The HUBZone Program was enacted by the HUBZone Act of 1997 and the Small Business Administration has set forth regulations implementing the Program in June 1998 to become effective October 1. The purpose of the HUBZone Program is to provide federal contracting opportunities for certain qualified small business concerns (SBCs) located in distressed communities in order to foster private-sector investment and employment opportunities. Unlike other SBA programs such as 8(a), set-asides for small disadvantaged business and women-owned firms, the program is (1) race and gender neutral and (2) designed to help communities rather than businesses owned by specific type of individuals.

An eligible firm will become a certified HUBZone business and placed on a list that all participating government agencies can use. Once it is decided that HUBZone status will be a consideration for contract award, the listed firm can either be awarded a sole source contract, compete for an award against only other eligible HUBZone firms or be given a price preference when competing against all other firms.

1. A HUBZone SBC must be a small business. Though originally envisioned to apply to all business regardless of size, the Program is currently limited to small businesses owned and controlled by US citizens. A small business is considered small by the SBA size standards for its standard industry classification (SIC) code at the time of contract offer. The SBC must be a small business corresponding to the SIC code assigned to the contract.

Since statistics on qualified census tracts and qualified non-metropolitan counties change resulting in some areas no longer meeting the definition, SBCs may remain on the list for another three years after change in status.

"Principle office" refers to the location where the greatest number of employees at any one location perform their work. The SBC may have other offices or facilities, whether or not in HUBZones, and may also have affiliates as long as they are qualified HUBZone SBCs, 8(a) firms or women owned businesses.

3. At least 35% of the concerns employees must reside in a HUBZone. "Employees" are considered people employed by a qualified SBC on a full time (or full time equivalent) permanent basis who works 30 or more hours per week. Full time equivalent also includes employees working less than 30 hours where work hours of such employees add up to, at least, 40 hours per work week. Temporary employees, independent contractors or leased employees are not considered employees. To "reside" in a HUBZone, an employee must either be registered to vote in the area or have lived in the HUBZone for 180 days.

A concern must apply to the SBA for certification. If the SBA determines the concern is a qualified HUBZone SBC, it will issue a certification and add it to the database so that all government agencies may access it at http://www.sba.gov/HUB (not yet operational as of this writing). To be certified, a concern must represent to the SBA:

1. It is a small business and is owned and controlled by a US citizen.

2. Its principle office is located in a HUBZone.

3. Not less than 35% of its current employees reside in a HUBZone.

4. It will use a good faith effort to ensure that 35% of its employees will continue to reside in a HUBZone as long as it is qualified and during performance of any contract awarded to it on the basis of them being qualified.

5. When it enters into subcontracts it will ensure that specified percentages of contract costs for itself and its subcontractors are incurred in HUBZones:

For service contracts, 50%

For manufactured goods, 50% (excluding material costs)

For general construction, 15% of labor costs

For special trade contruction, 25% of labor costs

Application for certification may be in writing or it is expected the SBA will implement an electronic form in the future.

Once certified, the SBC will self-certify annually if it wishes to remain on the list. To prevent interruption, it must self-certify within 30 calendar days after the one year anniversary. The self-certification must be in writing, stating that its circumstances making it eligible have not materially changed.

The following procurement methods for awarding contracts to HUBZone SBCs are:

Sole source awards to qualified SBCs.

Set-aside awards based on competition that is restricted to HUBZone SBCs.

Awards to qualified HUBZone SBCs through full and open competition after a price evaluation preference up to 10% in favor of qualified HUBZone SBC.

The Contracting Officer decides if a HUBZone opportunity exists. A HUBZone opportunity cannot exist if:

Either an 8(a) firm is currently performing the requirement or the SBA has accepted that the work will be performed under 8(a) set aside. A HUBZOne award may be awarded if neither the incumbent nor other 8(a) firms can perform the work.

The estimated value of the work is between $2,500 and $100,000, which is work procured under simplified acquisition procedures open to all small businesses.

The contracting activity otherwise would fulfill the requirement through award to Federal Prison Industries, Inc. or to Javitz-Wagner-O’Day non-profit agencies for the blind and severely disabled.

If the above conditions are not met, the CO must review the SBA’s list of qualified HUBZones SBC and then must set aside the requirement for competition restricted to qualified SBCs if the contracting officer:

Has a reasonable expectation that at least 2 qualified HUBZone SBCs will submit offers.

Determines that award can be made at a fair price

Under a HUBZone set-aside competition, if the CO receives only one acceptable offer from a HUBZone SBC it may make an award to that offeror on a sole source basis. A CO may award a sole source contract only if it determines (1) none of the three exclusions above apply (2) the anticipated award price will not exceed $5,000,000 for SIC manufacturing codes or $3,000,000 for all other SIC codes (3) two or more qualified HUBZone SBCs are unlikely to submit offers (4) the qualified HUBZone SBC is a responsible offeror able to perform the contract and (5) contract award can be made at a fair and reasonable price.

If still no acceptable offers are received, the CO may withdraw the HUBZone set aside competition and resolicit it as an 8(a) contract or small business set-aside. If procurement is not possible through either an 8(a) or small business set-aside, the CO may then resolicit the procurement to all through a full and open competition.

Qualified SBC’s need to be vigilant in their awareness of contracting opportunities because they can reverse a CO’s decision not to have a HUBZOne set-aside. Such an appeal must go through the SBA who must notify the CO within 5 business days of its decision. All procurement activity is supposed to stop until the head of the contracting activity issues a written decision on the SBA appeal.

A price preference can be used during full and open competitions. It works by adding 10% to the non-HUBZone offeror’s price and comparing the result. If after the 10% increase the HUBZone firm is lower, the CO must conclude it is the lowest price, responsible offeror.

What about price preferences for small disadvantaged firms? The CO must apply the 10% price preference for the SDB first and then apply it to the HUBZone firm. If the firm is both an SDB and HUBZone firm, the CO must apply both price preferences.

An example is provided: In a full, open competition, a HUBZone SBC offers $102; an SDB (who is not HUBZone qualified) offers $107 and a large business offers $93. The first step is to apply the SDB10% increase to the HUBZone firm, resulting in $112.2 and to the large business resulting in an offer of $102.3 that makes the large business lowest. Next, the 10% HUBZone preference is added to the large business resulting in an award for the HUBZone firm since its price is not more than 10% higher than the large business.

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