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Congressional Research Service publishes new report on SBA’s HUBZone program

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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

Minority-owned small business government contracting guides

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The blog Government Contracts Insights has published a series of posts (4 total) specific to federal government contracting as a minority-owned small business.  You can find links to the four posts below:

  1. Roadblocks inherent to the public procurement process for minority-owned businesses
  2. Overview of SBA contracting assistance programs
  3. Guide to the 8(a) and HUBZone programs
  4. Access to capital opportunities for minority-owned businesses

The end of an area: planning now for potential loss of HUBZone status

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2021 is an important year for the many HUBZone firms located in redesignated areas that will lose HUBZone status after 12/31/21.  For these firms, the time is now to plan for maintaining HUBZone status in 2022 and beyond.  Here’s what you need to know.

If you are located in a redesignated area that loses HUBZone eligibility after this year, you could make plans this year to move your office to a new location that will still be HUBZone eligible after the end of the year.  Before going that route, however, you should evaluate whether you can qualify your current principal office location to remain HUBZone eligible for at least 10 years under a new rule SBA implemented about one year ago.  According to this rule, if a firm owns its office or enters into a long-term lease (i.e., of at least 10 years) for its office in an area that qualifies as HUBZone at the time of the firm’s initial certification or an annual recertification, SBA will deem the firm’s principal office to be located in a HUBZone for at least 10 years from the date of the certification, as long as the firm maintains the long-term lease or continues to own the property.

Continue reading at:  Piliero Mazza

New Year, New HubZone Program Regulations

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The Small Business Administration (SBA) just rolled out a series of significant changes to the Historically Underutilized Business Zone (HUBZone) Program.  The Final Rule is found here and is now in effect (and has been since December 26, 2019).

The aim of the HUBZone Program is to encourage small business participation in specific geographic areas identified by the Government.  In order to take advantage of the Program’s set-aside contracting opportunities, a business must not only be located in the underutilized area, but must also employ residents of the community (specifically, in order to qualify as a HUBZone, 35% of employees must live in a HUBZone designated area).

These requirements – and the employee residency requirement, in particular – previously made establishing and maintaining HUBZone compliance a challenge.  In fact, running a HUBZone certified company often felt like trying to hit a moving target.

The Final Rule aims to encourage greater use of the HUBZone Program and remove some of the uncertainty outlined above.  Many of the changes are also meant to maximize the benefit to the residents of underutilized communities.

You can continue reading the full article at:  Fox Rothschild LLP

Highlights from the stalled SBA Reauthorization and Improvement Act of 2019

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Last month, Senator Marco Rubio, Chairman of the Senate Committee on Small Business and Entrepreneurship, released the Chairman’s mark to the Small Business Administration (SBA) Reauthorization and Improvement Act of 2019 (the “SBA Reauthorization Act”).  This legislation aims to modernize and streamline SBA programs, and would be the first comprehensive reauthorization of the Small Business Act in nearly twenty years.  Although the legislation appears stalled, it is likely that many of these initiatives will find their way into future policy initiatives.  Here are a few potential changes to track in the SBA Reauthorization Act:

  • Creation of a Centralized Certification Office.  With a few exceptions, small business programs are based on self-certification by each firm.  This legislation would create a centralized certification office for firms wishing to participate in the SBA’s Socially and Economically Disadvantaged Business Development Program (8(a)), Women-Owned Small Business Program (WOSB), Service-Disabled Veteran-Owned Small Business Program (SDVOSB), and Historically Underutilized Business Zone Program (HUBZone).  This would increase certainty for Government officials relying on size representations and reduce the number of speculative size and status protests.  However, it may also create logistical and funding complications for the SBA due to the sheer volume of applications.
  • Increased Sole Source Authority.  To increase the use of sole source awards for small businesses, the legislation would increase the contract-value limit on sole-source awards for the HUBZone, WOSB, and SDVOSB programs – from $6.5 and $7 million to $10 million for manufacturing contracts, and $4 million to $8 million for all other contracts.
  • Increased Venture Capital Investment in WOSBs.  The legislation would allow women-owned and minority-owned firms to accept venture capital and equity investments that would exceed 50 percent ownership of the firm, so long as those venture capital and equity investment firms are themselves women-owned or minority-owned.  This would allow WOSB and 8(a) entities to accept needed investments and still maintain their program status.

