HUBZone Your Small Business, Part I

Let’s face it, business is a pretty tough racket. That can be especially true if your a small business, you need every advantage you can get. This has been seen in cases where Walmart has moved into town or a big mega-mall plunks down and starts to eat into a the retail district of a downtown. But what if there was a very large market potentially available to you that could open a new revenue stream and had a way for you to compete in it that the big companies didn’t have access too? And what if it helped your community out as well?

The U.S. government, in 2004, spent the following in just a few sectors that are potentially open markets for small businesses (all dollars are billions, data from U.S. Government Printing Office, Budget of the United States Government: Historical Tables Fiscal Year 2006):

• Education, training, employment, and social services $ 87,945
• Health $240,134
• General science, space and technology $ 23,053
• Administration of justice $ 45,535

If we drill down into the details a bit, a very positive story emerges. According to the April 5, 2004 issue of Federal Times,(as posted at the U.S. Department for Housing and Urban Development news site at this link HERE), a quarter of the U.S. government’s prime contracting dollars were awarded to small businesses. That means that small businesses won $62.7 billion dollars in prime contracts, an increase from 2002 of $9.7 billion.

Whatever market size your serving now is likely small in comparison to what these market numbers represent. So finding those opportunities is a big market opportunity and keeping them once you have them is a good business practice. One tool in the small business person’s toolkit to help find these markets and compete in them is the HUBZone Empowerment Contracting Program. This program gives preferential treatment to small businensses. Here’s the particulars from the HUBzone web site:

The HUBZone Empowerment Contracting Program stimulates economic development and creates jobs in urban and rural communities by providing Federal contracting preferences to small businesses. These preferences go to small businesses that obtain HUBZone (Historically Underutilized Business Zone) certification in part by employing staff who live in a HUBZone.

You as a small business owner, get preferential treatment to contracts for helping a disadvantaged area of your community out. Sounds like a win-win to me but how does the program work, how do you tap into it, and what’s the experience of some who have?

How does the HubZONE program work?
First, your company must be considered a small business by SBA size standards (see the SBA for more info at this link HERE). Second, your company or a primary office have to be located in a HUBZONE, (we’ll talk about what that all means in the next section). Third, 35 percent of the staff of your company in the HUBZone have to be living in the HubZONE, the point being that your helping out a disadvantaged part of your city by doing this. Fourth, your business must be owned and controlled by one or more U.S. Citizens.

Tapping into the HubZONE
Tapping into HubZONES requires first that you actually be in one or be willing to relocate a primary office to one. Note that’s not your headquarters, just a key office. As defined by the program a primary office is one:

where the greatest number of employees at any one location actually perform their work, except for construction and service industries, which have exemptions based on their occasional need to assign employees at the contract location

To find out if your in a hubzone or if some target areas near you is you can use the handy tool located on the HubZone site. You can reach that tool by clicking on this link here.

Once you’ve found and are in a HUBZone location then you’ve got to get access to the contracts and start bidding on them. You can get help with doing that by going to the SBC contracts site by clicking to this link HERE.

Some neat points about the program are that:

• HUBZone set-asides considered before HUBZone sole-source or small business set-asides. These set-asides opportunities are only for HUBZoned companies (thus limiting the competition)

• Contracting Officer (CO) may set-aside acquisitions exceeding the Micro Purchase ($2,500) and below the Simplified Acquisition Threshold ($100K)

• A HUBZone firm can displace the apparent low offer of another bidder (other than another small business) if the HUBZone firm’s price is not more than 10% higher than the otherwise lowest, responsive and responsible offer [factor applied to ‘base offer’]. Just get close with your bid and practice good customer service and you’ll win in other words!

• For most large contracts (over $500,000 or $1 million construction), large business contractors must create a subcontracting plan reflecting HUBZone firm participation. So, your market size NOW involves bidding directly for contracts AND working as a partner with larger firms who need you, the small business owner, so that they can win bids. This opens up more opportunities for you, not a bad deal!

• “Rule of Two” – When 2 or more qualified HUBZone companies request a procurement be set-aside for HUBZone, the Government Contracting Office must release as HZ set-aside.

Next week, in “HUBZone Your Small Business, Part II” we’ll look at the HUBZone in action and the experience of those on the program.