By: Michael H. Payne and Edward T. DeLisle

In order to qualify as a Historically Underutilized Business Zone (“HUBZone”) contractor, a firm must be a “small business” based on the size standards provided by the North American Industry Classification System (NAICS); the firm must be at least 51% owned and controlled by citizens of the United States; the firm’s principal office (where the greatest number of employees perform their work, excluding contract sites) must be located in a designated HUBZone; and at least 35% of the firm’s total workforce must reside in a designated HUBZone. In construction, a company does not need to include its temporary, project specific, field labor force among the 35% of its employees who must reside in a HUBZone.   (See the SBA’s HUBZone regulations).

The program encourages small businesses to locate in and hire employees from economically disadvantaged areas. Small firms participating in the program can receive competitive advantages in winning federal contracts. The government generally expects approximately three percent (3%) of all federal contracting dollars to be awarded to HUBZone firms annually. As reported by the HUBZONE Contractors National Council, as of January 8, 2010, there were 9,255 HUBZone-certified small business concerns specializing in the following major industries:

• Construction – 2,984 firms (32% of total)
• Services – 4,176 firms (45.1%)
• Research & Development – 879 firms (9.5%)
• Manufacturing – 1,675 firms (18.1%)
(Numbers total more than 9,255 because some firms appear in more than one industry category.)

Many HUBZone-certified firms are also certified in other set-aside programs. 12.2% of HUBZone firms are also 8(a) small businesses (minority-owned); 8.0% are Service Disabled Veteran-owned firms; and 0.9% are qualified in all three set-aside programs.

The mission of the HUBZone program, as expressed by the SBA, is “to promote job growth, capital investment, and economic development to historically underutilized business zones by providing contracting assistance to small businesses located in these economically distressed communities.” See the SBA’s HUBZone website for more details. In order to apply for HUBZone status, companies are encouraged to apply using the electronic application on the SBA website.
 

Michael H. Payne is the Chairman of the firm’s Federal Practice Group. Edward T. DeLisle is a Partner in the firm and a member of the Federal Practice Group. He is a available to assist federal contractors on a whole range of small business issues including HUBZone certification, 8(a)compliance issues, Service Disabled Veteran-Owned Small Business formation, and teaming arrangements.