Small companies are often at a disadvantage in front of larger competitors when getting government contracts. This is because large businesses have higher sales resources and are more cost-efficient.
Hence, the SBA created the HUBZone program to address these issues and provide a level-playing field for small businesses to acquire government contracts.
In this article, you will learn about the HUBZone program developed by the United States Small Business Administration. You will also learn about the various features of this program and how it works.
Then, we will discuss the eligibility criteria of HUBZone for small businesses. Finally, we will share with you how to attain a HUBZone certification. Hence, to learn more, read on through to the end of the article.
What Is HUBZone?
The Office of Small Business Programs defines –
“HUBZone is a Small Business Administration (SBA) program for small businesses that operate and employ people in Historically Under-utilized Business Zones. The HUBZone Program mission is to promote job growth, capital investment and economic development to historically underutilized business zones, referred to as HUBZones, by providing contracting assistance to small businesses located in these economically distressed communities.”
The HUBZone program helps small businesses to grow in business zones that are historically underutilized. The government aims to award at least 3% of federal contracts to HUBZone businesses annually.
However, businesses with a HUBZone certification can also compete for contract awards under the socio-economic programs for which a business qualifies.
The federal government created the HUBZone program to support small businesses without a high business culture in those parts of the country. It also applies to locations where startups are not common.
The government funnels some of its purchases to small businesses from these areas. The program aims to offer these entrepreneurs incentives and increase employment in areas where people rarely look for jobs.
HUBZone Features: How Does It Work?
According to the official SBA website,
“The government limits competition for certain contracts to businesses in historically underutilized business zones. It also gives preferential consideration to those businesses in full and open competition. Joining the HUBZone program makes your business eligible to compete for the program’s set-aside contracts. HUBZone-certified businesses also get a 10% price evaluation preference in full and open contract competitions.”
The program’s goal (as the federal government states) is to award 3% of its contracts and subcontracts to small businesses with HUBZone certification.
However, the federal government has fallen short of its goal yearly. As per an audit from the US SBA in 2018, HUBZone-certified companies received only 2.05% of all prime contracts, up from 1.7% the year before.
The businesses under this program benefit from being more competitive and gaining the ability to do sole-source contracting. The internet behind the creation of the program is to diversify the federal government’s purchases and help small businesses from smaller parts of the country.
However, many critics talk about the program’s failure in various aspects. As per a 2019 review by the Washington Post, for over two decades, 70% of all HUBZone contracts in Washington, DC, went to only 11 companies. Furthermore, the money went to businesses located in wealthier neighborhoods.
What Are The Eligibility Criteria?
The US SBA sets the eligibility criteria for HUBZone companies and decides whether a company can get contracts through the HUBZone program. The SBA also keeps a record of those businesses, making it easier for federal agencies to find useful suppliers from among these companies.
The following are the factors that make a business eligible for HUBZone certification:
- It must meet the “Small Business” definition per SBA guidelines.
- The company must have at least 51% stake owned by US Citizens, an agricultural cooperative, a community development corporation, or a Native American tribe.
- The business’s main office is in a “historically underutilized business zone.” A map on the SBA website also shows which areas are identified as such.
- At least 35% of its employees must live in a HUBZone area. If a business receives certification but falls under this threshold later, it must meet this requirement before its annual recertification.
How To Attain HUBZone Certification?
Investopedia writes –
“In concrete terms, government agencies are incentivized to consider bids from HUBZone businesses, even in cases where the price they offer is slightly higher than that of other firms. The government offers a 10% “price evaluation preference” to certified entities for both full contracting and subcontracting competitions.”
If you think your business is eligible for HUBZone certification, you will need to create an account on the SBA website. Once you log in to your account, go to the “HUBZone” section under “Access.”
You must also have an account on Dun & Bradstreet, which provides you with a unique 9-digit number for each of your physical locations where your business is located. You can get this number for free.
Furthermore, you must also have a System for Award Management (SAM) account provided by the government. After receiving certification, update your profile on this account.
To maintain your HUBZone status, you will need to recertify with the program once every year.
Get Certified as a HUBZone Small Business: Steps to Follow
If you want to participate in the HUBZone program, getting certified by the SBA first is important. Here are the steps to get certified as a HUBZone Small Business –
- First, ensure that you have a SAM.gov account.
- Next, register for an SBA connect account and request access to the HUBZone portal. SBA has instruction videos you can check out.
- You will receive some time-sensitive information and instructions during the period. So, check your mail to get back to them within 2 business days.
- Submit your requested supporting documents three working days before then. Until you submit all the required documents, your submission won’t be assigned for eligibility review. You might be asked to respond to different queries. You must stay prepared with your team to respond within 5 business days. If you fail to respond or decline, it might result in your application being withdrawn.
- Check to see if your status was updated properly in DSBS and SAM. SBA will automatically update the status in DSBS and SAM within 48 hours.
Final Thoughts
Hope this article was helpful for you in getting a better idea of how HUBZone works. With the help of the HUBZone program, small businesses, especially the ones in underutilized areas, get a level-playing field to procure government contracts. Furthermore, the federal government also aims to award 3% of government contracts to HUBZone-certified businesses.
To qualify for the HUBZone program, a business needs to meet the definition of a “small business.” Furthermore, the business headquarters needs to be in an underutilized business zone. Do you have any more information regarding how to be eligible for this program? Share your ideas with us in the comments section below.
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