Tag Archives: HUB Zone

HUBZone Program Updates And Flexibilities During COVID-19

Standard
Image: SBA

Summarizing the following updates of interest to HUBZone enterprises:

I. HUBZone Program flexibilities during COVID-19

II. HUBZone Program updates related to a regulation change

______________________________________________________________________________

U.S. SMALL BUSINESS ADMINISTRATION (SBA)

 I.  HUBZone Program flexibilities during COVID-19

How can firms maintain the 35% HUBZone residency requirement if some employees are college students whose residence hall has closed?  SBA recognizes that some HUBZone employees are students who have been called home to locations no longer in a HUBZone, even though they continue to work remotely, impacting firms’ ability to maintain the 35% HUBZone residency requirement.  SBA will determine affected firms’ compliance with the 35% HUBZone residency requirement by reviewing documentation showing where the impacted employee lived prior to the COVID-19 response measures being put in place. Accordingly, a firm that has a HUBZone  employee that was required to move from student housing to a non-HUBZone location AND continues to work for the HUBZone firm, the firm may continue to count that employee as a HUBZone resident by providing documentation showing:  1) the university/college closed the student’s residence and 2) the employee has been maintained on the payroll.  This applies only to students who, at the time of the firm’s application for certification or recertification, were already on payroll and had residency established prior to the university closing student housing. 

How can firms maintain compliance with the Principal Office requirement if their employees are required to telework?  SBA recognizes that if all of a firm’s employees are required to telework in response to the COVID-19 pandemic, this might impact a firm’s ability to comply with the HUBZone program’s principal office requirement.  In response to this concern, SBA will determine affected firms’ compliance with the principal office requirement by reviewing the firm’s compliance prior to the telework measures being put in place. Accordingly, at the time of application for certification or recertification, a firm that has placed its employees on mandatory telework will have to provide documentation showing where its employees performed their work prior to requiring telework.  Such an applicant will also be required to provide a signed statement that: the firm put all their employees on telework associated with social distancing in response to the COVID-19 pandemic;  the teleworking measure is temporary in nature; and the employees will return to their normal work location once the teleworking measures have been lifted.

How can firms maintain compliance with the requirement for uninterrupted and continued employment for “Legacy HUBZone employees,” as outlined in the HUBZone regulations at 13 C.F.R. 126.200(d)(ii)(3), if employees are laid off or on extended sick leave?  The revised HUBZone regulations, which became effective December 26, 2019, allow firms to count “Legacy” HUBZone resident employees as permanent HUBZone resident employees if they are able to demonstrate that the employee was a HUBZone resident for 180 days prior to and for 180 days following the firm’s HUBZone certification or recertification.  In addition, the requirement states, “The certified HUBZone small business concern must maintain records of the employee’s original HUBZone address, as well as records of the individual’s continued and uninterrupted employment by the HUBZone small business concern, for the duration of the concern’s participation in the HUBZone program.”  SBA recognizes that many firms have placed employees on extended (unpaid) sick leave status or are contemplating layoffs. SBA will allow HUBZone companies to place an employee in a temporary non-paid status such as FMLA to care for themselves or a sick family member during COVID-19 if the firm attests to their intent to put such individuals back on payroll after the period of extended sick leave. However, there is no such exception for employees that have been laid-off.  If a firm lays off an individual, that individual cannot be counted as a “legacy HUBZone employee” for any future HUBZone certification or recertification.

Can the HUBZone Program expedite my application for certification?  SBA may expedite the application of any firm that submits a complete package for certification and indicates that they intend to respond to a specified solicitation that relates to COVID-19. 

