How Can the HUBZone Help?

The world of government contracting can be a difficult world to establish a new business, especially a small business. This has been addressed through the ‘Small Business Reauthorization Act of 1997’.  As a result, the Small Business Administration (SBA) created the Historically Underutilized Business Zones program (HUBZone) to help small businesses be competitive in the government contracting world.  This program provides four key benefits. There several requirements a business must meet in order to qualify for those benefits.

Benefits

10% Preference –The HUBZone business receives a 10% advantage over large businesses under US Code 13 CFR 126.613 guidelines. The business receives this advantage when the proposal submitted is not more than 10% of the lowest qualified competitor’s proposal. The large business proposals increase by 10%, once the contracting officer (CO) determines the proposal submitted meets this requirement. The adjustment then includes the proposal comparisons and the contract awarded on best value for the government.

Set-aside – Per Federal Acquisitions Regulations (FAR) 19.1305 and 19.1306, CO’s must determine whether an acquisition should be set-aside for HUBZone businesses.  This allows those businesses to compete against each other on a more even playing field.

3% budget – The SBA ensures government wide goals are set to ensure small businesses have a continued place in the government contracting world.  Currently, the goal for government contracts, prime and subcontracts, is set at 3% of government spending.  The HUBZone Contractors National Council provides data to show whether the government is meeting this goal.

Subcontractor Assistance – To ensure HUBZone businesses have their fair share of the market, contracts in excess of $650,000 ($1,500,000 for construction of public facilities) must submit a subcontracting plan which includes subcontracting opportunities for HUBZone businesses.  The subcontracting plan enforces work performed within the US.

Qualifications

In order to qualify as a HUBZone business, a small business must meet four requirements.

  1. The business must classify as a small business within the North American Industry Classification System (NAICS).
  2. It must meet the ownership and control requirements set by the SBA. In general, the business must be at least 51% owned by a US citizen or qualifying group and occupy a HUBZone.
  3. The principal office must also occupy a qualified HUBZone area. These areas are generally located in areas designated by the Department of Housing and Urban Development (HUD) based on poverty and household income; qualified non-metropolitan counties based on household income, unemployment rates, and difficult development areas; and Native American land
  4. At least 35% of the employees must live in a qualified HUBZone area.

Interested? See an earlier blog ‘Can the HUBZone Program Help Your Business?’ for details on registering and applying for this particular business status.  Talk to your government contract accountant for assistance.  This could be the boost your small business needs.


Contributed by Jamie M. Shryock, CPA


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