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Michael P. McHale D.J. Caulfield Director Area Director/U.S. East HUBZone Program

State of the HUBZone Program **FOCUS on Contracting** HUBZone Overview for GC Area Directors and PCRs Delivered via ReadyTalk March 1, 2007. Michael P. McHale D.J. Caulfield Director Area Director/U.S. East HUBZone Program. What We’ll Be Talking About.

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Michael P. McHale D.J. Caulfield Director Area Director/U.S. East HUBZone Program

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  1. State of the HUBZone Program **FOCUS on Contracting**HUBZone Overview for GC Area Directors and PCRs Delivered via ReadyTalkMarch 1, 2007 Michael P. McHale D.J. Caulfield Director Area Director/U.S. East HUBZone Program

  2. What We’ll Be Talking About • HUBZone program overview, purpose • Access, eligibility, portfolio • Statutes, regulations, GAO, court findings • Contracting methodologies with FAR cites • FOCUS: HUBZone Set-asides • Future plans • Questions and Answers

  3. Program Overview The HUBZone Program = E³ Community Based: Employment Empowerment Enterprise

  4. Purpose • Provide HUBZone firms Federal contracting assistance to: • Increase employment opportunities • Stimulate capital investment in those areas • Empower communities through economic leveraging and “multiplier effect.”

  5. Access • From outset, designed as virtual program available at: www.sba.gov/hubzone Covers: • Application for Certification • Recertification • Program Examinations • Contracting Officer Assistance

  6. HUBZone EligibilityRequirements • Size: Small, by relevant SBA standards; • Ownership and Control: At least 51% by U.S. citizen(s), or Community Development Corporation, or Agriculture Cooperative, or Alaska Native Corporation, or Indian tribe; • Location: “Principal Office” located in a HUBZone (where greatest number of employees perform their work)); and • Employment: At least 35% of employees must reside in a HUBZone. (NOTE: Location and Employment criteria for tribally-owned concerns differ.)

  7. HUBZone Eligibility,Qualified Areas • Metropolitan Area Census Tracts : 11,600 locations • “Qualified Census Tract” that meets test for Low Income Housing Tax Credit. (HUD) (Changes with decennial census.) • Non-metropolitan Counties: 1,294 full counties • Median household income is less than 80% of the non-metropolitan state level (Census) (Changes with decennial census.) • Unemployment rate that is not less than 140% of the state-wide or U.S. average (BLS) (Changes annually.) • Federally recognized Indian Reservations: 1,254 locations to include lands meeting definition of Indian Country (Change is periodic)

  8. HUBZone Eligibility,Qualified Areas cont’d • Difficult Development Areas: 112 locations • “Difficult Development Area” external to continental U.S. that meets test for Low Income Housing Tax Credit. (HUD) (Changes with decennial census.) • Former military base closed by BRAC: 107 • Former military bases closed as a result of Base Realignment and Closure Act (BRAC). Locations remain HUBZone for five years after date of closing or, if already closed by Dec. 8, 2004, five years from that date. (Defense) (Changes periodically.)

  9. HUBZone Portfolio • Total Portfolio: 13,258 • HUBZone firms’ total average annual receipts: $24.9 Billion • HUBZone firms’ total employment: 207,000 employees • HUBZone residents employed by HUBZone firms: 133,000 (65%) • Represented in 89 of the 92 NAICS industrial subsectors.

  10. Market Research for HUBZone firms • How to find a HUBZone firm -- • HUBZone Home Page • https://eweb1.sba.gov/hubzone/internet/ • (aka – www.sba.gov/hubzone) • Use ‘Contracting Officer’s HUBZone Gateway’ • Central Contractor Registration/Dynamic Small Business Source System (CCR/DSBSS) • http://www.ccr.gov

  11. HUBZone Contracting • Set-aside awards (HUBZone Rule of Two) • Sole source awards • Awards through full and open competition after application of 10% price evaluation preference (PEP) • Subcontracting Opportunities

  12. Contracts Not Availablefor HUBZone set-aside • Federal Prison Industries, or FPI. [Statutory] • Javits-Wagner-O’Day Act, or JWOD. [Statutory] • Current 8(a) requirements. [13CFR 126] • Orders under existing indefinite delivery contracts. [FAR] • Orders against Federal Supply Schedules. [FAR] • Requirements for commissary or exchange resale items. [FAR]

  13. FAR 19.1305(a) HUBZoneSet-Aside Procedures • First paragraph, first sentence: • A participating contracting officer shall set aside acquisitions exceeding the Simplified Acquisition Threshold for competition restricted to HUBZone small business concerns… • HUBZone set-asides shall be considered before HUBZone sole-source awards or small business set-asides

