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HUBZONE PROGRAM

HUBZONE PROGRAM. John A. Leonard Jr. Business Development Specialist Washington Metropolitan Area District Office. What We’ll Be Talking About. Events leading to creation of HUBZone Purpose of the HUBZone Program Current State of the HUBZone program

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HUBZONE PROGRAM

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  1. HUBZONE PROGRAM John A. Leonard Jr. Business Development Specialist Washington Metropolitan Area District Office

  2. What We’ll Be Talking About • Events leading to creation of HUBZone • Purpose of the HUBZone Program • Current State of the HUBZone program • Qualifications to be certified as a HUBZone concern • Contract Types (benefits) • Question & Answer Session

  3. Quick History • In 1996, U.S. Senator Christopher ‘Kit’ Bond, then Chairman of the Small Business Committee, crafts legislation to link preferences for award of Federal contracts to small businesses located in economically dormant and underserved areas, which he called HUBZones. • Feels JOBS, not more job training, is what’s needed to promote long-term economic viability.

  4. HUBZone Program Becomes LawOpens Doors • In 1997, Congress passed and the President signed into law the “Small Business Reauthorization Act of 1997,” which contained HUBZone provision. • In 1998, the U.S. Small Business Administration moves final rules to create HUBZone Program. • In 1999, program certifies on March 22nd the first HUBZone small business concern.

  5. Program Overview • Community-based • HUBZone Program = E³ • Employment • Empowerment • Enterprise

  6. Program Purpose • Provide Federal contracting assistance to qualified small business concerns located in historically underutilized business zones (HUBZones) to: • Increase employment opportunities • Stimulate capital investment in those areas • Empower communities through economic leveraging and the “multiplier effect.”

  7. A July 2008 GAO audit created a paradigm shift in the HUBZone Program’s objectives and processes Program launched • Backlog begins to fall • New portfolio monitoring initiatives launched GAO Audit report published Today

  8. During the Program’s transition, an application backlog developed – leading to long processing times Total Application Pipeline Result: Processing time grew to >10 months (peaked Dec09) Causes of backlog growth: • “Full-doc” process impacted processing rates • Staffing level grew slowly • Application volume grew

  9. The backlog has been eliminated and new applicants can expect their cases to be finalized within 90 days Total Application Pipeline Current: <90 days (Sept10) Causes of backlog reduction: • Processing rates improved • Staffing level way up

  10. In addition to tackling the backlog, the HUBZone Program began addressing its legacy portfolio Total Portfolio of HUBZone Certified Firms (~8,000 in September 2010) • Received PE Letter in FY2010 • Required firm to sign under penalty of perjury that it remains eligible – or be decertified • ~70% remain certified (~30% were decertified) Received Program Exam Letter in FY10 (~3,600) Recertified in FY2009 (~1,300) • Received site visits in FY2010 • Over 1,000 site visits performed • ~75% continued certification to-date Received Program Exam w/ site visit in FY20091 (~700) Certified w/ full doc review FY08-FY10 (~2,400) 1 Includes a limited number of firms having undergone other review efforts such as Protests/Appeals

  11. By end of FY 2011, all certified firms will have gone through a Program Examination (13 CFR 126 – Subpart D) Total Portfolio of HUBZone Certified Firms (~8,000 in September 2010) Received Program Exam Letter in FY10 (~3,600) • Certified firms to undergo “full-doc” review • All firms must demonstrate current eligibility Recertified in FY2009 (~1,300) Received Program Exam w/ site visit in FY20091 (~700) • Already completed “full-doc” review • Firms demonstrated eligibility with supporting documentation Certified w/ full doc review FY08-FY10 (~2,400)

  12. In the future state, certified firms will be subject to a range of monitoring initiatives • Annual assertion of eligibility • Requiring firms to attest in writing under penalty of perjury they remain eligible • Target: All certified firms (except those certified <1 year) • Full document reviews • Collection and review of documentation to verify current eligibility • Target: All certified firms • Contract audits • Collection and review of documentation to verify eligibility at time of contract bid and/or award • Target: Select certified firms with HUBZone contracts • Site visits • Unannounced visits by Field Operations staff to verify Principal Office criterion • Target: New applicants and select certified firms

  13. Program Design • From the outset, designed as a virtual program always available at: www.sba.gov/hubzone • Application for Certification • Recertification • Program Examinations

  14. HUBZone EligibilityRequirements • Size: • Small, by relevant SBA standards. • Ownership and Control: • At least 51% by U.S. citizen(s), Community Development Corporation, Agriculture Cooperative, Alaska Native Corporation, or Indian tribe.

