HUBZone is a program administered by the Small Business Administration (SBA) and is designed to help businesses that operate and employ people in Historically Underutilized Business Zones (HUBZones).
There are currently approximately 6,500 firms in this program and the congressional contracting goals for HUBZone firms are 3 percent of all federal procurement. The average HUBZone firm does over 1 million dollars in federal revenue.
The value of a HUBZone firm is that it gives the business holding the HUBZone a 10% pricing advantage over its competition while bidding on the same government contract. Additionally, when federal contracting officers are purchasing from a GSA Schedule, oftentimes a HUBZone reseller of a product is viewed as less expensive than the actual manufacturer of the good because of this 10% price preference. A HUBZone firm with a GSA Schedule on average sells 350% more product in terms of raw dollar sales than their small business peers.
HUBZone firms can bid on specific HUBZone set-aside contracts limiting the scope of competition to the subset of the 6,500 firms that have a HUBZone and are in the industry of the federal RFQ.
The 3% HUBZone target applies to all federal agencies. There are over 600 purchasing arms of the various federal agencies and, therefore, the agencies are in constant need of HUBZone qualified firms to perform on contracts to meet this budgetary target.
HUBZone firms are provided with subcontracting opportunities to large prime contractors. This is because firms bidding on government contracts in excess of $650,000 must provide an allocation for HUBZone firm participation as part of the contract. Having a HUBZone certification will greatly boost a prime contractor’s interest in using the firm as a subcontractor.
Bonding and loan programs are available to HUBZone firms. This is designed to further help HUBZone firms with the capabilities and requirements needed to meet the requirements to perform governmental contracts.
The owner of the applying HUBZone firm is included in the employee count of the firm regardless of whether or not the owner is drawing a salary.
An employee of a firm is considered to meet the criteria for being a resident of a HUBZone if they meet one of the following two criteria.
1. The employee has lived at the same location located within a HUBZone for the past 180 days.
2. The employee is registered to vote in a HUBZone location. To fully satisfy either criteria 1 or 2, the individual must intend on living in the HUBZone location indefinitely. Of these two criteria, the most common evidence the SBA uses to determine employee eligibility is the employee’s voter registration card. An employee does not have to work and live in the same HUBZone.
For firms with multiple locations the SBA uses the firm's principal office, this is the location where the greatest number of employees work. This is not to be confused with a company’s headquarters, which is where management is located.
Special rules apply for construction and service related firms with regard to assigning a firm's principal office. Because oftentimes employees of these types of firms report to work at a client location, the firm must still have an office located within the HUBZone and one employee must work at that location full-time to qualify.
If a firm has the HUBZone designation, all of the firm’s offices regardless of where they are located are deemed to be HUBZone certified.
HUBZone designation changes based on the SBA’s rationale for granting a particular location HUBZone status. Urban is concurrent with the U.S. Census and therefore changes every 10 -years. Rural reflects employment and income adjustments that are determined annually. Native American involves federal recognition and boundary changes that have no fixed time.
A HUBZone firm can also possess any other federal or state certification such as 8(a), SDVOSB, WOSB, MBE, DBE, WBE; all certifications are mutually exclusive. There are special cases where a location not on the HUBZone map could still be deemed HUBZone. The situation exists if the unemployment for the county of the primary business location is greater than 140% of the statewide average.