SBA Amends and Improves HUBZone Regulations

The U.S. Small Business Administration is making major updates to the Historically Underutilized Business Zone (HUBZone) Program, which comes as good news to those small business concerns who have struggled with the 1997 law. These revisions, becoming effective on December 26, 2019, are just in time for the holidays, and a wonderful present it is for the HUBZone program and all those involved.

The HUBZone program has faced a great deal of challenges since its inception in 1997. The program, which was designed to bring opportunity and growth to underutilized zones, has yet to flourish. Agencies to date have not yet been able to fulfill the government wide goal of awarding at least 3% of all contracts to HUBZone companies. This does not come from lack of effort, however.

On January 30, 2017, the executive branch issued Executive Order 13771 directing federal departments and agencies to reduce regulatory burdens and control regulatory costs. In response to this directive, SBA initiated a review of all of its regulations to determine which might be revised or eliminated, the HUBZone Program standing out as an area of improvement.  The revisions to the HUBZone Program effective December 26th clarify current HUBZone Program policies and procedures and makes changes that will benefit the small business community by making the HUBZone Program more efficient and effective.

With these new updates, many of the challenges facing HUBZone small business have been addressed and improved upon, namely the certification process. For service firms, winning contracts to perform services in another state would often require them to hire from non-HUBZone areas, disqualifying them from eligibility for future HUBZone contracts. To alleviate these problems, § 126.500(a) of the final rule requires only annual recertification rather than immediate recertification at the time of every offer for a HUBZone contract award.

Additionally, the SBA modified the process of determining which areas would be classified as HUBZones and when the qualifications would change. HUBZones previously would shift based annually based on the most recent income and unemployment numbers.  This made it extremely difficult to maintain compliance. The Final Rule solves this problem, offering a public online tool that depicts HUBZONEs and is update every five years rather than updating annually.

The current trend in HUBZone contract awards reported shows 1.65% in FY2017 and 2.05% in FY2018. Look for these numbers to increase in the coming years.

Author: Paul McVeigh