Most small-business contracting tools work by narrowing who can compete, through set-asides and sole-source awards. The HUBZone program has an additional tool that works in open competition, where large and small firms compete against each other. It is called the price evaluation preference, and it changes how prices are compared for evaluation purposes without changing what anyone is paid. Because it applies only in certain competitions and in a specific way, it is often misunderstood. This overview is general; read the solicitation’s provision and the current FAR text for the rules that apply.
How the preference works
In full and open competitions where it applies, the contracting officer gives offers from certified HUBZone small businesses a price evaluation preference by adding a factor of 10 percent to the price of other offers. The factor is not added to offers from HUBZone firms that have not waived the preference, and it is not added to an otherwise successful offer from a small business. In practice, then, the factor is applied to offers from large businesses.
A simple illustration: suppose a large business offers a price of $1,000,000 and a HUBZone firm offers $1,050,000. For evaluation, the large firm’s price is treated as $1,100,000, so the HUBZone offer is lower on evaluated price. If the contract is awarded to the HUBZone firm, it is paid its own price, $1,050,000. The adjusted figure exists only for comparison.
In best-value competitions, the adjusted prices are used in the price evaluation, and the tradeoff among price and non-price factors proceeds from there.
When it does not apply
The FAR identifies situations in which the preference is not used. In general terms, these include acquisitions expected to be at or below the simplified acquisition threshold, acquisitions in which price is not a selection factor, such as architect-engineer selections, and acquisitions in which all fair and reasonable offers are accepted, such as the award of multiple award schedule contracts. It also does not apply in competitions already set aside for small businesses, since the preference exists to help HUBZone firms compete against large businesses in open competition.
Obligations that come with it
A HUBZone firm that receives the benefit of the preference takes on obligations stated in the solicitation provision, including commitments related to the limitations on subcontracting for the work it performs. A HUBZone firm may elect to waive the preference, in which case the factor is added to its own offer as well and certain of those commitments do not apply. A firm considering a waiver should read the provision carefully and get advice.
Making the most of it
- Confirm that your HUBZone certification is current before you submit; the preference depends on your status.
- Look for the HUBZone price evaluation preference provision in full and open solicitations, and read how it will be applied.
- Do not assume the preference will close a large price gap; it is a fixed percentage, and non-price factors still matter in best-value awards.
- Plan to meet the limitations on subcontracting if you win.
The FAR’s HUBZone program rules, including the price evaluation preference, are in Subpart 19.13 at acquisition.gov, and certification information is at sba.gov.