By Colin Dean
In 1998, Congress enacted legislation creating streamlined, preferred contracting processes for eligible companies in Historically Underutilized Business Zones – or HUBZones – in order to provide incentives necessary to spur economic development and revitalization in those areas. To participate in this program, companies must meet certain requirements with regard to their ownership (more than 51 percent domestic), employees (more than 35 percent residing in the HUBZone), and location (within the HUBZone).
Over the last 20 years, Congress has made several changes to the legislation, affecting SBA regulations and corporate eligibility and compliance in the process. Now, with the passing of the 2018 National Defense Authorization Act (NDAA), the HUBZone program is seeing more changes that its authors hope will better address economic needs around the country.
For example, communities that house United States military bases often experience swift and harsh consequences when the Department of Defense announces base closings. While change is inevitable, the NDAA seeks to mitigate the speed of economic downturns in these situations by allowing the SBA to designate these communities HUBZones when the base closure begins rather than waiting until the base actually closes.
The legislation also revises the HUBZone eligibility determination process, with a view to expanding the program into more rural areas. Instead of comparing non-metropolitan areas against each other when determining whether a locale is eligible for HUBZone designation, the SBA will now compare rural county’s median household income against the statewide median when making its determination. In effect, rural areas won’t be competing against each other for HUBZone designation and the benefits of the program.
The NDAA also adds a more localized component to HUBZone determination. Going forward, state governors will be empowered to submit areas for SBA HUBZone approval that would not otherwise meet the HUBZone definition. The power is limited in scope, though, as governors will only be able to nominate one new HUBZone each year.
In other changes, the law demands the creation of an online tool to facilitate immediate changes to HUBZone maps spurred by SBA actions related to normal eligibility standards, natural disasters, base closures, and governor nominations of HUBZones. In another change that answers a congressional mandate for greater speed and efficiency, the SBA must conclude eligibility screenings for contractor submissions in a more timely manner, specifically no more than 60 days after document submission to the agency.
If you have questions about the changes to HUBZone eligibility or the program in general, Forrest Firm can help you navigate this space with confidence. Contact me to get started.