Can the HUBZone Program waive or reduce the 35% residency requirement?  This statutory requirement would necessitate Congressional action to change

     II.  HUBZone Program updates related to a change in regulations

When and why did SBA propose new rule changes to the HUBZone program? The SBA proposed new regulations to make it easier for small businesses to participate in the HUBZone program. These changes will make the program more attractive for small businesses to invest in HUBZones and hire HUBZone residents, providing greater impact to communities and making it easier for federal agencies to meet their goal to award 3 percent of contracts to certified HUBZone small businesses.  The rule change was published in November 2019 and took effect December 26, 2019.   

What are the new rules around recertification? All firms will be required to undergo an annual recertification rather than a triennial recertification, with a full documentation review taking place every three years.  Once certified, a firm is eligible for all HUBZone contracts for which the business qualifies as small, for a period of one year from the date of its initial certification or most recent recertification (unless the concern acquires, is acquired by, or merges with another firm during that period).   Prior to this change, in order to be eligible for a HUBZone contract, firms had to prove their HUBZone eligibility at both the time of offer and the time of award, lengthening the procurement process for HUBZone firms uniquely among all small businesses—and serving as a disincentive for federal agencies to contract with HUBZone companies. 

When and how will annual recertification begin? SBA has experienced a delay in the implementation of our new annual recertification process.   Firms which, based on the prior triennial recertification schedule, were due for recertification in 2020 will be contacted automatically by the HUBZone Certification and Tracking System (HCTS) and will be required to recertify on the anniversary date of their initial certification.  (For example, if a firm was initially certified on December 1, 2017, the firm will receive a notice from HCTS that it is due to recertify its HUBZone status within 30 days of December 1, 2020.)   All other firms (which were not scheduled to recertify in 2020 under the triennial recertification rules) will continue to be considered eligible as of the date of their initial certification or most recent recertification, and must be prepared to prove their eligibility at that time if their HUBZone status is protested in connection with a HUBZone solicitation issued after December 26, 2019.    Until such time as we have introduced a fully automated recertification process for all firms, we will also allow firms to voluntarily recertify on the anniversary date of their initial certification, if they choose to do so. We will advise firms within the next two weeks regarding the process for voluntary recertification on their anniversary date.

Are Governors now permitted to ask SBA to designate HUBZones?  A new Governor-designated covered areas initiative that became effective on January 1, 2020, represents an opportunity to expand the HUBZone program to reach more distressed rural communities.  The new authority allows state governors to petition SBA to designate as HUBZones rural areas with populations under 50,000 and unemployment levels of 120 percent of the U.S. or state average.  SBA will provide updates and update the HUBZone maps to reflect newly covered areas.

Are there other changes to the HUBZone maps? SBA has frozen the HUBZone maps through 2021, until the results of the 2020 Census are available. This will provide the program and participating small businesses with an opportunity to transition to a new requirement to update the maps and designations on five-year intervals, starting after the 2020 Census. Five-year HUBZone updates will enable small businesses to plan and invest in their HUBZone communities without fear that their designation may change from one year to the next, thus providing stability for both the community and HUBZone businesses. While the maps are frozen, no new Qualified Non-Metropolitan Counties, Qualified Census Tracts, or Redesignated Areas will be removed from or added to the maps. However, SBA will continue to add locations approved through the new Governor-designated covered areas initiative, qualified base closure areas, qualified disaster areas, and Indian lands, as any new data is received.

How has the definition of the Principal Office changed?   A new provision in the HUBZone regulations allows small businesses that invest in HUBZones by purchasing a building or entering a long-term lease (of 10 years or more) to maintain HUBZone eligibility for up to 10 years, even if at some point the office location no longer qualifies as a HUBZone. This provision does not apply to offices located in areas categorized on the HUBZone map as Redesignated areas.

