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Tuesday, July 23, 2013

Small Business Administration HUBZone Program

Robert Jay Dilger
Senior Specialist in American National Government

The Small Business Administration (SBA) administers several programs to support small businesses, including the Historically Underutilized Business Zone Empowerment Contracting (HUBZone) program. The HUBZone program is a small business federal contracting assistance program “whose primary objective is job creation and increasing capital investment in distressed communities.” It provides participating small businesses located in areas with low income, high poverty rates, or high unemployment rates with contracting opportunities in the form of “setasides,” sole-source awards, and price-evaluation preferences. Firms must be certified by the SBA to participate in the HUBZone program. On July 11, 2013, there were 5,788 certified HUBZone small businesses.

In FY2012, the federal government awarded 76,748 contracts valued at $8.1 billion to HUBZonecertified businesses, with about $1.88 billion of that amount awarded through a HUBZone setaside, sole source, or price-evaluation preference award. The program’s FY2012 administrative cost was about $9.1 million. Its FY2013 appropriation is $2.5 million ($1.976 million following sequestration), with the additional cost of administering the program provided by the SBA’s appropriation for general administrative expenses.

Congressional interest in the HUBZone program has increased in recent years, primarily due to U.S. Government Accountability Office (GAO) reports of fraud in the program. Some Members have called for the program’s termination. Others have recommended that the SBA continue its efforts to improve its administration of the program, especially its efforts to prevent fraud.

This report examines arguments both for and against targeting assistance to geographic areas with specified characteristics, such as low income, high poverty, or high unemployment, as opposed to providing assistance to people or businesses with specified characteristics. It then assesses the arguments both for and against the continuation of the HUBZone program.

The report also discusses the HUBZone program’s structure and operation, focusing on the definitions of HUBZone areas and HUBZone small businesses and the program’s performance relative to federal contracting goals. The report includes an analysis of the SBA’s administration of the program and the SBA’s performance measures.

This report also examines P.L. 111-240, the Small Business Jobs Act of 2010, which removed certain language from the Small Business Act that had prompted federal courts and GAO to find that HUBZone set-asides have “precedence” over other small business set-asides. It also briefly discusses H.R. 489, the HUBZone Expansion Act of 2013, and its companion bill in the Senate (S. 206), which would expand the area eligible for HUBZone status as a result of a BRAC military base closure, and S. 259, the Assuring Contracting Equity Act of 2013, which would increase the federal government’s small business contracting goals, including the goal to award not less than 3% of the total value of all small business eligible prime contract awards and subcontract awards to HUBZone small businesses to not less than 6%.

Date of Report: July 12, 2013
Number of Pages: 33
Order Number: R41268
Price: $29.95

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