Recognizing that our country -- our “team,” if you will -- is stronger when all our players are on the field and playing to their full potential, our federal and some state governments have developed programs to help disadvantaged entrepreneurs get started on the path of business ownership.
These programs mandate a portion of the money spent on taxpayer-funded projects be directed to minorities and women, groups who have paid taxes like all Americans but have historically suffered from discrimination or lack of opportunity in awarding of public contracts. The same preferences have been extended to businesses owned by veterans, and particularly disabled veterans.
To ensure participants actually meet the program criteria, the government established a process of certification -- an audit. This article is the first in a series describing the requirements for participation in these programs. We will begin with the HUBZone program.
HUBZone stands for “Historically Underutilized Business Zone.” The HUBZone program has a goal of stimulating economic development in communities by providing federal contracting assistance and preferences to small businesses. The program arose from provisions in the Small Business Reauthorization Act of 1997, in cooperation with the Small Business Administration.
Three types of contracts are available through the HUBZone program:
- Competitive HUBZone contracts can be awarded if there is reason to believe at least two HUBZone small businesses will submit bids and the contract will be awarded at a fair-market price.
- Sole-source HUBZone contracts can be awarded if it is unlikely two or more qualified HUBZone small businesses are likely to submit offers and the total contract price will not exceed $5 million for a manufacturing job or $3 million for a non-manufacturing job.
- Full and open competitive contracts are awarded where several HUBZone businesses are expected to bid on the job. The HUBZone small business may get a preference to do the work as long as its bid price is not 10% higher than that of the non-HUBZone business.
HUBZone program firms can qualify for higher SBA-guaranteed surety bonds on construction and service contract bids. Some can also benefit from employer tax credits, tax-free facility bonds and investment tax deductions.
To qualify for the HUBZone program, a business must meet the following criteria:
- It must be a small business by the SBA definition;
- Its principal office must be located within a Historically Underutilized Business zone;
- It must be owned and controlled by one or more U.S. citizens, a Community Development Corporation or an Indian tribe; and,
- At least 35% of its employees must reside in a HUBZone.
Existing businesses choosing to move into qualified areas can become eligible. In order to meet the requirement that 35% of a HUBZone company’s employees reside in a HUBZone, employees must live in a primary residence within the area for at least 180 days, or be currently registered as a voter in that area. The SBA’s website
can help you determine whether your business qualifies as a HUBZone company or find potential relocation sites that qualify as such.
We at Spilman Thomas & Battle are available to help you with your search, with qualification audits and to help you complete the necessary forms for this and other SBA programs.