Are there changes to the 35% HUBZone employee residency requirement?  The new rule allows HUBZone companies to retain long-term “Legacy” HUBZone resident employees as permanent HUBZone resident employees, under certain circumstances.  An employee who resides in a HUBZone for at least six months (180 days) at the time of certification or recertification, and continues to reside in a HUBZone for at least six months (180 days) after such time, may continue to be considered a HUBZone resident so long as they are continuously employed by the firm, even if he/she moves to a non-HUBZone area, or if the area of his/her residence loses HUBZone geographical eligibility. If the firm wants to count such a “Legacy” employee as a HUBZone resident for the duration of the individual’s employment, then at the time of any subsequent recertification, the firm will be required to identify any such employee and provide supporting documentation demonstrating that the individual resided in a HUBZone for 180 days before and after certification and that the individual has been an employee of the firm for the entire period of time since the firm’s certification.

How may I obtain help or learn more about the HUBZone Program?  The following resources may be accessed for additional support:

Federal Government Contracting Small Business Set-Aside Designations

Standard
Image: SBDC

SMALLTOFEDS” By Ken Larson

A small business set-aside designation can be a valuable tool if adequately documented, registered, certified and prudently used for bidding work that your enterprise is capable of performing successfully.

______________________________________________________________________________

“The following are the small business set-aside designations in federal government contracting:

1. Small Business – Established by North American Industry Classification (NAICS) Code for all categories of government business (Please download the “SBA Small Business Size Standards” at the “Box Net” Cubicle on the right margin of this web site for further information). Federal contract solicitations  have a NAICS Code assigned to them when they are registered at the below web site:

System for Award Managment (SAM)

2. Minority Business Enterprise (MBE) – A  good interim designation while an 8(a) application is in process for minority-owned companies:

National Minority Supplier Development Council MBE Information

3. Woman-Owned Business – Applicable to Women-Owned Businesses only:

SBA Woman-Owned Business Information and Application Site

4. Veteran-Owned Business – Applicable to Veteran-Owned Businesses only

SBA Veteran-Owned Business Program Information

5. Service Disabled Veteran-Owned Business – Applicable to Service Disabled Veteran-Owned Businesses only

SBA Service Disabled Veteran-Owned Business Information

6. Small/Disadvantaged Business SBA 8(a) Program – Requires 2 years in business and a lengthy application process with the SBA at the following web site:

SBA 8(a) Information and Application Site

7. Historically Under-Utilized Business (HUB) Zone Located – Pertains to small businesses located in geographic areas with a historical record of low government contracting. This designation requires application at the following HUB Zone Site Web Site:

Hub Zone Information and Application Site

QUALIFICATIONS, REGISTRATION, CERTIFICATIONS AND REPRESENTATIONS

To qualify as a small business for a given solicitation an enterprise must have registered at the System for Award Management Web Site under the applicable NAICS code for the procurement and meet the SBA eligibility size standards for that code.

A small business certifying under the above must have individuals qualifying for the designations with at least 51% ownership interest and an operating role in the company. 60% is recommended to avoid the appearance of a front. Silent partners and investors without qualifying status or an operating role in the firm do not count toward the designation. It is suggested that ownership interest be specified by name on the articles of incorporation with the state and by % of ownership in an operating agreement or similar document.

To qualify as a HUB Zone Enterprise the business must be located in a HUB Zone and a qualifying percentage of the members (owners or employees) of the business must also live in the applicable HUB Zone.

SUMMARY

Carefully select your small business designations when preparing your business and marketing plans for federal government contracting. Keep in mind that self-certifications are verified through records checks and site visits by contracting officers, DCMAO and Source Selection Boards for federal procurements before contract awards are made.

A small business set-aside designation can be a valuable tool if adequately documented, registered, certified and prudently used for bidding work that your enterprise is capable of performing successfully.”

https://www.smalltofeds.com/2009/06/federal-government-contracting-small.html

HUBZone’s Beware The Too Good To Be True Offer

Standard

Hubzone 3 SBA

too good 1 McIntoshMD Rules

Free Lip Piercing Image:  “McIntosh MD”       Rules and Hub Zone Images “SBA”

“WASHINGTON TECHNOLOGY”  By Andrew Miller

“While the [HUBZone] program was designed to provide legitimate small businesses with a path to get their foot in the door with the federal government, it has become a prime target for fraud.

