HUBZone Contractors National Council

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At the Council, we understand that substantive change is deeply rooted in policy reform and in 2024 we are focused on key priorities designed to enhance our impact and extend our reach. This year, our efforts are concentrated on advancing initiatives across several strategic areas, including improvements to the program, promoting a level playing field among SBA programs, reducing administrative burdens, and breaking down barriers to entry. The list below does not include all the initiatives the council is supporting, but it highlights our primary focus for the coming year. These priorities reflect our commitment to driving meaningful change and delivering sustainable results.

Apply the HUBZone Price Evaluation Preference to Task Orders

The HUBZone price evaluation preference helps level the playing field for HUBZone firms in full-and-open competition, as well as affords federal agencies greater opportunity to devote federal spending to HUBZone firms. Regrettably, federal agencies have interpreted FAR 19.1304 as prohibiting the price evaluation preference to task orders when, in fact, it only prohibits commodities. We urge Congress to direct federal agencies to amend their interpretation to follow the law as Congress intended. As the federal government increasingly drives its spending through IDIQ contracts, such as the “Best in Class” (BIC) contracts, a significant opportunity for HUBZone spending is being lost because the HUBZone price evaluation is not being applied in the award of task orders. Included in the House-passed version of the FY2021 National Defense Authorization Act (NDAA), applying the price preference would significantly benefit the SBA, federal agencies, HUBZone firms and the communities they serve. Amend the Criteria for Maintaining HUBZone Status. The HUBZone program provides flexibility for the requirement that 35% of its employees must be located in a HUBZone if a company holds a HUBZone contract awarded through the set-aside program. As employees and contracts change, a company may temporarily fall below the 35% threshold. The Council believes this flexibility should be applied to all HUBZone firms, regardless of whether they hold a prime contract awarded through the HUBZone set-aside program. If “attempt to maintain” is redefined to include all contracts, the program will significantly benefit by providing HUBZone companies more stability.

Addressing Limitations in HUBZone Eligibility: The Need for Reform in Designating Economically Distressed Areas

The regulations delineating eligible areas for the HUBZone program are based on a clear algorithm that assesses whether areas meet the statutory criteria to be classified as economically distressed. Despite this, caps exist that prevent communities from receiving the support they urgently need. For example, in metropolitan regions, a limitation is imposed such that no more than 20% of a region's census tracts can qualify, even if they meet the qualifications. Furthermore, in a positive move in 2019, the SBA allowed governors to petition for areas that meet specific criteria to be considered eligible. However, an arbitrary cap of 10% per year was introduced, which seems nonsensical. At the council, we advocate for the removal of these unnecessary barriers. If communities are genuinely economically distressed, they should be incorporated into the HUBZone map without delay. The current approach forces communities to wait for support that could make a significant difference in their economic health and development.

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Redefining 'Attempt to Maintain': Aligning HUBZone Compliance with the Program's Original Intent

When the HUBZone program was initially established, it recognized that external factors could impede a company's ability to maintain compliance. This acknowledgment led to the provision allowing companies engaged in HUBZone contracts to temporarily fall below the 35% employment requirement while still retaining their status. However, a significant challenge has emerged: on average, 85% of the dollars counted towards HUBZone spending are not earmarked as set-asides, which means that the anticipated flexibility is not extended. This lack of parity is unjust and requires rectification. If the government can count these expenditures towards its HUBZone goals, then businesses, too, should be granted the necessary grace and flexibility concerning compliance standards.

Align the Rulemaking Processes of SBA and the FAR Council

Pervading inconsistencies exist in government contracting due to discrepancies between final rules issued by the SBA and the Federal Acquisition Regulatory (FAR) Council. This causes confusion for both companies and federal agencies on which guidance they should ultimately follow. Many in the acquisition workforce do not follow changes in small business rules unless it is in the FAR, despite that final rulemaking by SBA is sufficient. In addition, the time lapse between FAR Council action and final rules promulgated by the SBA can span many years. To remedy this problem, the Council suggests adding the SBA to the FAR Council, and requiring the FAR Council issue its rulemaking simultaneously with SBA.

Expand Sole Source Contract Opportunities for HUBZone Companies

As government buying continues to trend toward buying through large contracting vehicles and moving away from direct contracts, the ability for small companies to win sole source awards is more crucial than ever. The Council supports eliminating option years for sole source contracts to allow for $4.5/$7 million each year, instead of over the life of the contract—as changed in House-passed H.R. 190 during the 116th Congress. The Council also believes that creating parity among SBA socioeconomic contracting programs, as it relates to sole source contracts, would incentivize agencies to increase their awards. A current impediment to awarding sole source contracts is the requirement that a contracting officer must show that they do not have a reasonable expectation that offers would be received from two or more HUBZone small business concerns. There is confusion around the language “reasonable expectation,” which leaves this interpretation up to each contracting officer. This presents a barrier to awarding a sole source contract to a HUBZone company, as this could open the door to a protest – an action contracting officers seek to avoid. Eliminating this requirement for the HUBZone, WOSB/EDWOSB and SDVOSB programs would increase these awards to small businesses. Additionally, SBA’s Office of Government Contracting and Business Development (GCBD) should develop guidance to clarify how the acquisition workforce can award sole source contracts to small businesses.

Increase Utilization of Small Businesses to Counteract the Impact of Category Management

The Council continues to work to minimize negative impacts of category management on small businesses. These efforts resulted in a requirement in the FY2020 NDAA of annual reporting of small business participation on BIC vehicles, and governmentwide reforms issues by the Administration in December 2021. The Council remains dedicated to finding opportunities that ensure maximum participation of HUBZone businesses, as the government has never met its 3% goal. While we were encouraged by the guidance issued by the Office of Management and Budget (OMB) directing agencies to consider the effect of category management and contract consolidation on small businesses, it is unclear if any of the Administration’s reforms have been adopted. We encourage OMB to issue an update on the implementation of these reforms.

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