HUBZone Program: Court Decision Highlights “Fracture” Policy

The SBA will not aggregate a HUBZone applicant’s employees with the employees of the applicant’s affiliates for purposes of determining compliance with the “35% rule,” but only if the SBA determines that there is a “clear line of fracture” between the HUBZone applicant and its affiliates.

A recent decision by the U.S. Court of Federal Claims highlights an important SBA policy, which isn’t codified in the SBA’s regulations but can have a tremendous impact on HUBZone Program eligibility.

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HUBZone Fraud: $250,000 Settlement In “Virtual Office” Case

A small business and its owner have agreed to pay $250,000 to resolve HUBZone fraud allegations, including a claim that the company’s HUBZone office was a “virtual” location where no employees actually worked.

According to a Department of Justice press release, Air Ideal, Inc. and its majority owner have also agreed to pay the government five percent of the company’s gross revenues over the next five years.

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Joint Ventures: SBA Proposes Major Changes

The SBA has proposed major changes to rules governing joint venturing for set-aside contracts.

As part of a proposed rule released last week, the SBA proposes to eliminate so-called “populated” joint ventures, and proposes additional changes regarding joint venture certifications, performance of work reports, and more.

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Limitations on Subcontracting: SBA Proposes Sweeping Changes

The limitations on subcontracting would undergo sweeping changes under a recent SBA proposal.

On December 29, the SBA issued a proposed rule to enact the changes implemented by Congress in the National Defense Authorization Act of 2013–including a thorough re-write of the way that compliance with the subcontracting limits is calculated and enforced.

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HUBZone Fraud: Government Alleges “Virtual Office” Scheme

A HUBZone contractor has been accused of HUBZone program fraud for allegedly falsely claiming to be located in a HUBZone, when in fact the office in question was a “virtual office” where no employees worked.

According to a Department of Justice press release, the contractor not only misrepresented its principal office location, but submitted a fabricated lease to the SBA as part of its HUBZone application.

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Thank You, HUBZones!

I am back in Lawrence after a trip to the Washington area, where I spoke at the National HUBZone Conference.  My conference presentation focused on the special rules for joint venturing and teaming on HUBZone set-aside contracts.

Thank you to Mark Crowley and the HUBZone Council for inviting me to be a part of this year’s National HUBZone Conference.  Thank you also to the clients, old friends, and new connections who made the conference especially worthwhile.  And thank you, too, to all those who attended my seminar and asked so many great questions.

After speaking at four government contracts conferences since August, I am beginning to feel a bit like a road warrior.  My next conference travels will take me to Wichita, Philadelphia, and New Mexico.  If we haven’t connected at an event yet this year, I hope to see you there.

GAO: Subcontracting Uncertainty Means No HUBZone Price Preference Required

An agency properly refused to apply the HUBZone price preference when the agency determined HUBZone company’s proposal was unclear as to whether the company would comply with the subcontracting limits set forth in the FAR’s HUBZone price preference clause.

In a recent bid protest decision, the GAO held that the Defense Logistics Agency reasonably refused to apply the HUBZone price preference in a procurement for supplies because the HUBZone company’s proposal suggested that HUBZone companies might perform less than 50% of the manufacturing costs.

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