As announced two weeks ago, we had the opportunity to sponsor the National HUBZone 2019 Conference in Chantilly, VA. There were many great presentations and industry updates, all of which could have a direct impact on HUBZone business in the near future.
Of these presentations, the U.S. Small Business Administration’s agency and regulatory update had potentially the greatest impact on HUBZone contractors. Led by Associate General Counsel, John Klein, the SBA’s team commented on many major changes to legislation that they feel will be made into law by 12/31/21.
Below are our 5 main takeaways from this update, which all focus on proposed changes to HUBZone requirements. It’s important to note that this information is all speculative at this point in time, but these were heavily emphasized throughout the 90-minute presentation:
1) HUBZone status is no longer required at all phases of attaining contract.
Prior requirement – Contractor must be HUBZone certified from the time of offer through time of award.
Proposed change – Contractor only has to be HUBZone certified at either the time of offer or time of award. No longer required for both steps.
Interpretation – Contractors in danger of losing HUBZone certification can still bid on work before losing status, which helps continue cash flow while management readdresses company status. New companies can also bid on work while attempting to become HUBZone certified rather than having to wait for the process to complete. This change should smooth out the work opportunities of companies on both ends of the spectrum.
2) HUBZone status to drop the minimum requirement from 35% to 20% HUBZone designated employees.
Prior requirement – Contractor must have at least 35% of its employees live in a HUBZone designated area.
Proposed change – Contractor only has to have at least 20% of its employees live in a HUBZone designated area.
Interpretation – The 35% rule is being loosened for HUBZone certification. This could allow for more companies to attempt to become HUBZone certified, as well as HUBZone work to become more competitive. The drop in percentage allows for current certified contractors to have some leeway in employee status.
3) Employees must live in HUBZone designated area for at least 180 days to be considered towards the new 20% requirement. Registering for a voter ID can no longer expedite process.
Prior requirement – Employees could either live in HUBZone designated area for 180 days or register for voter identification to be considered towards the 35% requirement.
Proposed change – Employees must live in HUBZone designated area for 180 days to meet the new 20% requirement.
Interpretation – While the 35% rule is being loosened, employee status is being tightened. This is mostly done to cut down on any loopholes being exploited in filing for voter registration. Contractors that depend on employee hirings to impact their percentage immediately will have to build in a 180-day buffer.
4) Employees do not lose HUBZone certification after 180 days, even if they move. However, status is lost once they leave the company.
Prior requirement – In order to count towards the 35% requirement, employees must live in a HUBZone area.
Proposed change – Employees can now move out of HUBZone area as long as they achieved HUBZone status after 180 days. This status is continuous only for that specific employer, and once employment ends, the status is lost.
Interpretation – SBA mentioned that one of the goals of HUBZone work is economic advancement for employees. They do not want to penalize companies for having employees advance in their careers and afford to move out of economically challenged areas. As long as the company still resides in the economically challenged area, and the employee stays with that company, they feel it is a beneficial to all parties to allow advancement and career growth.
5) The areas determined to be HUBZone designated will be unfrozen after the 2020 Census.
Current Status – The HUBZone map that defines the lines for which areas are economically challenged is currently frozen. SBA is waiting for 2020 Census information before unfreezing the maps.
Once Unfrozen – The estimated timeframe to be unfrozen is 12/31/21. HUBZone certification will continue as it was before the HUBZone map was frozen on 12/07/17. For example, if your company was in an area set for redesignation 3 months after being frozen on 12/07/17, you can expect the redesignation to occur 3 months after 12/31/21 on 03/31/21.
Follow Up Information
If any of the above points interest you or your company, we highly recommend attending this event next year. These are just 5 of the many important updates covered by the Council that effect HUBZone businesses in the near future. For more information, be sure to check in with the HUBZone Council here.
For frequently asked questions about current HUBZone rules and regulations, SBA’s HUBZone information can be found here.
For more information related to these potential changes, SBA has a blog they update regularly with more interpretations and concepts related to updates.