Three Things to Know about Historically Underutilized Business Zones (HUBZones)


Whether economic change occurs quickly or slowly, it can lead to decline, or even collapse, of once vibrant communities. Economic renewal and rebuilding take time and resources. One program the U.S. Government (USG) has developed to help communities and businesses revive neighborhoods in economically distressed areas is the Historically Underutilized Business Zone (HUBZone) program. The HUBZone program was established by the Small Business Reauthorization Act of 1997 and falls under the auspices of the U.S. Small Business Administration (SBA). It promotes economic development by providing more access to federal contracting opportunities as the USG has a government-wide goal of allocating 3 percent of all federal contracts to certified HUBZone businesses. In order to become a HUBZone company, a small business must apply for HUBZone status and be certified by the SBA as meeting all of the qualifications.

Three Things to Know About HUBZone Certification

1. What the USG Buys. The government buys a number of products and services from HUBZone businesses, however, the main industries are construction, facilities support services, security guards and patrol services, computer related services, engineering services, and administrative management and general management consulting services. Federal agencies can conduct a HUBZone set-aside procurement or a sole source procurement under certain guidelines. As a certified HUBZone small business, your business strategy may target one or more federal agencies, which you should understand thoroughly – what they buy, how, and when, including in-depth knowledge of their view of HUBZones, since many agencies never meet their goal of 3 percent. SBA publishes government-wide and agency level small business scorecards that show what the actual HUBZone utilization was by year and is a great source of information to guide you.

2. Compliance Challenges. Maintaining compliance with the HUBZone requirements is critical to maintaining your company’s certification. In a nutshell, you must be a small business, you must be owned and controlled at least 51 percent by a U.S. citizen, your HUBZone office must be the location where the greatest number of employees at any one location actually perform their work, and 35 percent of your employees must live in a HUBZone. Careful planning and monitoring is essential. You need to manage your numbers carefully to ensure to meet government requirements.

The HUBZone maps are necessary tools for monitoring changes to the designated HUBZone areas. If you do not stay informed about upcoming changes, you may find that an office or the areas where your employees live has been re-designated. HUBZone designation is a benefit and can be a significant investment in facilities, equipment, systems, employees, and training, so you want to protect your investment and your status by maintaining good records to demonstrate your compliance should you be audited.

3. Advocacy and Legislation. The HUBZone Contractors National Council is a non-profit trade association established in 1997 that provides information and support for companies and professionals participating in the HUBZone program, and advocates for businesses, organizations, and agency stakeholders.

According to the Council, on August 2, 2017, the Senate Small Business & Entrepreneurship Committee passed S. 690, the “HUBZone Investment Protection Act of 2017”, introduced by Senator Ben Cardin (D-MD), which extends HUBZone redesignation from three to seven years. They also passed S. 929, the “Invest in Rural Small Business Act of 2017”, introduced by Senator Jeanne Shaheen (D-NH) to amend the HUBZone employee residency requirement from 35 percent to 33 percent. These two bills, if passed by Congress, would strengthen the HUBZone Program, allowing HUBZone businesses to make substantial, long-term investments, positively impacting the communities they work in, without the fear of losing their HUBZone status.

In addition, H.R. 3294, the HUBZone Unification and Business Stability Act (HUBS), was introduced by Ranking Member Nydia Velázquez (D-NY), and co-sponsored by Chairman Steve Chabot (R-OH) to make important reforms to the HUBZone program, which would be implemented in 2020, to provide greater transparency, stability, improved metrics, and would accelerate the application process. The reforms would establish a 5-year cycle for determining the geographic boundaries creating greater certainty for companies operating within the program. It would also change the calculations for certain geographic areas that would potentially add as many as 1,000 rural and non-rural counties to the mapping.

The HUBZone program is important to U.S. city neighborhoods, rural areas, suburbs and small towns that need a little economic boost and to the small businesses that are seeking ways to grow their businesses through federal contracting. It is also a very challenging and labor intensive program to remain compliant due to the changing designated HUBZone areas, potentially affecting both principal office location and where employees live, but it is rewarding to be part of the solution to enhance local economic development in America by creating jobs, developing local skills and experience, and infusing new revenue into local communities that benefit from the HUBZone program. If the HUBZone reforms in H.R. 3294 and other initiatives (S. 690 and S. 929) now pending passage by Congress are approved, they would strengthen economic development, as well as the transparency and effectiveness of this important program.

Kanava International