Lately, it seems there has been an uptick in questions we receive at webinars, on the blog, and from prospective clients about the HUBZone program. There may be more interest in this program than there has been in the past as it could be a key tool for procurement designations in the future. At the same time, the HUBZone program, while making some aspects of the program more flexible, has also put more scrutiny on current and aspiring HUBZone contractors. This post talks about one process that puts a lot of scrutiny on HUBZone contractors: a HUBZone status protest.
HUBZone Basics
Generally, there are two main requirements for HUBZone (short for “Historically Underutilized Business Zone”) compliance: principal office and employee percentage. In addition, the HUBZone map shows regions that are deemed underutilized business zones and therefore qualify as HUBZones.
Principal Office. HUBZone Program participants must have their principal office located within a designated HUBZone. Principal office “means the location where the greatest number of the concern’s employees at any one location perform their work.” 13 C.F.R. § 126.103. The concern must also conduct business at that site and have a deed or active lease covering the location.
35% Employee Rule. To qualify for HUBZone, “at least 35% of a concern’s employees must qualify as HUBZone resident employees.” 13 C.F.R. § 126.200. Participants must also certify that it will attempt to maintain the 35% requirement throughout performance of any HUBZone contract, and those that fall between 20% during contract performance will be determined to have failed to attempt to maintain the HUBZone residency requirements.
Of course, this is just a general summary and does not mention all the requirements and recent updates. To read more about the HUBZone program, check out our recent posts:
- Rezoning (Part 2): Updates to the HUBZone Program
- Rezoning (Part 1): A Look at SBA’s Proposed Changes to the HUBZone Program
- News Flash: SBA Issues Proposed Rule with HUBZone and Small Business Changes
- Back to Basics: Get in the Zone, The HUBZone
- Breaking: HUBZone Appeals Coming Soon!
What is a HUBZone Status Protest?
A HUBZone status protest challenges the eligibility of an awardee for a HUBZone contract (HUBZone set-aside or one in which the price evaluation price was employed). HUBZone status protests can only be brought by SBA, the contracting officer for the procurement, or interested parties (essentially other bidders), per 13 C.F.R. § 126.800. Currently, any certified HUBZone offeror on a HUBZone set-aside can bring a HUBZone protest, per 13 C.F.R. § 126.103. Under a protest generally, “SBA will determine the eligibility of a concern subject to a HUBZone status protest as of the date of its initial offer that includes price.” 13 C.F.R. § 126.803.
Remember that the general timing rules for HUBZone protests is that they must be filed within 5 business days after notice of the successful offeror. In SBA terms: “For negotiated acquisitions, an interested party must submit its protest by close of business on the fifth business day after notification by the contracting officer of the apparent successful offeror.” 13 C.F.R. § 126.801.
With that background, here are some common reasons to consider filing a HUBZone status protest.
You Have Concerns about a HUBZone Competitor
You can review publicly available data to make an allegation about the eligibility of a competitor. This information could include:
- Social media, such as LinkedIn
- Company websites
- Press releases
- Public land records
- Other public records, e.g. corporate records or lawsuits
You can also use your company’s personal knowledge of the competitor and how its business operates.
This information can help determine if there is a possibility that a HUBZone competitor is not meeting either the principal office or 35% employee rule, or both. Be sure to include specific documentation and argumentation in your HUBZone protest.
You Were In Line for an Award and It Went to a HUBZone Competitor
Even if you aren’t entirely sure about how a competitor operates its principal office and employees, there still may be a way to bring a HUBZone protest. The rules state: “Specificity requires more than conclusions of ineligibility. A protest merely asserting that the protested concern did not qualify as a HUBZone small business concern, or that it did not meet the principal office and/or 35% residency requirements, without setting forth specific facts or allegations, is insufficient and will be dismissed.” 13 C.F.R. § 126.801. However, the protester can use documented facts about the protested company to then make allegations stemming from those facts and tie that to the HUBZone eligibility rules. That may be enough to get a foot in the door.
“In the event of a protest, the burden of proof to demonstrate eligibility is on the protested concern. If a concern does not provide requested information within the allotted time provided by SBA, or if it submits incomplete information, SBA may draw an adverse inference and presume that the information that the concern failed to provide would demonstrate ineligibility and sustain the protest on that basis.” 13 C.F.R. § 126.803.
This means that the HUBZone awardee must provide all requested information necessary to demonstrate it met the SBA HUBZone requirements. For instance, online records may show a business office that is not located in a HUBZone. The protest could argue this listed location is actually the principal office, and it is not located in a HUBZone.
The SBA is likely to request all records dealing with the 35% rule, even if that was not one of the protest grounds. And the awardee must respond to all of SBA’s questions. Those responses could show that the awardee was ineligible and put a protester in a better position for an award.
Conclusion
The HUBZone protest process can be a powerful way for a competitor to enforce the system and ensure that any awardee is properly following HUBZone rules. If your company is a HUBZone entity, make sure you are aware of the HUBZone protest process as one of the tools in your arsenal as a federal contractor.
Questions about this post? Email us. Need legal assistance? call at 785-200-8919.
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