What is the SBA HUBZone Program?
Compliance with the regulations and law can help you to avoid criminal liability for HUBZone fraud.
As a small business, you can qualify for the SBA HUBZone ( Historically Underutilized Business Zone Program). This is a unique opportunity for small businesses to gain access to federal contracting dollars. In addition, Congress has mandated that government contracting agencies attempt to award at least three percent of all federal government contracting dollars to HUBZone-certified small businesses each year.
HUBZone Definition – What is a HUBZone?
The SBA HUBZone Program is a United States Small Business Administration (SBA) program for small companies that operate and employ people in Historically Underutilized Business Zones. The identified tracts that qualify as a HUBZone really focus on the areas nationally and locally that have high unemployment rates, and low economy and are really under the radar when compared to other areas throughout the United States. Under the HUBZone definition, and if you are fortunate to become Certified, your revenues will arguably be infused into the HUBZone area and boost the local economy.
The program was created in response to the HUBZone Empowerment Act created by the US Congress in 1998 If you are located in a HUBZone, it can greatly benefit your company. Like anything else, you have to meet very specific requirements to take advantage of the program.
SBA HUB Zone Advantages and Benefits
When you become certified, you can immediately take advantage of the many HUB Zone benefits of being a small business government contractor. The first benefit of being in the program is that you become part of the elite group of bidders that are in historically underutilized business zones. Being part of this SBA Program opens the door to getting federal contracts and getting certain preferential considerations when solicitations are part of full and open competition. 13 CFR 125.6 Understanding Rules of Prime Contractor’s Limitations on Subcontracting FAR 52.219 14
- If you are trying to get SBA government contracts, you can get a 10 % price preference when you meet certain conditions during the proposal evaluation stage.
- You can bid special small business set-asides where others not in the SBA Program cannot.
- There is no expiration date for being in the Program
Historically Underutilized Business Zone Program Requirements
To become eligible for SBA HUBZone contracts, you must meet specific requirements. Your company must:
- Meet the legal requirements of a small business
- Be at least 51 percent owned and controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative, a Native Hawaiian organization, or an Indian tribe
- Have its principal office located in a HUBZone
- Have at least 35 percent of its employees live in a Historically Underutilized Business Zone
SBA requirements are governed by 13 CFR Part 126 Subpart B. The key aspect for meeting the SBA Historically Underutilized Business Program requirements is to be owned and controlled by an eligible person. This is where most challenges to your status lie. When your competition thinks that you are violating the legal requirements, it will file a HUBZone Protest at the SBA. See information about SBA Affiliation Meaning & Ostensible Definition.
For HUBZone Certified Contractors, Maintaining Your Certification is Critical
Once you are SBA certified, you must re-certify your status every three years. So long as you meet the requirements, your company can continue to reap the SBA HUBZone advantages indefinitely. This is different than the 8(a) BD Program which only limits participation to nine years.
To continue in the Historically Underutilized Business Zone Program, you also must notify the SBA if there are material changes that would impact your status. This includes:
- Change in business structure
- Change in the principal office
- Falling below the 35% employee HUBZone residency requirement
How Long Does it Take to Get HUBZone Certified?
When you have the initial SBA HUB Zone Application ready for processing, the SBA will give you approximately ten business days to submit all supporting documentation electronically. Once the SBA believes that your application is sufficient and complete, it generally takes approximately 90-120 days to get a response from the SBA and be notified of a decision. However, keep in mind that the SBA often takes longer due to internal workload. Learn about Consequences of Procurement Fraud Schemes & Avoiding Criminal Liability
Problems to Watch out For As a Certified Company
A common problem still lurks when SBA small business contracts are awarded to small businesses but the subcontracted amount or work violates the limitations on subcontracting rules. If you are a HUB Zone certified company, in order to prevail in a size protest or challenge to your status, you must bring more than your status to the table than your status. See also information about avoiding mistakes with SDVOSB joint venture.
The other problem that many small businesses tend to encounter is not meeting the similarly situated small business status. There is still confusion as to what are the limitations on subcontracting requirements versus what you can actually subcontract out to other small businesses and still avoid affiliation. Find out more about SBA Sets Record Straight On DOD Mentor Protege Programs 13 CFR 125.9 & 13 CFR 124.520.
Is HUBZone Set-Asides Mandatory?
The SBA Historically Underutilized Business Zone Program helps small businesses that are located in economically disadvantaged or distressed areas. The contracting agency is not mandated to set aside all contracts for a certified HUBZone company. However, if considering a set-aside, then SBA HUBZone contracts can be restricted to qualified small business concerns if the contracting officer has a reasonable expectation that at least two qualified Historically Underutilized Business Program concerns “…will submit offers and that the award can be made at fair market price.” See 15 USC 657a (B) (2000).
How to Avoid HUBZone Fraud
Many certified contractors face criminal charges for HUBZone company fraud. Sometimes, the small business owners may not be aware of the compliance rules or simply made an honest mistake. Nevertheless, various federal agencies are recently conducting an increased amount of IG investigations. The DOJ is also conducting federal investigations against small businesses for fraud. Companies can avoid adverse decisions by simply following the limitations on subcontracting rules, preparing and drafting legally sound teaming agreements, in addition to avoiding the appearance of having pass-through contractors. These areas are where our HUBZone fraud lawyers can help. See also information about SBA mentor protege relationships.
We are Here to Help Maximize Your Outcomes
For immediate help getting federal contracts and HUB Zone certified, finding out what qualifies as a HUBZone, capitalizing on advantages, litigation or other issues with the program, contact our Government SBA HUBZone Program lawyers at 1-866-601-5518.