The HUBZone program is an effort of the Small Business Administration (SBA) to help small firms in distressed communities bid on federal government contracts.
In this article, we’ll cover the basics of how the SBA HUBZone program works, what types of small businesses are eligible to participate, recent changes to the program, and other contract options available if your company doesn’t qualify for the HUBZone program.
What Is the SBA HUBZone Program?
The SBA is an independent agency of the federal government that helps small business owners start, build, and grow their enterprises. One of the ways it aids small businesses is through government contracting. In fiscal year 2019, the federal government awarded 26.9% or $132.9 billion in federal contract dollars to small businesses through its programs.
One contracting assistance program, titled the Historically Underutilized Business Zones (HUBZone) program, was enacted in 1977 by the HUBZone Act. Its underlying goal is to promote job growth, capital investment, and economic development in historically underutilized business zones, according to its mission statement.
“The intent is to help strengthen the local economies in distressed communities by encouraging the infusion of capital into firms located in those communities, and by employing individuals who live in a HUBZone,” Lori Gillen, director of the HUBZone program, said in an email to The Balance.
How Does the SBA HUBZone Program Work?
If businesses meet the requirements for participation in the HUBZone program, they can apply for certification. Once certified, the company is eligible for a series of economic boosts, including the ability to submit offers on set-aside contracts and receive a 10% price evaluation preference in full and open contract competitions. The federal government has a goal of awarding at least 3% of federal contract dollars to HUBZone-certified small businesses each year.
HUBZones are spread across the country and its territories, and the areas are largely determined by unemployment and income data. The SBA has a HUBZone map that allows you to check if your business is eligible for the program.
HUBZones and federal Opportunity Zones—an IRS-backed economic development tool that allows individuals to invest in distressed areas of the U.S.—are different, but tend to overlap. According to Gillen, Opportunity Zones offer tax incentives for investments made in under-resourced communities. About 70% of Opportunity Zones are currently located in a HUBZone.
What Businesses Qualify for the SBA HUBZone Program?
To qualify for the program, your business must:
- Be a small business, as determined by the size standards tool
- Be more than 50% owned and operated by U.S. citizens, a community development corporation, an agricultural cooperative, a Native Hawaiian organization, or an Indian tribe
- Have its principal office—where the majority of people do the most work—located in a HUBZone
- Employ a minimum of 35% of workers who live within the specified HUBZone
If a business is in the HUBZone program, it must recertify for the program annually. There’s no cap on the number of times a company can participate, as long it continues to qualify. Every three years, all certified HUBZone firms must undergo a program examination as part of the recertification process, ensuring the business still meets qualifications.
Not sure if your small business qualifies for the HUBZone program? Get a preliminary assessment via the SBA’s qualification assessment.
Recent Changes to the SBA HUBZone Program
In the past, the HUBZone program has faced criticism by lawmakers and the media for allocation of funds and shortcomings in the tracking process.
In 2020, the SBA implemented changes to the program in an effort to make it easier for businesses to take advantage of its services, and to strengthen compliance. The revisions focus on three main areas: improving customer experience, increasing program use, and expanding and stabilizing the HUBZone footprint.
Key changes include faster certification decisions, now set at 60 days, freezing HUBZone maps through 2021 (to be updated every five years), expansion into rural areas with high levels of unemployment, and supporting long-term investment in communities.
IMPORTANT: Before participating in the HUBZone program, you must be certified by the SBA. To apply for certification, you must go through a series of steps in the general login system, where you’ll verify your business’ qualifications, submit requested documentation, and verify your application within 10 days of submission.
Alternatives to the SBA HUBZone Program
There are several different ways of contracting that can help a small business win awards from the federal government. If your company doesn’t qualify for assistance through the SBA HUBZone program, you might find an alternative option to be a better fit.
- Set-aside contracts for small businesses: The government limits competition for certain contracts to small businesses, called “small business set-asides.” The purpose is to assist small businesses in procuring federal contracts. Some of these are available to people outside of SBA contracting assistance programs.
- Programs based on socioeconomic criteria: Some set-asides are saved for small businesses that meet certain socioeconomic criteria. If a firm meets qualifications, they are eligible to submit offers for and be awarded contracts set aside in the following programs: Women Owned Small Business, 8(a) Business Development for disadvantaged small businesses, and Service-Disabled Veteran-Owned small businesses.
- Joint ventures: Two or more small businesses may combine efforts and compete for a contract award as a team. Another option is for small businesses to seek a mentor and participate in the All Small Mentor-Protégé program. Through this program, a small business forms a joint venture with a larger, mentor company, and together they can compete for any contract for which the small business is eligible.
- The HUBZone program is an SBA effort to propel small business growth in historically underutilized business zones.
- Once a qualifying firm applies and is certified, the business can make offers on contracts reserved for HUBZone companies, and receive a 10% price evaluation preference in full and open contract competitions.
- HUBZone areas—selected mainly by unemployment and income data—are spread across the nation and its territories.
- If your small business doesn’t meet HUBZone requirements, there are other contracting options you might qualify for, such as small business set-asides, programs based on socioeconomic standing, or joint ventures.