SBA moves to Safeguard HUBZone Program

Historically Underutilized Business Zones or HUBZones are present across large parts of the country.

November 18, 2023

Author : Alex Bustillos

The US Small Business Administration (SBA), through its HUBZone (Historically Underutilized Zone) program, strives to award 3% of federal contracts to these certified contractors. 

To qualify as a HUBZone-certified contractor, a business must meet the following criteria:

  1. Be an SBA-sized small business
  2. At least 51% U.S.-owned and operated, a Community Development company, agricultural cooperative, Alaska Native company, Native Hawaiian organization, or Indian tribe
  3. It has its headquarters in a HUBZone
  4. A minimum of 35% of employees must live in a HUBZone

But over the years, the program that was designed to safeguard the minority community is often exploited by bigger players. For this reason the SBA has taken measures to combat the misuse of the program and maintain the it's integrity. 

An internal SBA investigation has found a number businesses abusing the HUBZone program. The inquiry was made possible by enhanced procedures and compliance controls. In response, the SBA started the decertification process to eliminate unqualified companies from the HUBZone program. All additional program benefits, including HUBZone set-aside contracts, are lost for decertified enterprises. 

SBA HUBZone researchers found a trend whereby businesses continued to pay HUBZone residents who did not work for them to claim them as workers and make them seem eligible for the program.

The key actions taken by the SBA to reinforce HUBZone program integrity are:

  • Decertification of wrongdoers.
  • Removing fraudulent companies from broader federal government procurement activities.
  • Strengthening regulations.
  • Increasing auditing and monitoring.

To remind applicants and current HUBZone-certified businesses of the need to offer HUBZone residents real job opportunities, the SBA released a new Information Notice.

The recent announcement strengthens the Biden-Harris Administration's resolve to combat fraud and safeguard public funds. 

Although most HUBZone-certified small businesses follow the guidelines, these increased efforts show SBA's dedication to ensuring its programs achieve the intended purpose.

Category : Historically Underutilized Businesses

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