cheryl adams hubzone lawyerBy Cheryl E. Adams, Esq.

You may need to beat a competitor’s price by 10% to win a government contract, if your firm is not an SBA certified HUBZone small business concern.  Also, sometimes the government will set-aside a procurement for HUBZone entities, which means only SBA certified HUBZone concerns are eligible to win the contract.  These are two examples of situations where having a valid SBA HUBZone certification could be essential to winning a lucrative federal government contract.

If your SBA certified HUBZone competitor fails to meet requirements for HUBZone certification, in some situations a government contract award to that competitor could be overturned.  Also, contract awards can be challenged where the government’s price analysis is flawed and fails to properly account for the 10% price preference in favor of SBA HUBZone small business concerns.

If your firm is HUBZone certified, it is important to ensure that you understand the rules and comply, otherwise potentially you leave your company vulnerable to attack from competitors.  It takes a lot of resources to win a government contract.  Do not risk having the contract snatched away from you through your own failure to maintain compliance with your HUBZone qualifications.

Bid Protest Basics

It is important to know that the rules for a pre-award bid protest are different from the rules for a post-award bid protest.

Pre-award Bid Protest:  In general, pre-award bid protests must be filed before offers are due.  For example, if the solicitation’s evaluation factors or other requirements do not make sense or are inconsistent, or key provisions are left out, a protester might need to take steps to ensure that type of issue is either resolved or protested before offers are due.  If you miss the deadline for a pre-award protest, often you cannot simply wait until after you know whether you won the contract to protest.  If you do that, you could lose your opportunity to challenge.

Post-award Bid Protest:  In general, post-award bid protests involve facts that the protester could not have known about before offers were due.  Often challenges involving mistakes the government made when it evaluated offers are the subject of post-award protests.  For example, if the contracting officer failed to follow the evaluation requirements written in the solicitation, and instead used some other process to award the contract, that mistake might be the subject of a post-award protest.

Best Practice Regardless whether you win the contract or not, ask for a post-award debriefing from the Contracting Officer.  If available, the post award debriefing is designed to help offerors submit better proposals in the future.  It can also provide some new insight into how the Contracting Officer evaluated proposals.

Intervenor:  If you win a government contract, and a competitor launches a bid protest or other litigation against the government, sometimes you and your legal team can be an “intervenor” and help the government fight back to protect the contract award.  The government often welcomes the resources an intervenor can provide when it faces litigation challenging its decisions.  Do not be afraid to consider intervening if you win a contract, and a competitor launches a protest or appeal.

SBA Protests:  Certain types of protests, or appeals, must be heard by SBA.  For example, challenges alleging violations of SBA’s size standard rules, or violations of SBA’s HUBZone certification rules, normally must be brought to SBA, not the U.S. Court of Federal Claims (COFC), the General Accountability Office (GAO) or the boards of contract appeals.

SBA HUBZone Compliance Bid Protests

Where an offeror’s compliance with SBA HUBZone certification requirements is at issue, the process for a protest is significantly different from the process for other types of bid protests. Here, the primary goal is to further the public policy of helping the economic development for people living in HUBZone areas.

Thus, the bid protest system helps ensure that HUBZone contract awards, and HUBZone price preferences, are awarded only to businesses that comply with the requirements of the program.

Enforcement of the HUBZone requirements is the responsibility of the U.S. Small Business Administration (“SBA”).  SBA enforcement is accomplished through a variety of mechanisms, including:

(1) HUBZone small businesses are required to self-report to SBA material changes affecting their status.

(2) SBA will consider “specific and credible” information from third parties, alleging that a certified HUBZone small business concern no longer meets the eligibility requirements for continued program eligibility.

(3) SBA has a decertification process, which includes both voluntary decertification, as well as an SBA-initiated decertification process.  See 13 CFR 126.309.

