This Federal small business contracting program was created in 1997 to encourage economic development in HUBZones, which are areas that typically have low median household incomes and/or high unemployment rates. To identify HUBZone areas, use the SBA HUBZone map tool at http://map.sba.gov/hubzone/maps/. Currently, all neighbor islands are designated as HUBZone areas. On the island of Oahu, there are only small pockets of HUBZone designated areas.
The Federal government’s goal is to award 3 percent of both prime and subcontracts to HUBZone firms. Unfortunately, this goal is one that the government consistently fails to achieve.
Similar to all of the other small business programs, benefits include set-aside and sole-source opportunities. Additionally, HUBZone firms enjoy a 10% price evaluation preference in full and open contract competitions, as well as subcontracting opportunities.
In order to participate in the program, a company needs to meet a number of eligibility criteria, including being owned and controlled by a U.S. citizen, Community Development Corporation (CDC), agricultural cooperative or Indian tribe/ANCs. Unfortunately, Native Hawaiian Organizations (NHOs) were not included in the exception that granted Indian tribes and ANCs authorization to participate in the HUBZone program.
The remaining eligibility criteria for a business seeking HUBZone participation include:
- Must be small in its primary industry (according to SBA’s size standards);
- Have a principal office located in a HUBZone; and
- 35% of the business’ employees must live in a HUBZone.
On November 25, 2015 President Barack Obama signed the Fiscal Year 2016 National Defense Authorization Act (NDAA) (S. 1356) into law. There is a provision included in the bill that authorizes businesses owned by NHOs, wholly or in part, to participate in the HUBZone program, as long as they meet the other eligibility criteria. This provisions stems from a bill introduced by Representative Mark Takai (D-HI), H.R. 2950, which was offered as an amendment to the NDAA.
While implementing this change will take some time, especially since regulations will need to be updated, this is a great win for NHOs, the Native Hawaiian community, and Hawaii’s business community.
For more information about the NDAA and why business should understand the legislation, visit our blog post from December 12, 2014.