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 July 5, 2019, the SBA’s Dynamic Small Business Search database included 6,897 firms with active HUBZone certifications.

In FY2018, the federal government awarded $9.8 billion to HUBZone-certified businesses.  About $2.3 billion of that amount was awarded with a HUBZone preference ($2.1 billion through a HUBZone set-aside, $112.6 million through a HUBZone sole-source award, and $100.7 million through a HUBZone price-evaluation preference).  About $1.8 billion was awarded to HUBZone certified businesses in open competition with other firms.  The remaining $5.7 billion was awarded with another small business preference (e.g., set aside and sole source awards for small business generally and for 8(a), women-owned, and service-disabled veteran-owned small businesses).

The HUBZone program’s administrative cost is about $8.4 million annually.  It received an appropriation of $3.0 million for FY2019, 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 due to GAO reports of fraud in the program and efforts by small businesses to ease HUBZone eligibility requirements.

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 continuation of the HUBZone program.

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.

Continue reading at:  https://crsreports.congress.gov/product/pdf/R/R41268