To retain their HUBZone eligibility and avoid potential civil or criminal liability, small business owners need to understand the potential pitfalls.”


I’m sure you’re familiar with the adage, “If it sounds too good to be true, it probably is.”

For owners of HUBZone businesses—small businesses that operate and employ people in Historically Underutilized Business Zones (HUBZones)—it’s a motto to keep in mind as they travel to one of the largest HUBZone matchmaking events in the country this October, the National HUBZone Conference in Chantilly, Virginia.

This annual conference provides a tremendous opportunity for HUBZone business owners and corporations to network and identify potential partners who can help them win business with the federal government. Unfortunately, such gatherings can also attract nefarious corporate executives who are on the hunt for a HUBZone business to illegally use as a pass-through to gain access to lucrative federal contracts that would otherwise be out of reach.

But there are proactive steps a HUBZone business can take to protect itself and the integrity of the HUBZone program.

Understandably, many small businesses are unable to comprehensively serve the needs of a federal contract on their own, so they partner with larger corporations. There are legitimate ways to engage in such a partnership and the SBA provides extensive guidance in how to do so. However, HUBZone businesses are sometimes approached with a proposal to sign off as a partner on a contract or bid without having to perform any of the actual work. That should raise a red flag. Experienced HUBZone businesses generally refuse to engage in these types of deals. But when large businesses are intent on establishing a pass-through with a HUBZone organization, they will often use conferences to shop the offer to many potential partners until someone says “yes.”

In other cases, large businesses and corporations are more covert about their intent to use a HUBZone organization as a pass through. In these instances, in the months immediately after partnering on a piece of business, a HUBZone organization may find their corporate partner slowly beginning to squeeze them out of performing the work for which they have been contracted, while still continuing to pay them. In these situations, when the work arrangement starts to look and feel less like a partnership and more like the HUBZone business is just being used for its HUBZone certification, it may be time to take a closer look at the engagement to see if the larger business is committing fraud.

Contractor fraud in HUBZone set-aside programs is a little bit like an iceberg. It can be difficult to detect and prove, which is why even though the problem is pervasive, only a small percentage of fraud cases ever make it to a courtroom. This is why HUBZone contractors play a key role in helping to police their industry. In particular, there are a number of ways for HUBZone business owners to protect themselves and the HUBZone program from these pervasive forms of fraud.

First, if you are a HUBZone business owner who is approached at a convention like the National HUBZone Conference to become a “pass through” for a larger corporation, keep your eyes and ears open. There is a strong likelihood that the corporate contact who offered you a “too good to be true” deal will pursue your peers until someone agrees to their terms. When you have knowledge of this type of fraud, it is important to reach out to an attorney who specializes in government contracting fraud cases and can help you share this information with the federal government. Often, by serving as a whistleblower, you may be entitled to monetary rewards if the government can prove the fraud occurred.

Second, if you are a HUBZone business that enters into a partnership with a larger organization, make sure you have a tightly defined contract and scope of work. This scope of work should clearly state the percentage of work that you are required to perform, as well as what the work will entail. By having these legal documents established at the beginning of a relationship, it will be very difficult for a corporate partner to illegally squeeze you out of a partnership.

Third, and most importantly, it is critical that HUBZone businesses have a strong backbone to stand-up to corporate executives rather than giving in and accepting payment in exchange for the use of their certification. If you’re in a partnership, insist that you perform the work—even if your corporate partner pressures you not to. And if you’re presented with a “too good to be true” offer, protect yourself and your business by walking away. When in doubt, talk to a lawyer.”

https://washingtontechnology.com/articles/2018/10/08/insights-miller-hubzone-warnings.aspx?s=wtdaily_091018

ABOUT THE AUTHOR:

Andrew Miller is a shareholder and attorney at the firm Baron & Budd.