If the SBA HUBZone certified offeror is not a small business

One requirement of HUBZone certification is the concern must be “small” under the size standards for the applicable NAICS codes.  Thus, a bid protest alleging that the HUBZone offeror is not small (and is therefore ineligible to receive the contract award) would be an SBA size protest.  The process for obtaining a size determination from the SBA Area Office would be followed, and SBA’s Office of Hearings and Appeals (“SBA OHA”) would hear challenges to the SBA Area Office’s size determinations.

If the SBA HUBZone small business concern failed to comply with other HUBZone requirements

Basic Rules:  FAR 19.306 provides the basic rules for protesting award of a contract to a HUBZone small business concern.  Bid protests must be in writing.  The firm in question must be the apparently successful offeror.  Also the HUBZone status of a Joint Venture who is an apparently successful offeror may be protested.  See also 13 CFR 126.8.   See generally 13 CFR 126.8

For procurements other than sole source awards, the protester must be either:

(1)  An “interested party.” Interested parties submit their protests to the contracting officer (“CO”).  The CO must forward to SBA any non-premature protest received, notwithstanding whether he or she believes it is sufficiently specific or timely.

(2) the contracting officer; or

(3) the SBA.

Only SBA or the CO may protest the proposed awardee’s status as a certified HUBZone small business concern.

Grounds for Filing a Bid Protest:  SBA will consider HUBZone status protests based on grounds for protest:

(1) The concern is not a qualified HUBZone small business concern as described at 13 CFR 126.103 and 13 CFR 126.200;

(2) The principal office is not located in a HUBZone; or

(3) At least 35 percent of the employees do not reside in a HUBZone.  Note that where a firm has been hiring new employees, under the SBA rules it may only be obligated to “attempt to maintain” 35% employee HUBZone residency.  Where the “attempt to maintain” rules apply, a firm might not be in violation unless it falls below a 20% HUBZone residency floor.

(4) Additionally, SBA will consider protests regarding a Joint Venture’s failure to meet eligibility requirements of 13 CFR §126.200 (at time of most recent certification or recertification) and / or §126.616 (at time of offer submission).

Timing and eligibility for HUBZone contracts: SBA adopted new eligibility rules, effective December 26, 2019.  When protesting, it can be helpful to remember that under the new rules, a HUBZone small business concern is eligible to receive government contracts as of:

(1) the date of its initial certification; or

(2) the date of its most recent recertification

whichever is later in time.  After a concern completes its annual recertification, any subsequent protests during that year relate back to its eligibility as of the date of recertification.

Filing deadline – 5th Business Day – usually:  The deadline for filing a HUBZone status bid protest can be found at 13 CFR 126.801.  Currently, for “interested parties” filing a protest, the deadline is:

(1) Negotiated acquisitions:  Close of business on the fifth business day after notification by the contracting officer of the apparent successful offeror (exceptions apply for Federal Supply Schedule procurements,  Multiple Award Contracts, and where the CO requested recertification of HUBZone status);

(2) Sealed bid acquisitions:  by close of business on the fifth business day after bid opening, or if the price evaluation preference was not applied at the time of bid opening, by close of business on the fifth business day from the date of identification of the apparent successful offeror.

Bid protests are premature if filed prior to bid opening or notification of intended award.

5 day deadline to respond to a HUBZone protest A firm has five days after receiving notification of a “timely and specific” protest to provide responsive information to SBA.

SBA D/HUB decides HUBZone status cases in 15 days:  Unless the protest is dismissed, the SBA D/HUB will determine the status of the protested small business concern within 15 business days after receipt of a complete protest referral.  The D/HUB determination is effective immediately and is final unless overturned on appeal by the AA/GC&BD, or designee, pursuant to §126.805.

A concern found to be ineligible is precluded from applying for HUBZone certification for ninety (90) calendar days from the date of the final agency decision (the D/HUB’s decision if no appeal is filed, or the decision of the AA/GC&BD if the protest is appealed).

Appeals of SBA HUBZone Status Decisions

The deadline to appeal a HUBZone status determination is currently five business days after the date of receipt of the protest determination. SBA will dismiss any appeal received after the five-day period.

