Business Utilization and Development Memorandum (BUDM) 01-01
HUBZone Contracting Program
D-7800
ACM-1.10
To: Regional Director, P.N., MP, LC, UC, GP
Attention: PN-3702, PN-3703, MP-825, LC-3103, UC-458, GP-3800
Director, Administrative Service Center
Attention: D-2945
Director, Management Services
Attention: D-7810
From: Ron Simonich
Manager, Business & Economic Development Program
Subject: Business Utilization and Development Memorandum (BUDM) 01-01 - HUBZone Contracting Program
On October 1, 2000, the Bureau of Reclamation will implement the Historically Underutilized Business Zone (HUBZone) Program.
Program Description
Congress enacted the HUBZone Act of 1997 as Title VI of the Small Business Reauthorization Act of 1997 (Public Law 105-135) on December 2, 1997. The purpose of this act is to provide a program of federal contracting assistance for qualified small business concerns located in distressed communities in an effort to increase employment opportunities, investment, and economic development in these communities. The program provides for set-asides for firms that meet the definition of a HUBZone small business concern (SBC), sole source awards to HUBZone SBCs, and price evaluation preferences for HUBZone SBCs in acquisitions conducted using full and open competition.
Definition
A HUBZone is a historically underutilized business zone, which is an area located within one or more qualified census tracts, qualified nonmetropolitan counties, or lands within the external boundaries of an Indian reservation.
Relationship to Other Business and Economic Development Program Elements
Currently, regulations issued by SBA provide that the 8(a) Program takes priority over the HUBZone Program. 13 CFR 126.607 provides that, prior to proceeding with a HUBZone set-aside, the contracting officer (CO) must identify qualified HUBZone 8(a) concerns and other 8(a) concerns and that the CO must give first priority to qualified HUBZone 8(a) concerns. After determining that there are no qualified 8(a) sources, the CO must proceed to examine the requirement for possible HUBZone set-aside or sole source acquisition as described below. Also, the FAR reiterates two other CFR paragraphs (126.605 and 606) by excluding from the HUBZone Program requirements currently being performed by an 8(a) participant or requirements SBA has accepted for performance under the authority of the 8(a) Program, unless SBA has consented to release the requirement from the 8(a) Program.
This current priority order may change. Congressional Small Business Committee staff negotiators disagree over the major difference between House and Senate versions of the Small Business Reauthorization Act: a provision in the Senate version requiring contracting officers to give equal preference to HUBZone and 8(a) businesses. This disagreement has grown more pronounced since it first surfaced when SBA was last reauthorized in 1997. Language in the Senate report that year specified equal preference. But the House insisted that 8(a) should have priority. The statutory language did not resolve the matter, but SBA agreed with the House and issued regulations giving first priority to the 8(a) Program. I will issue a supplement to this BUDM if the FY 2001 SBA Reauthorization Act changes this situation.
The HUBZone Program has a higher priority than small business set asides. See also the following coverage on HUBZone set-aside procedures for a discussion of the Very Small Business Program (VSBP) and the Small Business Competitive Demonstration Program (SBCDP).
HUBZone Small Business Concerns
To be a HUBZone small business concern, a concern must appear on the list of qualified HUBZone SBCs maintained by SBA. Eligible HUBZone SBCs are included in PRO-Net (http://pro-net.sba.gov/). To receive SBA certification as a qualified HUBZone SBC, a concern must be a HUBZone SBC as defined in 13 CFR 126.103, have at least 35% of its employees residing in a HUBZone, and certify that it will attempt to maintain this percentage during the performance of any HUBZone contract it receives. A qualified HUBZone SBC may have affiliates so long as the affiliates qualify as HUBZone SBCs, 8(a) participants, or women-owned small businesses. Nonmanufacturers (referred to as "regular dealers" in the HUBZone Act) may be certified as qualified HUBZone SBCs if they meet the requirements above and can demonstrate that they can provide products manufactured by qualified HUBZone SBCs.
HUBZone Set-Aside Procedures
The CO must set aside acquisitions exceeding the simplified acquisition threshold for competition restricted to HUBZone small business concerns when the CO has a reasonable expectation that offers will be received from two or more HUBZone small business concerns and award will be made at a fair market price. SBA's PRO-Net contains an excellent search mechanism and should be used to identify potential HUBZone sources as an integral part of the presolicitation screening process. Acquisitions exceeding the micro-purchase threshold but not exceeding the simplified acquisition threshold may be restricted to HUBZone SBCs at the discretion of the CO. In this case, it is important to consider that set-asides for Emerging Small Businesses under the SBCDP and Very Small Businesses under the VSBP both carry a higher set-aside priority than HUBZone set-asides.
