HUBZone Joint Ventures: FAR Council Gets It Wrong

The FAR Council’s proposed update to the limitations on subcontracting, and the DoD’s subsequent FAR deviation, have been met with widespread approval by small contractors.

But for HUBZone Program participants, the proposed rule and DoD deviation contain a glaring problem: a requirement that the HUBZone member of a joint venture take sole responsibility for meeting the applicable limitations on subcontracting. This requirement, which doesn’t apply to joint venturers in other socioeconomic programs, is unfair to HUBZones, and at odds with SBA regulations. 


The Large Business Runway Extension Act: For Some Contractors, New Five-Year Size Period Will Backfire

The House and Senate have passed the “Small Business Runway Extension Act of 2018,” which appears poised to become law in the coming days. As my colleague Matt Moriarty has written, the bill would amend the SBA’s small business size rules to use a five-year average, instead of a three-year average, in calculations using receipts-based size standards.

The purpose of the bill is to help contractors avoid becoming “other than small” following a period of quick growth, but not all companies will benefit. For companies with declining revenues, the bill may backfire, causing those companies to be stuck as large businesses longer. 


Limitations on Subcontracting: DoD Issues Comprehensive FAR Deviation

Earlier this week, the FAR Council issued a proposed rule to conform the FAR to the SBA’s regulation governing limitations on subcontracting. But the DoD isn’t waiting around while the FAR Council finishes the process.

The DoD has issued a comprehensive FAR deviation, effective immediately. The DoD’s FAR deviation will, effectively, temporarily conform the DoD’s use of the FAR to the SBA’s regulation while the FAR Council works on a final rule. The deviation instructs DoD contracting officers to use alternate FAR clauses when issuing small business set-asides, small business partial set-asides, and set-asides or sole source awards to 8(a) Program participants, HUBZones, SDVOSBs, EDWOSBs and WOSBs. The alternate FAR clauses, in turn, use the same formulas as the SBA’s regulation (and underlying statute) to calculate compliance with the limitations on subcontracting. Importantly, the alternate FAR clauses allow small prime contractors to count work performed by “similarly situated entities” toward the primes’ own performance thresholds. 



Since the inception of the program, the Federal Government has not met its goal to obligate 3 percent of eligible prime contract dollars to HUBZone small businesses. 

The purpose of this evaluation is to examine factors that contribute to federal agencies reaching the HUBZone Program socioeconomic goal using a mixed-methods analytic approach.1 The SBA can use findings from the evaluation to develop strategies and additional studies to: 1) increase the number and dollar amount of HUBZone contracts to eligible small businesses, 2) support the improvement of marketing and best practices of the HUBZone Program across CFO Act agencies, and 3) provide recommendations for the HUBZone Program.


GSA Schedule Consolidation Update 

According to a Nextgov article, the General Services Administration (GSA) will use the coming year to determine what its recently-announced, consolidated schedule will look like. The GSA announced in November that it would consolidate twenty-four multiple award schedules into a single contract vehicle. “Over this year, we’ll start the consolidation of the MAS program,” said Stephanie Shutt, director of the MAS Program Management Office, speaking at a recent GSA industry day. Ms. Shutt reported that the consolidation will likely be a five-year process, and moving existing contract holders to the new schedule will likely begin in January 2020. Ms. Shutt recommended, however, that companies waiting for a new contract or those looking to get on the schedule continue with business as usual and not halt their efforts or wait for the GSA to get caught up as it consolidates the award schedules.

Potential Impacts for Government Shutdown

A Nextgov article discussed the potentially significant impacts the government shutdown may have on government contractors, especially small businesses. The article recommended that contractors have preparations in place to weather a lapse in work. Representative Gerry Connolly (D-VA) commented that “President Trump’s Christmas shutdown will be incredibly harmful to government contractors who support their federal employee partners but aren’t made whole after the government reopens. These people have families, mortgages and other daily expenses.” Federal employees exempted from furlough through the shutdown will not receive paychecks, but they will generally get back pay once the shutdown has ended. Federal contractors who are paid for time worked, rather than salaried, cannot be paid for the time they did not work, which may make budgets tighter for people, especially around the holidays. Another article by Nextgov recommended that vendors still submit questions and bids according to previously-posted deadlines, even if contracting officers are not there to receive them. Vendors should ensure submissions are timestamped and well-documented. 

Increase in Block-chain Spending 

According to a Bloomberg Government article and Laura Criste, blockchain spending nearly tripled in Fiscal year 2018. Federal agencies invested more in blockchain technologies in fiscal 2018 than all previous years combined, and federal use of blockchain is expected to continue rising in fiscal 2019. This may mean that more money will go toward contractor implementations of the nascent technology. For example, the Department of Homeland Security released a new solicitation in November seeking solutions that use blockchain and distributive ledger technology to issue digital documentation in a way that prevents fraud, counterfeiting, and forgery. 


How to reach your HUBZone Goals 

Only 9 federal agencies met the government’s 3% goal for contracting with small businesses in Historically Underutilized Business Zones (HUBZones) in fiscal 2016. What factors helped those 9 agencies succeed and other agencies fail?

      A recent report looked into that question and made four conclusions:

  • The main barriers to success were agencies’ perceptions of HUBZone firms’ availability and capabilities and unfocused HUBZone marketing.
  • Agencies that did not meet the 3% HUBZone goal put HUBZone firms at a lower priority than small businesses participating in programs for disadvantaged owners, women owners, and service-disabled veteran owners.
  • The main factors that contributed to reaching the HUBZone goal were extensive marketing of the HUBZone program to small businesses to increase the vendor base; targeted research on HUBZone small businesses’ capabilities in fulfilling agency needs; and comprehensive training for small businesses about federal procurement.
  • Overall, few agencies utilized HUBZone set-asides to help them reach the 3% HUBZone small business procurement goal.

HUBZone firms on the rise

A new report from the Congressional Research Service (CRS) offers insight into recent growth in the number of HUBZone certified firms as well as into HUBZone contracting, number of zones and application processing times.

The number of certified HUBZone firms has been on the rise for the last three years since hitting a low in mid-2015, according to the CRS report.There were 6,558 HUBZone firms as of Nov. 8, up from a low point of 5,207 firms in July 2015. That is a 26% increase. The number of HUBZone firms has experienced fairly large changes in the last seven years. From a high of 8,533 firms in May 2011, the number dropped sharply to 6,900 in December 2011, and then slowly decreased further to bottom out at 5,207 in July 2015. The number rebounded to 5,930 in January 2017 and has continued to grow. Small Business Administration officials blamed the downward trend from 2011 to 2015 on many HUBZone census tracts becoming ineligible due to increased incomes.

It turns out that HUBZone firms are doing fairly well in federal contracting, but a relatively small portion is being awarded through HUBZone set-asides, according to the CRS report. HUBZone firms won $7.5 billion in federal contracts in fiscal 2017, mostly through generic small business set-asides or through socio-economic small business set-asides. Small firms often have multiple certifications in addition to being generically “small.” The HUBZone firms were awarded $1.49 billion through HUBZone set-asides, $347 million through HUBZone price-evaluation preferences and $65 million in HUBZone sole-source awards in fiscal 2017, the CRS report said.


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