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U.S. Small Business Administration proposes new HUBZone rules
Published on 11/01/2018

The U.S. Small Business Administration (SBA) is proposing certain rule changes which would make it easier for businesses to retain their HUBZone (Historically Underutilized Business Zone) certification even when the boundaries of specified geographic HUBZones are changed. The change is pursuant to a 2017 presidential executive order relating to the efficiency and costs of various federal programs.

HUBZone businesses are generally defined as businesses that are located in a designated HUBZone and which have an employee composition made up of at least 35 percent residents of a HUBZone. In the proposition, the SBA states that the "major challenge" for the prior two decades for the HUBZone program and businesses certified through it has been "the lack of stability and predictability for program participants", given that the precise boundaries of HUBZones are in flux, pursuant to changes in economic data. Thus, the first major component of the new proposed rule would treat a given individual as a HUBZone resident if the individual lived in a HUBZone at the time that their employer was certified as a HUBZone business and has continued to work for that same business, even if the area where the individual resides is no longer designated a HUBZone (or if the individual has moved of their own accord).

The second major rule change is removing the requirement for HUBZone certified businesses to prove that they meet the criteria for certification each time that they are involved in the offer or award of a contract with HUBZone opportunities attached to it, and switching to annual recertification procedures instead. As the SBA points out, the net effect of these two changes would prevent situations in which, upon winning a contract, a HUBZone firm must hire additional workers, which, in some cases, depending on the residences of the new workers, would then immediately strip the company of its HUBZone certification.

There is a comment period on the proposed rule changes that lasts through December 31st, 2018. Further instructions for submitting comments are found on the same page where the proposed rule changes are provided, at https://www.federalregister.gov/documents/2018/10/31/2018-23285/small-business-hubzone-program-government-contracting-programs.

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