Continue reading at:  Morrison & Foerster

Understanding HUBZones

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Location, location.  It’s the biggest factor in the price of real estate but it also gives some businesses an advantage in the highly competitive world of federal contracting.

Where a company’s home office is located and even where its employees live determine whether it gets a bigger slice of the juicy federal pie of contracts and sub-contracts.

The Small Business Administration designates certain geographic locations throughout the country as Historically Underutilized Business Zones, or HUBZones.

HUBZone firms in Madison County were awarded almost $42 million in federal contracts in the 2018 fiscal year, according to Tom Todt, director of the Alabama District office of the U.S. Small Business Administration.

Alabama has 135 HUBZone-certified companies and 47 of those are in Madison County, said Mary Jane Fleming, Procurement Business Adviser for the Alabama Procurement Technical Assistance Center.  That center is co-located with the University of Alabama in Huntsville’s Small Business Development Center at the Huntsville-Madison County Chamber of Commerce.  PTAC helps companies with HUBZone certification and other SBA contracting programs at no cost.

Similar to set-aside contracts for businesses owned by minorities, women or service-disabled veterans, the HUB program is designed to give an advantage to certain areas based on history and demographics.

“The SBA HUBZone program’s purpose is to increase employment opportunities, investments and economic development” in those areas, Fleming said.

Continue reading at:  AL.com

Congressional Research Service issues report on HUBZone program

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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

Clayton County ‘opportunity zone’ which overlaps a HUBZone provides incentives for government contractors

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An Opportunity Zone is a community investment tool established by Congress in the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in low-income urban and rural communities.  Clayton County has set aside funds to grant to small businesses as their down payment for a SBA-backed loan should they choose to relocate to Clayton County’s Opportunity Zone.  The area is also located directly next to the Hartsfield-Jackson International Airport, making exporting a reality for businesses located in the Opportunity Zone.  The Opportunity Zone located in Clayton County overlaps as a HUBZone as well, providing additional potential advantages if the small business qualifies for the HUBZone program (Please note that to qualify for the HUBZone program, not only does your principal place of business need to reside in a HUBZone, but the requisite number of employees, 35%, need to also reside in a HUBZone to qualify). 

You can learn more about the Clayton County “opportunity zone” incentives here:  Atlanta Small Business Network

See also:  SBA posting regarding Clayton County “opportunity zone.”

You can learn more about the SBA HUBZone program here:  SBA HUBZone Program website

SBA proposes big changes to the HUBZone program

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The SBA’s Historically Underutilized Business Zone program intends well—by directing awards to contractors in regions that have been passed by economically, the federal government has tried to lift these areas up.

But the HUBZone program has exacting regulations, which (ironically) have helped cause it to be an underutilized tool for contracting officers. This could soon change.

On October 31, the SBA published a proposed rule that, if adopted, would bring clarity to the HUBZone regulations. In this post, we wanted to bring you up to speed on some of the more substantive proposed changes regarding certification requirements and the HUBZone protest process. Changes to employee definitions and requirements will be handled in another post.

Keep reading this article at: http://smallgovcon.com/hubzone-program/sba-proposes-big-changes-to-the-hubzone-program/

SBA’s Georgia district office conducts monthly 8(a) and HUBZone workshops in Atlanta

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The U.S. Small Business Administration’s Georgia District Office conducts monthly workshops which provide an overview of the requirements for eligible small businesses to participate in the 8(a) and the HUBZone programs.

These free workshops are scheduled to be conducted in Atlanta on Oct. 10, Nov. 14, and Dec. 12, 2018.

They are held at 10:00 am at Suite 300, 233 Peachtree Street, NE, Harris Tower, Atlanta, GA 30303.

Advance registration is required and can be accomplished at: https://www.eventbrite.com/e/8a-hubzone-workshop-tickets-41770204807

 

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