  14. FAR 19.1305 HUBZoneSet-Aside Procedures cont’d • CO may set-aside acquisitions exceeding the Micro Purchase Threshold ($2,500) and below the Simplified Acquisition Threshold ($100K) • SBA can appeal CO decision not to set-aside a requirement over $100K: • PCR launches process

  15. FAR 19.1306 HUBZoneSole Source Awards • Only one HUBZone SB available • Requirement not currently being performed by a non-HUBZone SB • HUBZone SBC must be a responsible contractor - price must be fair/reasonable • Anticipated price of contract (including options) is less than: -- $5.5 M - manufacturing, or -- $3.5M - all other industries

  16. FAR 19.1307 Full/Open Competition Price Evaluation Preference • A HUBZone firm can displace the apparent low offeror (other than another small business) if its price is not more than 10% higher than the otherwise lowest, responsive and responsible offeror [factor applied to ‘base offer’].

  17. SubcontractingOpportunities • There is no statutory percentage HUBZone goal for subcontracting, however… • Agencies tend to agree on 3% as annual goal. • For most large contracts (over $500,000 or $1 million construction), large business contractors must create a subcontracting plan reflecting HUBZone firm participation. • Factors into ‘Past Performance.’

  18. Federal Government-wide Prime HUBZone Contracting Awards by Fiscal Year • FY 1999 Goal - 1% Actual - not available • FY 2000 Goal – 1.5% Actual - $663.3M (.33%) • FY 2001 Goal – 2.0% Actual - $1.7 B (.72%) • FY 2002 Goal – 2.5% Actual - $1.7 B (.71%) • FY 2003 Goal – 3.0% Actual - $3.4 B (1.23%) • FY 2004 Goal – 3.0% Actual - $4.8 B (1.59%) • FY 2005 Goal – 3.0% Actual - $6.1B (1.94%)

  19. Comparison of FY05 Set-Aside Awards Small Business versus HUBZone • Data obtained from Federal Procurement Data System–Next Generation (FPDS-NG) on 11/01/06 • Some agencies may combine a number of set-asides and insert into FPDS-NG as one award entry.

  20. HUBZone Set-Aside Contracts --Evolutionary Language • Statutory – PL 105-135 • Regulatory – 13CFR 126 • Federal Acquisition Regulation – Subpart 19.13 • General Accountability Office – rulings • U.S. Ninth Circuit Court of Appeals -- ruling ‘HUBZone Rule of Two’

  21. SBA Reauthorization (PL 105-135)Title VI – HUBZone Act of 1997 • Public Law 105-135, encompassing HUBZone Act of 1997, contains this clause: • “Notwithstanding any other provision of law, a contract opportunity shall be awarded . . . on the basis of competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.” Appears in 15 U.S.C. 658(b)(2)(B).

  22. Regulatory – 13CFR 126 • § 126.607 When must a contracting officer set aside a requirement for qualified HUBZone SBCs? • (a) The contracting officer first must review a requirement to determine whether it is excluded from HUBZone contracting pursuant to §126.605. • (b) If the contracting officer determines that §126.605 does not apply, the contracting officer shall set aside the requirement for HUBZone, 8(a) or SDVO SBC contracting before setting aside the requirement as a small business set-aside. • (c) If the contracting officer decides to set aside the requirement for competition restricted to qualified HUBZone SBCs, the contracting officer must: • (1) Have a reasonable expectation after reviewing SBA's list of qualified HUBZone SBCs that at least two responsible qualified HUBZone SBCs will submit offers; and • (2) Determine that award can be made at fair market price.

  23. Federal Acquisition Regulation – Subpart 19.13 19.1305  HUBZone set-aside procedures. • (a) A participating agency contracting officer shall set aside acquisitions exceeding the simplified acquisition threshold for competition restricted to HUBZone small business concerns when the requirements of paragraph (b) of this section can be satisfied. The contracting officer shall consider HUBZone set-asides before considering HUBZone sole source awards (see 19.1306) or small business set-asides (see Subpart 19.5). • (b) To set aside an acquisition for competition restricted to HUBZone small business concerns, the contracting officer must have a reasonable expectation that— • (1) Offers will be received from two or more HUBZone small business concerns; and • (2) Award will be made at a fair market price. • (c) A participating agency may set aside acquisitions exceeding the micro-purchase threshold but not exceeding the simplified acquisition threshold for competition restricted to HUBZone small business concerns at the sole discretion of the contracting officer, provided the requirements of paragraph (b) of this section can be satisfied. • (d) If the contracting officer receives only one acceptable offer from a qualified HUBZone small business concern in response to a set aside, the contracting officer should make an award to that concern. If the contracting officer receives no acceptable offers from HUBZone small business concerns, the HUBZone set-aside shall be withdrawn and the requirement, if still valid, set aside for small business concerns, as appropriate (see Subpart 19.5).