The SBA PCR can also recommend that acquisitions be set aside for HUBZone small businesses under FAR 19.402. When SBA intends to appeal a CO's decision to reject a recommendation of the PCR to set aside an acquisition for competition restricted to HUBZone SBCs, it must notify the CO in writing of its intent within five working days of receiving the CO's notice of rejection. Upon receipt of this notice, the CO must suspend action on the acquisition unless the Head of the Contracting Activity (HCA) makes a written determination that urgent and compelling circumstances, which significantly affect the interests of the government, exist. Within 15 working days of SBA's notification, SBA must file its formal appeal with the HCA, or the appeal may be considered withdrawn. The HCA must reply to SBA within 15 days of receiving an appeal. The HCA's decision is final. This process is distinct from the small business set-aside appeal process delineated at FAR 19.505 and corresponding DIAR and RAR sections.
If the CO receives only one acceptable offer from a qualified HUBZone SBC in response to a set-aside, the CO should make award to that concern. If the CO receives no acceptable offers from HUBZone SBCs, the HUBZone set-aside must be withdrawn and the requirement set aside for small business concerns if appropriate.
When an acquisition is set aside for HUBZone SBCs, the CO must insert the clause at FAR 52.219-3, Notice of Total HUBZone Set-Aside, in solicitations and contracts.
HUBZone Sole Source Awards
If an acquisition is not set aside for HUBZone SBCs, the CO may consider an award to a HUBZone SBC on a sole source basis without considering a small business set-aside if:
1. Only one HUBZone SBC can satisfy the requirement;
2. The anticipated price of the contract, including options, will not exceed $5 million for a requirement within a manufacturing NAICS code or $3 million for any other NAICS code;
3. The requirement is not currently being performed by a non-HUBZone small business concern;
4. The acquisition is greater than the simplified acquisition threshold;
5. The HUBZone SBC has been determined to be a responsible contractor; and
6. Award can be made at a fair and reasonable price.
A Justification for Other Than Full and Open Competition is required pursuant to FAR 6.302-5(b)(6) and (c)(2).
The SBA has the right to appeal the CO's decision not to make a HUBZone sole source award.
Price Evaluation Preference for HUBZone Small Business Concerns
The price evaluation preference for HUBZone SBCs must be used in acquisitions conducted using full and open competition except:
1. Acquisitions expected to be less than or equal to the simplified acquisition threshold;
2. Where price is not a selection factor so that a price evaluation preference would not be considered (e.g., A-E acquisitions); or
3. Where all fair and reasonable offers are accepted (e.g., the award of multiple award schedule contracts).
The CO must give offers from HUBZone SBCs a price evaluation preference by adding a factor of 10% to all offers except:
1. Offers from HUBZone SBCs that have not waived the evaluation preference;
2. Otherwise successful offers from small business concerns;
3. Otherwise successful offers of eligible products under the Trade Agreements Act when the acquisition equals or exceeds the dollar threshold in FAR 25.403; and
4. Otherwise successful offers where application of the factor would be inconsistent with a memorandum of understanding or other international agreement with a foreign government.
The factor of 10% must be applied on a line item basis or to any group of items on which award may be made. Other evaluation factors, such as transportation costs or rent-free use of government facilities, must be added to the offer to establish the base offer before adding the 10% factor.
A concern that is both a HUBZone SBC and a small disadvantaged business (SDB) will receive the benefit of both the HUBZone SBC price preference and the SDB price evaluation adjustment. Each applicable price evaluation preference or adjustment must be calculated independently against an offeror's base offer. These individual preference and adjustment amounts must both be added to the base offer to arrive at the total evaluated price for that offer.
The CO must insert the clause at FAR 52.219-4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns, in solicitations and contracts when using full and open competition. This clause is not used in acquisitions that do not exceed the simplified acquisition threshold.
Summary
To summarize, the HUBZone Act of 1997 authorizes the use of set-asides for qualified HUBZone SBCs; sole source awards to HUBZone SBCs; and a price evaluation preference for HUBZone SBCs. To participate in any of these programs, a firm must be certified by SBA as a HUBZone SBC.
Please disseminate this BUDM to all acquisition personnel in your Region.
As we have previously advised, SBA plans to present training on the HUBZone Program during fiscal year 2001. I strongly urge maximum possible attendance by acquisition personnel. Should you have any questions on this subject, please contact me at (303) 445-2447.