HUBZone (Historically Underutilized Business Zones) is a program designed by the Small Business Administration (SBA) for small companies with at least 51% of ownership and controlled by U.S. citizens, or a Community Development Corporation, an agricultural cooperative, or an Indian tribe, including Alaska Native Corporations. The HUBZone program was created in response to the HUBZone Empowerment Act created by the US Congress in 1998, to boost small business.
For an employee to qualify as a HUBZone resident for a specific HUBZone contract, the employee must live in an officially designated HUBZone area on the date the contract is awarded. The decision of the U.S. Court of Federal Claims in Dorado Services, Inc. v. United States, No. 16-945C (2016) involved an Air Force solicitation for a solid waste collection and disposal for installations in San Antonio. The solicitation was set-aside specifically for HUBZones.
The Air Force awarded the contract to Dorado Service in the fall of 2015, after evaluating competitive proposals. GEO International Management, Inc, an unsuccessful offeror, filed a HUBZone protest with the SBA questioning the HUBZone eligibility of Dorado. GEO stated the date requirements could not have been met for the employees residency. In order to become certified in the HUBZone program, there are two criteria that must be met. First, the company’s primary office must be located in a HUBZone. And second, at least 35 percent of the company’s employees must live in a HUBZone. The Court found that eight individuals did not live in a qualified HUBZone tract on the date of the award, and a judgment was filed against Dorado.
As the Court decision suggested, given that employees can move and that HUBZone tracts themselves can expire, HUBZone contractors must monitor the compliance of the 35% residency requirement and take action to address potential issues. The Court’s decision reflects a “best practice” for HUBZone contractors and is an important update to the HubZone rules.
Are you considering HUBZone contracts and would like to learn more, or have questions about HubZone rules? Contact our team at KDuncan and Company and learn more about the benefits and challenges of HUBZones contracts.
KDuncan & Company is dedicated to providing knowledge and support for small government contractors about concerns regarding government contracting. For questions on areas such as as cost proposals, accounting systems, DCAA compliance, and incurred cost audits, reach out to KDuncan & Company.