The Historically Underutilized Business Zones program, usually called HUBZone, was created by Congress in the late 1990s and is administered by the U.S. Small Business Administration. Its purpose is to encourage economic development and employment in areas that have historically had less access to investment, by giving small businesses located in and employing people from those areas an advantage in federal contracting.
What makes an area a HUBZone
HUBZones are designated using defined criteria. Types of HUBZones include qualified census tracts, qualified non-metropolitan counties, lands within the boundaries of Indian reservations, qualified base closure areas, and certain areas affected by disasters. Designations are based on data such as income and unemployment and are updated periodically, which means an area can gain or lose HUBZone status over time.
The SBA provides an official HUBZone map on its website. It is the authoritative way to check whether a particular address is in a HUBZone. Because maps are updated, check again whenever you plan an office move or prepare for recertification.
The core requirements
In general terms, a firm seeking HUBZone certification must meet requirements along these lines:
- Be a small business under the SBA size standard for its primary NAICS code
- Be at least 51 percent owned and controlled by U.S. citizens, or by certain eligible entities such as Alaska Native corporations, community development corporations, agricultural cooperatives or Indian tribes
- Have its principal office located in a HUBZone
- Have at least 35 percent of its employees reside in a HUBZone
Each of these terms has a specific regulatory meaning. “Principal office” generally refers to the location where the greatest number of employees perform their work, with certain exceptions. “Employee” and “reside” are also defined in the regulations. Read them carefully, because the details matter.
Benefits of certification
Certified HUBZone firms may compete for contracts set aside for HUBZone businesses and, under certain conditions, receive sole-source awards. In full and open competitions, HUBZone firms may also receive a price evaluation preference, which adjusts how offers from other firms are compared. Congress has also set a government-wide goal for the share of federal contract dollars going to HUBZone businesses.
Staying compliant
HUBZone status requires ongoing attention. Firms must recertify on a regular schedule, and the 35 percent residency requirement can shift as employees are hired, leave or move. Many HUBZone firms track employee residency continuously rather than checking it only at recertification time. There are also rules about performing HUBZone contracts, including limitations on subcontracting and expectations around maintaining residency levels during performance.
Questions worth asking regularly:
- Is our principal office still in a designated HUBZone on the current map?
- Where do our employees live today, and how does that compare to the 35 percent threshold?
- Do upcoming hires or departures change the picture?
The HUBZone program can be a strong fit for firms already rooted in designated communities. Before applying, review the current program requirements at sba.gov, and consider talking with an SBA district office, an APEX Accelerator, or a government contracts professional about how the rules apply to your situation.