Historically Underutilized Business Zones (HUBZone) Firms

The Historically Underutilized Business Zones (HUBZone) program helps small businesses in urban and rural communities gain preferential access to federal procurement opportunities.

Eligibility for HUBZone

Make sure to review the HUBZone to understand the HUBZone requirements (www.sba.gov). To qualify for the program, a business (except tribally-owned concerns) must meet the following criteria:

It must be a small business by SBA standards

It must be owned and controlled at least 51% by U.S. citizens, or a Community Development Corporation, an agricultural cooperative, or an Indian tribe

Its principal office must be located within a “Historically Underutilized Business Zone,” which includes lands considered “Indian Country” and military facilities closed by the Base Realignment and Closure Act

At least 35% of its employees must reside in a HUBZone.

To qualify for a HUBZONE, your business concern must be classified as a small business as defined by the SBA.  Small business means your business concern, with its affiliates, must meet the size standard corresponding to its primary industry classification.

Your firm’s principal office must be located in a qualified SBA designated HUBZone.  A Principal Office is defined as the location where the greatest number of the business employees at any one location perform their work. However, for those businesses whose primary industry is service or construction, the determination of principal office excludes the business employees who perform the majority of their work at job-site locations to fulfill specific contract obligations.

Your firm must be at least 51% unconditionally and directly owned and controlled by persons who are US citizens.  Unconditionally and direct ownership means directly owning at least 51% of the firm. Ownership must be direct and cannot be through another business or trust, unless the trust is revocable and you are the sole grantor and trustee of the trust. Control means both the day-to-day management and long term decision making authority for the business concern.  Generally, you should be the highest ranking officer of the business too.

Thirty Five percent (35%) of your business employees must reside in a SBA designated HUBZone.  An employee is all individuals employed on a full-time, part-time, or other basis, so long as that individual works a minimum of 40 hours per month. This includes employees obtained from a temporary employee agency, leasing concern, or through a union agreement or co-employed pursuant to a professional employer organization agreement. SBA will consider the totality of the circumstances, including criteria used by the IRS for Federal income tax purposes and those set forth in SBA’s Size Policy Statement No. 1, in determining whether individuals are employees of a concern. Volunteers (i.e., individuals who receive deferred compensation or no compensation, including no in-kind compensation, for work performed) are not considered employees. However, if an individual has an ownership interest in and works for the business a minimum of 40 hours per month, that owner is considered an employee regardless of whether or not the individual receives compensation. Residency requirements are to live in a primary residence at a place for at least 180 days, or as a currently registered voter, and with the intent to live there indefinitely.

Certify that when performing a HUBZone contract, at least 35% of your employees continue to reside in a SBA designated HUBZone. If your firm is owned by an Indian Tribal Government, 35% of your employees engaged in performing that contract must reside within a SBA designated HUBZone. You must “attempt” to maintain the 35% requirement throughout the life of the contract.

Federal Agencies are required to award 3 percent of their prime contracts to qualified HUBZone small businesses. Firms that are HUBZone certified by the SBA are eligible for Federal procurement preferences.

A HUBZone-certified firm can receive an application of a 10 percent price evaluation preference in full and open competition, for requirements above the simplified acquisition threshold. In such cases, the price offered by a HUBZone firm will be deemed lower than the price offered by the lowest, responsive large business offeror, as long as the HUBZone firm’s price is not more than 10 percent higher than the price offered by that offeror.

Award of contracts set-aside for competition among HUBZone-certified firms.

Negotiation of sole source contracts if the contracting officer determines that: only one HUBZone-certified firm can satisfy the requirement; the anticipated award price of the contract is not more than $5.5 million for manufacturing requirements, and not more than $3.5 million for all other requirements; the vendor is responsible with respect to performance; and the award can be made at a fair and reasonable price.

While there is no specific goal for award of subcontracts to HUBZone-certified firms, construction contracts exceeding $1 million, and all other prime contracts exceeding $550,000, must include, to the extent practicable, subcontracting plans that provide opportunities for HUBZone-certified firms.

For more information contact the Small Business Administration at www.sba.gov.

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