Overview
Subpart 19.13 details the Historically Underutilized Business Zone (HUBZone) Program, which aims to stimulate economic development, investment, and employment in specific distressed areas. It provides the regulatory framework for federal contracting officers to award contracts through set-asides, sole-source awards, and price evaluation preferences specifically for SBA-certified HUBZone small business concerns.
Key Rules
- Eligibility & Certification: To be eligible, a firm must be certified by the Small Business Administration (SBA) and appear in the Dynamic Small Business Search (DSBS) and SAM. Eligibility is based on the firm's status at the time of the initial offer.
- The "Rule of Two": A contracting officer (CO) shall set aside acquisitions exceeding the micro-purchase threshold if there is a reasonable expectation that at least two HUBZone small businesses will submit offers and the award can be made at a fair market price.
- Priority Hierarchy: Under FAR 19.203, COs must consider HUBZone set-asides or sole-source awards before considering general small business set-asides.
- Sole-Source Thresholds: Sole-source awards can be made if the "Rule of Two" isn't met, provided the price (including options) does not exceed $8.5 million for manufacturing NAICS codes or $5.5 million for all other NAICS codes.
- Price Evaluation Preference: In full and open competition, a 10% price evaluation factor is added to offers from concerns that are not small businesses. This preference does not apply when competing against other small businesses.
- Exclusions: The HUBZone program does not take precedence over mandatory sources like Federal Prison Industries (FPI) or AbilityOne, nor does it typically apply to requirements already accepted into the 8(a) program.
Responsibilities
- Contracting Officer (CO): Responsible for conducting market research to determine the "Rule of Two," applying the 10% price preference in full and open competitions, and inserting appropriate clauses (52.219-3 or 52.219-4).
- Small Business Administration (SBA): Responsible for certifying HUBZone firms, maintaining the DSBS database, and filing formal appeals if a CO rejects a recommendation for a HUBZone set-aside.
- HUBZone Small Business: Must ensure they are certified and listed in SAM/DSBS at the time of offer; they may also form joint ventures provided at least one party is a certified HUBZone concern.
- Head of the Agency: Responsible for making the final decision on SBA appeals regarding set-aside rejections.
Practical Implications
- Strategic Market Research: For COs, market research is critical. If two or more HUBZone firms are identified, the set-aside is mandatory before considering a general small business set-aside, which can significantly limit the competition pool to a specific socio-economic category.
- "Place of Performance" vs. "Location of Firm": HUBZone preferences are based on where the business is located and its employee residency, not necessarily where the contract work is performed.
- Full and Open Competition Advantage: The 10% price evaluation preference is a powerful tool for HUBZone firms. In a scenario where a large business bids $1,000,000 and a HUBZone firm bids $1,050,000, the large business’s bid is evaluated as $1,100,000, making the HUBZone firm the "low bidder" for evaluation purposes.
- Procedural Delays: If the SBA appeals a CO's decision not to set aside a requirement, the procurement is effectively frozen (suspended) until the appeal is resolved, unless urgent circumstances exist.