As we blogged about earlier this month, the SBA’s May 31, 2016 final rule made some major changes to a number of regulations dealing with small business procurement. Some of those changes relate to the SBA HUBZone contracting program.

Specifically, finding that the current regulations set forth at 13 C.F.R. 126.200(b)(6) and (d) were duplicative, the SBA proposed to revise the regulation by deleting 13 C.F.R. 126.200 (d) in its entirety, and revising 13 C.F.R. 126.200(b)(6) to state that a small business concern must, in its HUBZone application, represent that it will comply with the applicable limitations on subcontracting with respect to any procurement that it receives as a qualified HUBZone small business concern. These subcontracting limitations are provided in 13 CFR 125.6(c) and 13 CFR 126.700 (and, as we blogged about earlier this month, are also changing effective June 30).

Because of the other changes dealing with the limitations on subcontracting, and “similarly situated entities” one commenter asked the SBA to clarify whether a HUBZone “similarly situated entity” subcontractor must meet the 35% residency requirement for

HUBZone program participation. In its final rule, the SBA clarified that a HUBZone similarly situated entity subcontractor must be able to qualify for the prime HUBZone procurement in order to be considered a similarly situated entity. However — consistent with the decision to define “similarly situated entities” in accordance with the NAICS code assigned to the subcontract at issue, not the prime contract (see our previous blog for further explanation of that distinction) — the SBA explained that this means the subcontractor must also be HUBZone certified and be considered small for the NAICS code assigned to its subcontract.

Finally, the rule revises 13 CFR 126.700 in its entirety, to make it consistent with the changes made to 13 CFR 125.6.

We will keep you posted on any further changes.

Michael H. Payne is Chair of the Firm’s Federal Contracting Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution.

Amy M. Kirby is an Associate in the firm’s Federal Contracting Practice Group and focuses her practice on government construction litigation. Amy’s practice includes a wide variety of federal construction matters.