Government Business
Small Business Administration's HUBZone Government Contracting
By Richard White
May 19, 2005, 12:37

The Small Business Administration's HUBZone program provides contract preferences to qualified small firms located in over 8,000 designated HUBZone areas. The purpose of the program is to increase employment, capital investment, and economic development to these relatively underdeveloped areas.

HUBZones can be as small as a city block or as large as an entire county. They also include lands on Native American reservations.

Program Benefits

As of October 1, 2000, all federal buying agencies must follow HUBZone program requirements. The annual contracting goals for the program were one percent of the total value of all federal prime contracts in FY 1999. There have been and will be annual increases of .5 percent until the program reaches its maximum goal of 3 percent in FY 2003.

There are four types of HUBZone tools to help federal buyers meet their mandated goals:

1. A HUBZone set-aside contract can be awarded if the contracting officer has a reasonable expectation that two or more HUBZone firms will submit offers and that the contract can be awarded at a fair market price.
2. A sole source HUBZone contract can be awarded if the contracting officer doesn't have a reasonable expectation that two or more qualified HUBZone small businesses will submit offers, determines that the HUBZone firm is responsible and that the contract can be awarded at a fair price. The government's estimate for a HUBZone sole source contract cannot exceed $5 million for manufacturing requirements or $3 million for other requirements.
3. A full and open competition contract can be awarded with a 10-percent price evaluation preference. This preference is applied only if the low offeror is a large business.
4. Subcontracting plans for large business federal contractors must include a negotiated HUBZone subcontracting goal.

• Be small,
• Be located in an "historically underutilized business zone" (HUBZone)
• Be owned and controlled by one or more U.S. Citizens, and
• Have at least 35% of its employees residing in a HUBZone.

• A qualified census tract (as defined in section 42(d)(5)(C)(i)(1) of the Internal Revenue Code of 1986);
• A qualified "non-metropolitan county" that is not located in a metropolitan statistical area (as defined in section 143(k)(2)(B) of the Internal Revenue Code of 1986), and in which the median household income is less than 80 percent of the non-metropolitan state median household income, or that is based on the most recent data available from the Secretary of Labor, has an unemployment rate that is not less than 140 percent of the statewide average unemployment rate for the state in which the county is located; and
• Lands within the external boundaries of an Indian reservation.