SBA will re-examine a protest determination only if there was a clear and significant error in the processing of the protest or if the D/HUB failed completely to consider a significant fact contained within the information supplied by the protestor or the protested HUBZone small business concern.  SBA will not consider additional information or changed circumstances that were not disclosed at the time of the D/HUB’s decision or that are based on disagreement with the findings and conclusions contained in the determination.

AA/GC&BD decides HUBZone status appeals in 5 days The AA/GC&BD, or designee will make a decision within five business days of receipt of the appeal, if practicable.  The ADA/GC&BD’s decision is the final agency decision.

Final agency decisions, of course, can be appealed to higher courts. See generally 13 CFR 126.8o5.

Protesting both small business size and HUBZone status

If an interested party intends to protest both the small business size and HUBZone status of an apparent successful offeror, it must file two separate protests.  FAR 19.306(c).

Bid Protests –Potential Bid Protest Issues for Protest Venues Other Than SBA

Two issues to look for if you are considering a protest to a venue or forum other than SBA might include:

(1) The solicitation is missing FAR 52.219-4

 As a general rule, contracting officers are required to include the clause at 52.219-4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns, in solicitations and contracts for acquisitions conducted using full and open competition.  See FAR 19.1309.   

FAR 52.219-4 provides that offers submitted by qualified HUBZone businesses will be evaluated by adding a factor of 10 percent to the price of all other offers.  Except… the contracting officer will not add the factor of 10 percent HUBzone price preference to offers from other (a) small businesses concerns or (b) other HUBZone small businesses that did not waive the evaluation preference.

This requirement applies broadly to all federal agencies that employ one or more contracting officer.  If a procurement is for full and open competition, and this provision is not in the solicitation, the omission should be brought to the attention of the contracting officer before offers are due.

There are some exceptions to the requirement to include FAR 52.219-4, so it is not always a mistake for the contracting officer to leave it out.

Case law indicates that even if FAR 52.219-4 is omitted from a solicitation where it was required, the statute 15 USC 657a(b)(3)(A) requires the 10% price evaluation factor in favor of HUBZone small businesses to be applied anyway.  See Delany Construction Corporation v US,  Court of Federal Claims No. 03-193C (May 19, 2003)

(2) The 10% problem – price evaluation

In the event that a solicitation for a full and open competition procurement does include the 10% price evaluation factor in favor of SBA HUBZone small businesses, it has not always been an easy matter for the government to apply the 10% factor.  As case law shows, misunderstandings between the government and contractors often centers on whether the government properly applied the 10% price evaluation preference for small business HUBZone offerors.

In one case, once bidders’ prices were submitted and the 10% HUBZone factor was applied, it found that the “prices of all the other bidders, including plaintiff, would be outside [the government cost estimates price reasonableness] range were the 10 percent HUBZone evaluation factor added thereto.”  This revision resulted in litigation.  Manson Constr. Co. v US, 64 Fed. Cl. 746 (Feb 14, 2005).

Complications can arise in a best value analysis, where the contracting officer has failed to adjust prices to account for the 10% HUBZone preference.  Depending on how the best value analysis is performed, the omission may (or may not) be harmless error.  See Gulf Group, Inc. v US, 61 Fed C. 338, No. 03-2793C (July 16, 2004)

SBA Can Appeal A Contracting Officer Decision Not to Set Aside a Procurement for HUBZone Firms

The Federal Acquisition Regulation (“FAR”) includes a preference for competitions between two or more HUBZone firms over HUBZone sole source procurements.

To set aside an acquisition for competition restricted to HUBZone small business concerns, the contracting officer must have a reasonable expectation that-

(1) Offers will be received from two or more HUBZone small business concerns; and

(2) Award will be made at a fair market price.

FAR 19.1305 includes a process that allows SBA to appeal in the event a contracting officer rejects an SBA recommendation to set-aside an acquisition for HUBZone small business concerns.

Call Our HUBZone Lawyers for Immediate Help

For help with your SBA HUBZone bid protest or appeal issues, please contact our government contract small business attorneys at 1-866-601-5518 for a FREE 30 MINUTE CONSULTATION.