HUBZone Program updates related to a change in regulations
When and why did SBA propose new rule changes to the HUBZone program?
The SBA proposed new regulations to make it easier for small businesses to participate in the HUBZone program. These changes will make the program more attractive for small businesses to invest in HUBZones and hire HUBZone residents, providing greater impact to communities and making it easier for federal agencies to meet their goal to award 3 percent of contracts to certified HUBZone small businesses. The rule change was published in November 2019 and took effect December 26, 2019.
What are the new rules around recertification?
All firms will be required to undergo an annual recertification rather than a triennial recertification, with a full documentation review taking place every three years. Once certified, a firm is eligible for all HUBZone contracts for which the business qualifies as small, for a period of one year from the date of its initial certification or most recent recertification (unless the concern acquires, is acquired by, or merges with another firm during that period). Prior to this change, in order to be eligible for a HUBZone contract, firms had to prove their HUBZone eligibility at both the time of offer and the time of award, lengthening the procurement process for HUBZone firms uniquely among all small businesses—and serving as a disincentive for federal agencies to contract with HUBZone companies.
When and how will annual recertification begin?
SBA has experienced a delay in the implementation of our new annual recertification process. Firms which, based on the prior triennial recertification schedule, were due for recertification in 2020 will be contacted automatically by the HUBZone Certification and Tracking System (HCTS) and will be required to recertify on the anniversary date of their initial certification. (For example, if a firm was initially certified on December 1, 2017, the firm will receive a notice from HCTS that it is due to recertify its HUBZone status within 30 days of December 1, 2020.) All other firms (which were not scheduled to recertify in 2020 under the triennial recertification rules) will continue to be considered eligible as of the date of their initial certification or most recent recertification, and must be prepared to prove their eligibility at that time if their HUBZone status is protested in connection with a HUBZone solicitation issued after December 26, 2019. Until such time as we have introduced a fully automated recertification process for all firms, we will also allow firms to voluntarily recertify on the anniversary date of their initial certification, if they choose to do so. We will advise firms within the next two weeks regarding the process for voluntary recertification on their anniversary date.
Are Governors now permitted to ask SBA to designate HUBZones?
A new Governor-designated covered areas initiative that became effective on January 1, 2020, represents an opportunity to expand the HUBZone program to reach more distressed rural communities. The new authority allows state governors to petition SBA to designate as HUBZones rural areas with populations under 50,000 and unemployment levels of 120 percent of the U.S. or state average. SBA will provide updates and update the HUBZone maps to reflect newly covered areas.
Are there other changes to the HUBZone maps?
SBA has frozen the HUBZone maps through 2021, until the results of the 2020 Census are available. This will provide the program and participating small businesses with an opportunity to transition to a new requirement to update the maps and designations on five-year intervals, starting after the 2020 Census. Five-year HUBZone updates will enable small businesses to plan and invest in their HUBZone communities without fear that their designation may change from one year to the next, thus providing stability for both the community and HUBZone businesses. While the maps are frozen, no new Qualified Non-Metropolitan Counties, Qualified Census Tracts, or Redesignated Areas will be removed from or added to the maps. However, SBA will continue to add locations approved through the new Governor-designated covered areas initiative, qualified base closure areas, qualified disaster areas, and Indian lands, as any new data is received.
How has the definition of the Principal Office changed?
A new provision in the HUBZone regulations allows small businesses that invest in HUBZones by purchasing a building or entering a long-term lease (of 10 years or more) to maintain HUBZone eligibility for up to 10 years, even if at some point the office location no longer qualifies as a HUBZone. This provision does not apply to offices located in areas categorized on the HUBZone map as Redesignated areas.
Are there changes to the 35% HUBZone employee residency requirement?
The new rule allows HUBZone companies to retain long-term “Legacy” HUBZone resident employees as permanent HUBZone resident employees, under certain circumstances. An employee who resides in a HUBZone for at least six months (180 days) at the time of certification or recertification, and continues to reside in a HUBZone for at least six months (180 days) after such time, may continue to be considered a HUBZone resident so long as they are continuously employed by the firm, even if he/she moves to a non-HUBZone area, or if the area of his/her residence loses HUBZone geographical eligibility. If the firm wants to count such a “Legacy” employee as a HUBZone resident for the duration of the individual’s employment, then at the time of any subsequent recertification, the firm will be required to identify any such employee and provide supporting documentation demonstrating that the individual resided in a HUBZone for 180 days before and after certification and that the individual has been an employee of the firm for the entire period of time since the firm’s certification.
How may I obtain help or learn more about the HUBZone Program?
The following resources may be accessed for additional support:
Your SBA District Office can provide local assistance on topics such as government contracting, certifications, financing, general business support, and more. The list of local offices can be found at https:// sba.gov/local-assistance/.
The SBA Answer Desk at 1-800-827-5722 and firstname.lastname@example.org can also answer general questions.
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