The Historically Underutilized Business Zone Empowerment Contracting (HUBZone) program provides participating small businesses located in areas with low income, high poverty, or high unemployment with contracting opportunities in the form of set-asides, sole-source awards, and price-evaluation preferences. Its primary objectives are job creation and increased capital investment in distressed communities. Firms must be certified by the SBA to participate in the program. As of February 9, 2021, the SBA’s Dynamic Small Business Search database included 7,720 firms with active HUBZone certifications.
In FY2019, the federal government awarded $11.5 billion to HUBZone-certified businesses. About $2.0 billion of that amount was awarded with a HUBZone preference ($1.9 billion through a HUBZone set-aside, $95.0 million through a HUBZone sole-source award, and $72.5 million through a HUBZone price-evaluation preference). About $2.8 billion was awarded to HUBZone certified businesses in open competition with other firms. The remaining $6.7 billion was awarded with another small business preference (e.g., for small businesses generally or for 8(a), women-owned, and service-disabled veteran-owned small businesses).
The HUBZone program’s administrative cost is about $11.7 million annually. It received an appropriation of $3.0 million for FY2021, with the additional cost of administering the program provided by the SBA’s appropriation for salaries and general administrative expenses.
Congressional interest in the HUBZone program has increased in recent years, primarily because the program has had difficulty reaching its 3% contracting goal.
This report examines arguments both for and against targeting assistance to geographic areas with specified characteristics as opposed to providing assistance to people or businesses with specified characteristics. It then assesses the arguments both for and against the program’s continuation.
The report also discusses the HUBZone program’s structure and operation, focusing on the definition of HUBZone areas and HUBZone small businesses and the program’s performance relative to federal contracting goals. It includes an analysis of the SBA’s administration of the program and the SBA’s performance measures.
This report also examines HUBZone-related legislation, including P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018, which, among other provisions, allows small businesses that have HUBZone status on or before December 31, 2019, to retain that status until the SBA prepares an updated online tool depicting HUBZone qualified areas based on the 2020 Census (anticipated by the SBA to take place in December 2021). Once operational, the new online tool (currently called the HUBZone map) must be updated every five years for qualified census tracts and nonmetropolitan counties and when a change in status takes place for other HUBZone types (e.g., when an area becomes or ceases to be a redesignated area or a base closure area). Also, governors, starting on January 1, 2020, may petition the SBA each year to designate areas located in nonurban areas, with a population of 50,000 or fewer, and an average unemployment rate at least 120% of the national or state average, whichever is lower, as HUBZones. The SBA is also required, not later than one year after enactment, to publish performance metrics measuring the HUBZone program’s success in promoting economic development in economically distressed areas.
Read the full report here: https://crsreports.congress.gov/product/pdf/R/R41268
