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HUBZone Program Updates Bring Needed Efficiency to the FAR

7.12.21 – Posted in E&B Alerts – Government Contracts

After the SBA updated its regulations three years ago to increase the use of HUBZone small business concerns across the country, updates are finally coming to the FAR. The Department of Defense (DoD), General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA) are proposing to amend the Federal Acquisition Rules (FAR) to implement the Small Business Administration’s (SBA) regulations for the Historically Underutilized Business Zone (HUBZone) Program. The HUBZone Act of 1997 originally tasked SBA with administering a program to assist small businesses in low-income, high-poverty areas, Indian reservations, closed military bases, and disaster areas. The HUBZone’s primary objectives are to create jobs and increase capital investment in distressed communities. Businesses that participate in the HUBZone program can receive competitive advantages when bidding on federal contracts, such as receiving sole-source awards and set-asides.

The SBA reviewed the HUBZone Program policies in 2019 and revised the regulations at 84 FR 65222 to reflect current policies. The final rule, issued on November 26, 2019, was efficient and effective; it eliminated ambiguous regulations and reduced burdens on small businesses and procuring agencies. On June 14, 2021, this proposed rule was introduced to attempt to accomplish the same efficiency and effective goals. Overall, the proposed rule reflects the SBA’s regulations and updates the HUBZone small business concern definition, streamlines eligibility and notification requirements, and clarifies HUBZone protest procedures. These streamlined regulations will add clarity to the HUBZone Program and promote small business opportunities in the federal marketplace.

Definition of Small Business Concern

The proposed rule’s definition of “HUBZone small business concern” refers the reader to 13 C.F.R. § 126.200, which lists the eligibility requirements for a concern to qualify as a HUBZone small business concern, and to the SBA’s designation of a HUBZone small business concern in the Dynamic Small Business Search (DSBS). The DSBS is the database that government agencies use to find small business contractors and maintains profiles indicating the HUBZone certification status of small business concerns. By referring readers to the DSBS to ascertain a concern’s HUBZone status, persons are no longer required to directly contact the SBA to gain the same information. In addition, the term “qualified” would be removed from all references to a “qualified HUBZone” because a “HUBZone” title indicates that a business already has SBA certification to become a HUBZone small business concern. These definition changes, while seemingly minor, will likely reduce confusion, encourage efficient use of SBA resources, and ensure the FAR is current with SBA policies.

Updated procedures for filing a HUBZone status protest

Under the proposed rule, only the SBA and contracting officer may protest HUBZone certification status for a sole-source procurement. This stands in contrast to all other procurements, where the SBA, the contracting officer, or other interested parties may protest a status appeal. The proposed rule also updates the references in the FAR based on SBA’s regulations for filing a protest against a HUBZone joint venture. If a disappointed offeror wishes to file a protest against a HUBZone joint venture, the protestor must include (1) a statement of why the HUBZone small business did not meet eligibility requirements either at the time of application to the SBA or when the SBA last certified the small business concern; and/or (2) why the HUBZone joint venture did not meet the SBA’s joint venture requirements at time of the submission of offer. These clarified procedures will assist disappointed offerors with bringing protests in compliance with SBA regulations.

HUBZone Program Eligibility and Notification

The FAR previously required a HUBZone small business concern to be HUBZone eligible upon initial offer and at time of contract award, and to notify the contracting officer of any material changes before a contract award that would affect its HUBZone eligibility. The proposed rule removes the eligibility at time of contract award and notification requirement, requiring only that HUBZone small business concerns are eligible at the time of their initial offer. This revision should allow more HUBZone small businesses to competitively bid on contracts.

Awards at or below the SAT

Previously, the FAR prevented the application of HUBZone set-aside procedures for sole-source contracts and procurements for commercial items, including commercially available off-the-shelf (COTS) items, that are at or below the simplified acquisition threshold (SAT). The proposed rule would remove this prohibition, allowing contracting officers to consider HUBZone sole-source awards and procurements for commercial and COTS items with dollar values at or below the SAT. Small business will be positively impacted by this change, as it ensures HUBZone Program benefits extend to the many contracts valued at or below the SAT, greatly increasing the opportunities for small businesses in the federal marketplace.

The common themes for this proposed rule are consistency and efficiency. By amending the FAR to reflect the existing, efficient SBA regulations, small businesses currently participating – or attempting to participate – in the HUBZone Program would be provided much clarity. In addition, the proposed rule promotes small business interests by creating additional opportunities for small businesses to participate in the HUBZone Program. Hopefully, with these changes, the Federal Government may finally reach its annual goal of awarding 3% of prime and subcontract awards to HUBZone small business concerns.

All comments on the proposed rule are due by August 13, 2021.

For additional information regarding this proposed rule, or for assistance drafting and submitting proposals, quotations, or bids, please contact the government contract attorneys at Eckland & Blando LLP.