5 Things has previously discussed 8(a) Program basics and eligibility requirements. But the 8(a) Program isn’t the only socioeconomic program benefiting small businesses. In this post, we’ll begin exploring another crucial program for small businesses: the Historically Underutilized Business Zone—or HUBZone—program.
Here are five things you should know about the HUBZone program.
The Department of Justice has filed a complaint accusing an Ohio construction contractor and its owner of fraudulently obtaining HUBZone certification and HUBZone set-aside contracts.
According to a DOJ press release, the government is alleging that William Richardson, the owner of TAB Construction Co. Inc., made false statements regarding TAB’s principal office to obtain HUBZone certification, then used that certification to win millions of dollars in HUBZone set-aside contracts.
Two Kentucky-based government contractors and their owners have agreed to pay $6.25 million to settle HUBZone fraud claims, according to a U.S. Department of Justice press release.
The costly settlement puts an end to a saga involving DOJ claims of a vacant “principal” office, undisclosed affiliation, and fraudulent statements made to the SBA and and the U.S. Army.
Last week, I had the honor of returning to Washington, DC and giving a presentation at the National HUBZone Conference on best practices for remaining HUBZone compliant. The presentation addressed critical ongoing HUBZone compliance issues, including the principal office rule, 35% employee residency rule, and other HUBZone eligibility rules.
Many thanks to Mark Crowley and the HUBZone Council for inviting me to be part of the conference. And a big “thank you” to my engaged audience of HUBZone companies, which asked many great questions and probably could have kept going all morning if there had been time. Finally, thanks to my sister Karen, for allowing me to use her apartment in Van Ness as my personal HUBZone Conference hotel and introducing me to Comet Ping Pong while I was in town.
If your company is HUBZone certified, but you weren’t able to make it to this year’s National HUBZone Conference, never fear. My presentation slides are now up on the Past Presentations page. Enjoy!
In order to qualify as a HUBZone business, 35% of a company’s employees must reside in a HUBZone (though not necessarily the same HUBZone where the business has its principal office). But what happens if a business slips below the 35% requirement? After all, employees come and go all the time.
Here’s how it works.
When is a HUBZone set-aside not really a HUBZone set-aside? According to one GAO bid protest decision, when Federal Prison Industries (also known as UNICOR) submits an offer.
In GAO Protest of Tennier Industries, Inc., B-403946.2 (June 29, 2012), the Defense Logistics Agency set-aside a procurement for HUBZone contractors, but awarded the contract to Federal Prison Industries rather than a HUBZone company. One might think that the GAO would sustain a bid protest. Instead, the GAO held that the award to FPI was A-OK.
After GAO reports described the HUBZone program as vulnerable to fraud and abuse, the SBA has cracked down in recent years—making site visits, decertifying HUBZone small businesses, even threatening some with suspension and debarment for violating the regulations.
The SBA should be commended, of course, for taking steps to ensure that HUBZone participants remain on the up-and-up, but the stricter enforcement can spell trouble for HUBZone firms that mean well, but don’t fully understand their ongoing compliance obligations under the HUBZone regulations. Case in point: the SBA has apparently proposed to decertify some HUBZone firms for failing to keep the SBA informed of “material changes” that may affect their program eligibility.