  15. HUBZone Eligibility Requirements, cont’d… • Location: • “Principal Office” must be located in a HUBZone (may differ for tribally owned concerns). • Employment: • At least 35% of employees must reside in a HUBZone (may differ for tribally owned concerns).

  16. HUBZone Qualified Areas

  17. HUBZone Qualified Areas, cont’d… • Metropolitan Area Census Tracts : 10,169 areas • “Qualified Census Tract” that meets test for Low Income Housing Tax Credit. (HUD) (Changes with decennial census.) • Non-metropolitan Counties: 1,349 counties • Median household income is less than 80% of the non-metropolitan state level (Census) (Changes with decennial census.) • Unemployment rate that is at least 140% of the lower of the state-wide or U.S. average (BLS) (Changes annually.)

  18. HUBZone Qualified Areas, cont’d… • Federally recognized Indian Reservations: 659 • Locations include land meeting the definition of Indian Country (BIA and IRS) (Change is periodic) • Difficult Development Areas: 67 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: 48 • 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)

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

  20. How to Locate HUBZone contractors

  21. Federal Government-wide Prime HUBZone Contracting Awards by Fiscal Year • FY 1999 Goal - 1% Actual - not available • FY 2000 Goal – 1.5% Actual - $663.3 M (.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 - $6.2 B (1.94%) • FY 2006 Goal – 3.0% Actual – $7.1 B (2.11%) • FY 2007 Goal – 3.0% Actual – $8.5 B (2.24%) • FY 2008 Goal – 3.0% Actual – $10.1 B (2.34%) • FY2009 Goal – 3.0% Actual – $12.4 B (2.80%) • FY2010 Goal – 3.0% Actual – $12.8 B (2.30%)

  22. Performance of work requirements for HUBZone contracts - - - 13 CFR Section 126.700 • The HUBZone SBCs must spend at least 50% of the cost of the contract incurred for personnel on its own employees or employees of other qualified HUBZone SBCs. • A qualified HUBZone SBC prime contractor receiving a HUBZone contract for general construction may meet this requirement itself by expending at least 50% of the cost of the contract incurred for personnel on its employees or it may subcontract at least 35% of the cost of the contract performance incurred for personnel to one or more qualified HUBZone SBCs. A qualified HUBZone SBC prime contractor may not, however, subcontract more than 50% of the cost of the contract incurred for personnel to non-qualified HUBZone SBCs. • A qualified HUBZone SBC prime contractor receiving a HUBZone contract for specialty construction may meet this requirement itself by expending at least 50% of the cost of the contract incurred for personnel on its employees or it may subcontract at least 25% of the cost of the contract performance incurred for personnel to one or more qualified HUBZone SBCs. A qualified HUBZone SBC prime contractor may not, however, subcontract more than 50% of the cost of the contract incurred for personnel to non-qualified HUBZone SBCs.

  23. Performance of work requirements for HUBZone contracts 13 CFR Section 126.700 cont’d . . . • A contracting officer may waive the 50% requirement for a particular procurement after determining that at least two qualified HUBZone SBCs cannot meet the requirement.

  24. HUBZone Program Benefits cont’d… • 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. Section 602(b)(1)(B) of the Act, 15 U.S.C. sect. 657a • GAO has interpreted this language to mean that a HUBZone set-aside is mandatory where the enumerated conditions are met. • SBA has requested reconsideration of the GAO's decision. • The SBA's position is that there should be parity between the small business programs.

  25. What you can do • Maintain your eligibility • Keep good records • Notify SBA of firms that are out of compliance • Be prepared for upcoming “full-doc” Program Examinations

  26. Key stakeholder issues • Long processing times • Why is it taking so long? Can my application get processed faster? • Fraud and abuse • Can I be certain a firm with HUBZone certification is truly eligible? • HUBZone Geographic designations • My region is suffering economically – why aren’t we a HUBZone? • Will my area lose its status with the 2010 census? If so, when? • Employee definition change • How is the new definition different? What if my firm is no longer eligible? • Contracting and parity • Does HUBZone take precedence over other SBA federal contracting programs? • What is being done to increase the number and value of HUBZone contracts?

  27. THANK YOU! John A. Leonard Jr. BDS; WMADO John.Leonard@sba.gov

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