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Office of Small and Disadvantaged Business Utilization
Small Business Program Policy Manual
Historically Underutilized Business Zone Program (HUBZone) Program
****This chapter is pending revision****
A. HISTORICALLY UNDERUTILIZED BUSINESS ZONE
(HUBZONE) Program
The Historically Underutilized Business Zone (HUBZone) Act of 1997 (15 U.S.C. 631) Title VI of Public Law 105-135 created the HUBZone Empowerment Contracting Program. The purpose of the HUBZone Program is to provide Federal contracting assistance for qualified small business concerns located in historically underutilized business zones, in an effort to increase employment opportunities, investment and economic development in those areas. The Federal Acquisition Regulation (FAR) 19.13 requires that HUBZone small business concerns must be certified by the Small Business Administration.
B. HOW THE HUBZONE PROGRAM OPERATES
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The US Small Business Administration (SBA) regulates and implements the program. In addition, it determines which businesses are eligible to receive HUBZone contracts and maintains a listing of qualified HUBZone small businesses. The SBA adjudicates protests of eligibility to receive HUBZone contracts and monitors the program’s impact on employment and investment in HUBZone areas.
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Eligibility Criteria for the Program: A small business must meet the following criteria to qualify for the HUBZone Program:
- It must be a small business by SBA Size standards;
- Its principal office must be located within a HUBZone, which includes lands on federally recognized Indian reservations;
- It must be owned and controlled by one or more U.S. Citizens; and
- At least 35% of its employees must reside in a HUBZone (an employee may reside in one HUBZone and work in another and still meet the residency standards).
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A HUBZone is an area that is located in one or more of the following:
- A qualified census tract (as defined in section 42(d)(5)©(I)(1) of the Internal Revenue Code of 1986);
- A qualified “non-metropolitan county” (as defined in section 143(k)(2)(B) of the Internal Revenue Code of l986) with median household income of less than 80 percent of the State median household income or with an unemployment rate of not less than 140 percent statewide average, based on U.S. Department of Labor recent data; or
- Lands within the boundaries of federally recognized Indian reservations
C. BENEFITS OF THE HUBZONE PROGRAM
Federal Contract Benefits. There are four types of HUBZone contract opportunities:
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Competitive
A competitive HUBZone contract can be awarded if the contracting officer has a reasonable expectation that at least two qualified HUBZone small businesses will submit offers and that the contract can be awarded at a fair market price.
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HUBZone Sole Source Awards
A contracting officer may award contracts to small business concerns on a sole source basis without considering a small business set-aside.
A sole source HUBZone contract may be awarded if the contracting officer does not have a reasonable expectation that two or more qualified HUBZone small businesses will submit offers, determines that the qualified HUBZone is responsible and determines that the contract can be awarded at a fair price. The government estimate cannot exceed $5.5 million for manufacturing requirements or $3.5 million for all other requirements with any NAICS Code. SBA has the right to appeal the contracting officer’s decision not to make a HUBZone sole source award. The contracting officer shall insert the Clause 52.219-3, Notice of Total HUBZone Set-Aside in contracts for acquisitions that are set aside for small business concerns under FAR 19.1305 or 19.1306.
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Full and Open Competition
A full and open competition contract can be awarded with a price evaluation preference of 10 percent. The offer of the HUBZone small business will be considered lower than the offer of a non-HUBZone/non-small business providing that the offer of the HUBZone small business is not more than 10 percent higher. The contracting officer shall insert Clause at FAR 52.219-4, Notices of Price Evaluation Preference for HUBZone Small Business Concerns, in solicitations and contracts for acquisitions conducted using full and open competition. The clause shall not be used in acquisitions that do not exceed the simplified acquisition threshold.
Price Evaluation Factor: The price evaluation preference for HUBZone small business concerns shall be used in acquisitions conducted using full and open competition. The preference shall not be used (1) in acquisitions expected to be less than or equal to the simplified acquisition threshold; (2) where price is not a selection factor so that price evaluation would not be considered (e.g. Architect/Engineer acquisitions), and (3) where all fair and reasonable offers are accepted) (e.g. the award of multiple award schedule).
The contracting officer shall give offers from HUBZone small business concerns a price evaluation preference by adding a factor of 10 percent to all offers, except (1)offers from HUBZone small business
that have not waived the evaluation preference; (2) otherwise successful offers from small business concerns; (3) otherwise successful offers of eligible products under the Trade Agreements Act
when the acquisition exceeds the dollar threshold and (4) otherwise successful offers where application of the factor would be inconsistent with a Memorandum of Understanding or other international agreements with a foreign government.
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Simplified Acquisitions
FAR Part 19.1305 states that contracting officers shall set aside for HUBZone small business concerns an acquisition of supplies or services that has an anticipated dollar value exceeding $3,000 and not exceeding the simplified acquisition threshold. The contracting officer's decision not to set aside an acquisition for HUBZone participation below the simplified acquisition threshold is not subject to review by the SBA as stated in Subpart 19.4. Contracting officers should always consider HUBZone contractors for acquisitions under the simplified acquisition threshold in accordance with the order of precedence (see FAR 13.003).
Subcontracting Goals. All subcontracting plans for other than small Federal contractors must include a HUBZone subcontracting goal.
HUBZone Set-Aside Awards
Requirements which exceed the Simplified Acquisition Threshold shall be set-aside for HUBZone small business concerns in accordance with FAR 19.1305(b). If the contracting official has a reasonable expectation that 1) offers will be received from two or more HUBZone small business concerns; and 2) award will be made at a fair and reasonable price, the requirement shall be reserved for HUBZone small business concerns.
The CO shall consider HUBZone set-asides before considering HUBZone sole source awards (19.306) or small business set-asides (19.5).
Sole Source HUBZone Awards
The CO may award contracts to HUBZone small business concerns on a sole source basis (FAR 19.306 and SBA 13CFR126.609) without considering small business set-asides, provided:
- Only one HUBZone can satisfy the requirement;
- The anticipated price, including options will not exceed $5M for manufacturing and $3M for services;
- The requirement is not currently being performed by a non-HUBZone small business concern; *
- The acquisition is greater than the simplified acquisition threshold;
- The HUBZone concern has been determined to be a responsible contractor with respect to performance; and
- Award can be made at a fair and reasonable price.
HUBZone sole source awards are discretionary on the part of the CO. However, if a non-HUBZone small business concern is currently performing the requirement that requirement remains in the small business set-aside program. The SBA Procurement Center Representative (PCR) may appeal the CO’s decision.
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Other Specialized Assistance
Eligible HUBZone firms may qualify for higher SBA-guaranteed surety bonds on construction and service contract bids.
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