  24. Federal Acquisition Regulation – Subpart 19.13 cont’d • (e) The procedures at 19.202-1 and, except for acquisitions not exceeding the simplified acquisition threshold, at 19.402 apply to this section. When the SBA intends to appeal a contracting officer’s decision to reject a recommendation of the SBA procurement center representative (or, if a procurement center representative is not assigned, see 19.402(a)) to set aside an acquisition for competition restricted to HUBZone small business concerns, the SBA procurement center representative shall notify the contracting officer, in writing, of its intent within 5 working days of receiving the contracting officer’s notice of rejection. Upon receipt of notice of SBA’s intent to appeal, the contracting officer shall suspend action on the acquisition unless the head of the contracting activity makes a written determination that urgent and compelling circumstances, which significantly affect the interests of the Government, exist. Within 15 working days of SBA’s notification to the contracting officer, SBA shall file its formal appeal with the head of the contracting activity, or that agency may consider the appeal withdrawn. The head of the contracting activity shall reply to SBA within 15 working days of receiving the appeal. The decision of the head of the contracting activity shall be final.

  25. General Accountability Office

  26. U.S. Ninth Circuit Court of AppealsJan 11, 2006 The Court says: Congressional intent ‘clear and explicit’ for priority of HUBZone concerns in Federal contracting over small business set-asides. • Used phrase ‘unequivocal terms’ that contracts be designated as a HUBZone set-aside when criteria met: • Cited SBA regulations and current FAR that contracting officer ‘must set aside the requirement for competition restricted to qualified HUBZone if: • (1) Expects two or more HUBs will compete; and • (2) Fair market price

  27. Four Common Myths That Severely Impact HUBZone Contract Opportunities • MYTH #1. It’s difficult to identify HUBZone firms when conducting market research to establish a basis for a HUBZone set-aside. • Reality: It's actually quite simple to identify HUBZone firms through the following sources: • HUBZone Home Page • https://eweb1.sba.gov/hubzone/internet/ • (aka – www.sba.gov/hubzone) • Use ‘Contracting Officer’s HUBZone Gateway’ • Central Contractor Registration/Dynamic Small Business Source System (CCR/DSBSS) • http://www.ccr.gov

  28. Four Common Myths Severely Impacting HUBZone Contract Opportunities cont’d • MYTH #2. The HUBZone portfolio is composed of small, undercapitalized, low-tech service and construction firms. • Reality: The HUBZone portfolio of over 13,000 firms includes capability in virtually every NAICS code procured by the Federal Government. HUBZone Portfolio includes: • 931 firms with annual revenue of $10 million+ • 620 firms with over 100 employees • 141 clothing manufacturers • 498 machine shops • 1,177 computer service firms

  29. Four Common Myths Severely Impacting HUBZone Contract Opportunities cont’d • MYTH #3. The ‘HUBZone Rule of Two’ does not apply to procurement actions that were formerly set-aside for small business (aka -- historical small business set-asides) • Reality: There is no exemption to the ‘HUBZone Rule of Two’ for historical small business set-asides. The ‘HUBZone Rule of Two’ is based upon specific language found in The HUBZone Act of 1997, the FAR, SBA’s regulations, Federal Court rulings and GAO decisions. All historical small business set-asides are subject to the ‘HUBZone Rule of Two’ requirement. • MYTH #4. Movement of a historical small business set-aside to a HUBZone set-aside cannot be accomplished until a small business impact study is conducted. If it is determined that the proposed HUBZone set-aside will “impact” a small business (former contract awardee), then the requirement cannot be issued as a HUBZone set-aside. • Reality: Unlike the 8(a) Program, there is no requirement to conduct an impact study when a procurement is moved from a small business set-aside to a HUBZone set-aside

  30. Future Plans • Continue HPQRS Pilot- FedBizOpps electronic monitoring by the Office of HUBZone Program intended to: • Increase program awareness among Federal agencies, and • Remind contract personnel of HUBZone requirement of the 3% statutory prime contracting goal. • Results: Mixed, thus far educational benefit but few decision reversals

  31. Future Plans cont’d • Marketing to contract officials • HUBZone Set-aside Letter • Initiated by HUBZone firms to identify a future requirement as a HUBZone set-aside • SBA system will generate an e-mail message formally requesting that forecast purchase be a HUBZone set-aside. • To include HUBZone-generated market research. • Will launch early Spring 2007

  32. The best social program is a job. – President Ronald Reagan

  33. The HUBZone Program “Rebuilding America's Communities, One Small Business at a Time "

  34. The HUBZone Program Now it’s time for the Questions and Answers

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