How to Avoid Mistakes Meeting SBA Historically Underutilized Business Zone HUBZone Bidding Qualifications

HUBZone Definition

The HUBZone Program (Historically Underutilized Business Zone) is a United States Small Business Administration (SBA) program that provides some level of government contracting preferences for small company owners that operate their principle place of business in a designated consensus track and also provide jobs to employees who live in a HUBZone. To meet the HUBZOne definition, small businesses must also meet the 35% employee residency requirement.

The HUBZone program was developed under the HUBZone Empowerment Act created by the US Congress in 1998. Congress gave the SBA exclusive authority to oversee the HUBZone Program.

After you get SBA HUBZone certified, can walk into deadly landmines when trying to meet the HUBZone bidding qualifications and requirements for HUBZone small business set-asides.

The rules are very strict. Failing to meet them can cause you to lose out on millions in business revenues.

Basic Historically Underutilized Business Zone (HUBZone Definition) Eligibility Requirements

To qualify for the SBA HUBZone Program, your small business (except tribally-owned concerns) must meet the following requirements:

  • It must be a small business by SBA standards
  • It must be owned and controlled at least 51% by U.S. citizens, or a Community Development Corporation, an agricultural cooperative, or an Indian tribe
  • Its principal office must be located within a “Historically Underutilized Business Zone (HUBZone Certification),” which includes lands considered “Indian Country” and military facilities closed by the Base Realignment and Closure Act
  • At least 35% of its employees must reside in a HUBZone.

Under the 13 CFR 126.300, to participate in the SBA HUBZone Program, small businesses must first get certified through the SBA. One of the most common mistakes made by applicants is  meeting the program’s 35% residency requirement. 13 CFR 126.200(b)(4) requires that “[a]t least 35% of the [business’s] employees must reside in a HUBZone.”

This issues usually surfaces during HUBZone set-asides when bidder must meet the HUBZone eligibility requirements both at the time of the bid offer  and award.   The US Court of Federal Claims has addressed this very issue in a recent bid protest case.

HUBZone Status and HUBZone Requirements for Bidding (13 CFR 126.6)

Under 13 CFR 126.601(c), HUBZone small business must meet the 35% residency requirements both on the date of the offer and at the time of the award.  When a company challenges the HUBZone requirements for bidding in a bid protest, companies may have to present support eligibility documents to the SBA including (a) company payroll records  showing all employees and number of hours worked per week at the time of offer and at the time of award, (b) for employees who worked less than 40 hours during the week when the offer was submitted or during the week of award, the SBA may ask you to submit supporting documents to show that your employees worked at least 40 hours in a month as of the date of offer and the time of award, (c) supporting documents  showing the home address of each HUBZone resident employee  at the time offers were submitted and at the time of award, including copies of driver’s licenses or voter registration cards showing that the employee’s home address is in a HUBZone.

13 CFR 126. SBA HUBZone Qualifications — Employee Definition

What is an employee under the HUBZone regulations?  Under 13 CFR 126.103, the definition of  “employee” means “all individuals employed on a full-time, part-time, or other basis, so long as that individual works a minimum of 40 hours per month.”

Under the HUBZone regulations, the SBA qualifications guidelines look at “the totality of the circumstances, including criteria used by the IRS for Federal income tax purposes and those set forth in SBA’s Size Policy Statement No. 1.”

Can the Court of Federal Claims Hear HUBZone Protest Decisions? 28 USC 1491(b)(1) defines the  Court of Federal Claims’ bid protest jurisdiction. The  Claims Court can “render judgment on an action by an interested party objecting to . . . a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” This means that once there is an objection to a solicitation or the award of the contract, the Court of Federal Claims can hear your case.

Also, if there are objections related to a statutory or regulatory violation, such as SBA HUBZone regulations, that are in connection with the specific procurement or proposed procurement, the Claims Court has jurisdiction to hear your case. See Sys. Application & Techs., Inc. v. United States, 691 F.3d 1374, 1380–81 (2012).  

In addition, you also still have to meet the interested party requirement need to file a bid protest.  See CGI Fed. Inc. v. United States, 779 F.3d 1346, 1348 (Fed. Cir. 2015); Myers Investigative and Sec. Servs., Inc. v. United States, 275 F.3d 1366, 1369 (Fed. Cir. 2002).

Termination from the SBA HUBZone Program: What happens if you don’t provide sufficient documentation to meet the HUBZone requirements and qualifications for employee residency requirements? Under 13 CFR 126.306, the HUBZone small business has the burden of proof to show its continuing eligibility. Failure to provide supporting documentation to meet the bidding requirements to the SBA can result in an adverse action which includes immediate termination from the HUBZone Program.

Avoid Costly Mistakes in SBA Program Litigation. See What We Do to Help

For help in SBA HUBZone bid protests or HUBZone status litigation, call our government small business lawyers at 1-866-601-5518.