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 a business initially applies to the HUBZone program, it must demonstrate that 35% of its employees reside in HUBZones.  From that point on, the requirements vary, depending on the business’s contractual position.

A HUBZone firm must meet the 35% requirement as of the date it submits its initial offer for a HUBZone set-aside award.  It must also meet the requirement on the date of award (unlike other SBA set-aside programs, where the proposal date alone determines eligibility).

Once a HUBZone business has been awarded a contract, it must “attempt to maintain” the 35% level.  This means that the business is permitted to slip below 35% without withdrawing from the program, and without losing its contract.  However, the business must make good faith efforts to return to the 35% number, such as posting advertisements, holding job fairs, and so on.  The SBA might decertify a firm that makes only halfhearted efforts to regain its 35% residency status.

If a HUBZone firm falls below the 35% threshold, it can continue to perform existing HUBZone contracts, but cannot submit proposals for new HUBZone contracts until it re-establishes its compliance with the 35% requirement.

In a nutshell, then, the 35% requirement is mandatory for initial HUBZone admissions, at the time a contractor submits a offer on a HUBZone proposal, and on the date of award.  At all other times, the contractor must attempt, in good faith, to maintain compliance.