The HUBZone Empowerment Contracting Program is an initiative of the U.S. Small Business Administration (SBA) that gives preference in securing federal contracts to small businesses located in “historically underutilized business zones,” or HUBZones. There are three types of HUBZones: urban areas as defined by U.S. census figures; “non-metropolitan counties” or rural areas that meet certain median household income parameters; and Native American lands (lands on federally recognized Indian reservations). As of 2005 there were nearly 8,500 HUBZones in the United States.
The HUBZone program—which was established under the Small Business Reauthorization Act of 1997—provides access to federal contracting opportunities for small businesses that maintain a principal office in one of these areas and employ people who live there. It is intended to improve the economic status of distressed communities by encouraging the growth and long-term viability of small businesses, thus helping to create jobs and attract private investment.
As of October 1, 2000, all U.S. government agencies were required to give preference to HUBZone businesses when awarding federal contracts. The goal of the program was to award 2 percent of federal contracts to HUBZone businesses in 2001, 2.5 percent in 2002, and 3 percent in each year thereafter. In 2000, Federal agencies reported that they had awarded only $663 million in contracts to HUBZone companies, a number that represented 0.33 percent of all primer contracts. This was far short of the goal set for that year. In 2001, the budget for the program was cut sharply and the Small Business Administration (SBA) was forced to maintain the program with limited funds. The program has been maintained and as of 2005, $8 million of the SBA’s budget was earmarked for the HUBZone Program.
The SBA is responsible for determining which businesses are eligible for HUBZone contracts, maintaining a list of qualified small businesses, and reporting to Congress on the results of the program. As of May 31, 2005, 12,983 firms were HUBZone-certified. To qualify as a HUBZone contractor, a small business must meet the following criteria: it must be a small business according to SBA size standards; it must have a principal office located in a HUBZone; it must be owned or controlled by U.S. citizens; and at least 35 percent of its employees must be HUBZone residents. If any of a firm’s locations meet these standards, then the entire company is eligible for HUBZone status.
HUBZone contracts are awarded in three principal ways. When more than one qualified HUBZone business is expected to submit a bid, then the contract is awarded competitively at a fair market price. If only one qualified HUBZone business submits a bid, that business can receive a sole source contract at a fair price. In some situations, contracts are awarded via a full and open competition in which qualified HUBZone businesses receive a preference if their bid is less than 10 percent higher than those of other bidders.
In addition to preferences in securing federal contracts, HUBZone businesses also can qualify for higher SBA guaranteed surety bonds on contract bids. In cases where the HUBZone is also designated as a federal Empowerment Zone/Enterprise Community, small businesses may also qualify for other tax credits and deductions. To find out more about the HUBZone program, see the Small Business Administration Web site at http:// www.sba.gov/hubzone.