connections — Tough Leaf can help you find and win them.
The rules may be changing, but with the right strategy, your opportunities can grow.