Q. What is the HUBZone Empowerment Contracting Program?
The HUBZone Empowerment Contracting Program stimulates economic development and creates jobs in urban and rural communities by providing Federal contracting preferences to small businesses. These preferences go to small businesses that obtain HUBZone (Historically Underutilized Business Zone) certification in part by employing staff who live in a HUBZone. The company must also maintain a "principal office" in one of these specially designated areas. [A principal office can be different from a company headquarters, as explained later in this document.] The program resulted from provisions contained in the Small Business Reauthorization Act of 1997.

Q. How does a firm qualify for this program?
To qualify for the program, a business must meet the following criteria:

• 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.

Q. How does SBA define the term "reside" in reference to the residency requirement?
The term reside means to live in a primary residence at a place for at least 180 days, or as a currently registered voter, and with intent to live there indefinitely. Employers should be aware that it makes no difference which HUBZone their employees reside in. An employee can reside in one HUBZone and work in another and meet the standards for this residency requirement.

Q. How does SBA define the term "principal office?"
It’s the location where the greatest number of employees at any one location actually perform their work, except for construction and service industries, which have exemptions based on their occasional need to assign employees at the contract location. Notice that the ‘principal office’ definition can mean something very different from a company’s headquarters. It could happen that a small business might have a headquarters in a non-HUBZone location and establish a principal office within a HUBZone locality and still qualify legitimately for program participation.

Q. If my small business has several offices and one is qualified as a ‘principal office’ that serves as the basis for a HUBZone designation, can all my offices claim HUBZone certification?
Yes, HUBZone is a status that applies to the entire business. This designation will remain in effect as long as any of the firm’s locations meet the test for and are certified as a "principal office" for HUBZone certification (assuming all other eligibility requirements are similarly maintained).

Q. What benefits are small businesses receiving under this program?
Generally speaking, there are two levels of benefit. The first relates directly to Federal contracts, while the second involves specialized assistance.

There are four types of HUBZone contract opportunities:

• Competitive: Contracts can be set-aside for HUBZone competition when the contracting officer has a reasonable expectation that at least two qualified HUBZone small business concerns (SBCs) will submit offers and that the contract will be awarded at a fair market price.
• Sole-source: HUBZone contracts can be awarded if the contracting officer determines that:
• only one qualified HUBZone SBC is responsible to perform the contract,
• two or more qualified HUBZone SBCs are not likely to submit offers and
• the anticipated award price of the proposed contract, including options, will not exceed:

• Full and open competitive contracts can be awarded with a price evaluation preference. The offer of the HUBZone small business must not be 10 percent higher than the offer of a non-small business.
• Subcontracting: All subcontracting plans for large business Federal contractors must include a HUBZone subcontracting goal.

• Eligible HUBZone firms can qualify for higher SBA-guaranteed surety bonds on construction and service contract bids.
• Firms in Federal Empowerment Zones and Enterprise Communities (EZ/EC) can also benefit from employer tax credits, tax-free facility bonds, and investment tax deductions.

Q. Does this program only apply to small businesses that are currently located in HUBZones, or can firms move to these areas and then become eligible to participate?
This program applies to firms that are currently located within HUBZones and can include any start-up business that chooses to start operation in a HUBZone. An existing small business that chooses to relocate to a HUBZone can also become certified provided it meets the remaining criteria outlined earlier.

Q. Does a business that attempts to qualify for the HUBZone Program based upon its location on an Indian reservation have to be Indian owned?
No. As long as the principal office of the business is located on an Indian reservation and meets all other eligibility criteria, it can earn the HUBZone designation.

1. Urban = Metropolitan Area Census Tracts (HUD) - 7,000 total in U.S.
2. Rural = Non-metropolitan Counties – 900 total in U.S.

* Rural designation results when median household income is less than 80% of the non-metropolitan state level (Census)

*Rural designation can also occur when analysis shows an unemployment rate that is not less than 140% of the state-wide average (BLS)

3. Native American = All federally recognized Indian reservations as defined by external boundary – exceeds 340 total in U.S.

Urban is concurrent with the census (change is every ten years).

Rural reflects employment and income adjustments (employment levels determined annually).

Native American involves Federal recognition and boundary changes (no fixed time).

Q. Will small businesses participating in the SBA’s 8(a) Business Development Program that are already in or relocate to a HUBZone area be eligible to receive both 8(a) and HUBZone contracting opportunities?
Yes. This is termed the "superpreference" and can be quite beneficial, so a firm that has one designation and legitimately qualifies for the other is strongly urged to obtain both.

Q. How can a firm's eligibility as a HUBZone participant be challenged?
The specific process for challenging a firm's eligibility as a HUBZone participant is detailed in the SBA's operating regulations. Generally, these regulations allow an interested party to challenge the accuracy of an existing certification based on allegedly falsified applicant information or substantive changes that might have occurred since certification was first obtained. The SBA will have final authority in this regard.

Q. Can the SBA protest a contracting officer's decision not to award a contract opportunity to a qualified HUBZone small business?
Yes. The SBA’s Administrator may file a written request for re-consideration of the contracting officer's decision with the Secretary of the Department, or Agency head.

Q. What is the SBA's responsibility under the program?
SBA is responsible for formulating regulations to implement and administer the program. SBA is also required to submit a report no late than March 2002 to the Small Business Committee concerning the degree to which the HUBZone Program has resulted in increased employment opportunities and investment in HUBZones. Further, SBA is required to periodically examine and verify participant eligibility and investigate challenges to HUBZone certification.