By Carol L. O’Riordan
A HUBZone (Historically Underutilized Business Zone) is a geographic area that benefits from a U.S. Small Business Administration (SBA) program that was established in 1998. The program helps small businesses in urban and rural communities gain preferential access to federal procurement opportunities.
The SBA regulates and implements the HUBZone program by determining which businesses are eligible to receive HUBZone contracts, maintaining a listing of qualified HUBZone small businesses that federal agencies can use to locate vendors, adjudicating protests of eligibility to receive HUBZone contracts, and reporting to Congress on the program’s impact on employment and investment in HUBZone areas.
One of the requirements to qualify as a small business that is eligible under the program is that 35 percent of the company’s employees must live in the HUBZone.
Set-Aside Alert, a periodical that covers small business contracting issues, recently reported that the HUBZone program has been struggling to meet its goals for years and that advocates of the program are pushing for legislative changes to improve the program, specifically the 35 percent requirement.
The HUBZone Contractors National Council is asking Congress to reduce the HUBZone employee residency requirement from 35 percent to 33 percent. Set-Aside Alert echoed the sentiment that many of our clients have voiced: this would make it much easier for small businesses to meet the requirement, since after this change, the rule could be met with one out of every three employees living in the zone.
Currently, the requirement is especially burdensome in certain situations. For example, for companies with three employees, two must live in the zone in order to exceed 35 percent. For companies with nine employees, four must live in the zone; under a 33 percent requirement, only three would be required.
And as Shirley Bailey, board chair of the HUBZone Council, said in testimony on March 2, 2017, before the House Small Business Committee, “In addition to simplifying the calculation for employers, this also helps small firms to ensure they meet their requirements after the unforeseen departure of one employee.” Or, we might add, after an employee’s announcement that he or she just moved from a HUBZone area.
We regularly help our clients design strategies and procedures to ensure that they remain in compliance with HUBZone requirements, from hiring, to monitoring employee residence, to reporting changes to SBA. We believe that the HUBZone program should be allowed and encouraged to grow to meet the goals that Congress had in mind for it, and this change is one good way to foster that growth.