National Association of Government Contractors

United States House of Representatives
New bill would strengthen HUBZone program.
Legislative Proposal Strengthens HUBZone Program

Legislators have been searching for answers to bolster a small business program designed to focus on economically disadvantaged communities, and vendors are saying their most recent effort goes a long way toward solving some of its biggest problems.

The Small Business Administration's Historically Underutilized Business Zone (HUBZone) program incentivizes small businesses to base their headquarters in and hire employees from communities with high unemployment and low median incomes.

However, the government has never reached its goal of awarding 3 percent of its contracts to HUBZone-certified businesses. SBA reports it came closest within the last decade in 2009 with 2.81 percent, but that number has steadily dropped to a low of 1.67 percent in 2016.

One of the main reasons behind this is the way HUBZone qualification data is calculated. The income and unemployment numbers used to designate HUBZones are updated annually, causing the zones to shift on a yearly basis. This makes it difficult for businesses seeking HUBZone certification to conduct long-term planning in order to locate their headquarters and hire employees in such a way that will maintain compliance.

A newly proposed bill would solve this by instituting a new update schedule, where HUBZones are only re-evaluated every five years, starting in 2020.

Additionally, the new bill would take measures to entice businesses into rural areas by loosening the economic requirements on non-metropolitan areas to qualify as HUBZones. Currently, rural areas must have median household income below 80 percent of non-metropolitan state median income to qualify. The new bill would remove the word "non-metropolitan" from that calculation, meaning rural areas would only have to have a median household income below 80 percent of the entire state.

The new bill would also lengthen the amount of time that areas suffering from base closures or declared as disaster areas would qualify as HUBZones, encouraging more companies to enter those areas.

The bill would also introduce new accountability measures for the SBA to meet. First, it would put the onus on SBA to be more proactive in ensuring that businesses are able to continue meeting HUBZone compliance standards by requiring them to make more data more readily available to businesses. Currently, businesses are responsible for ensuring their own continued compliance, but SBA isn't always timely with its information.

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