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Federal Market Intelligence for Small Business |
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Set-Aside Alert exclusive research:HUBZones losing momentum againFollowing modest growth for 2 years, awards dropped in FY15HUBZone contract awards have stalled again, after two years of modest increases, continuing a mostly downward trend that began six years ago. HUBZone contract awards totaled $6.4 billion in fiscal 2015, which was 1.82% of eligible contract spending, according to the government’s latest Small Business Goaling Report posted on the Federal Procurement Data System website. That was a reduction from $6.7 billion in fiscal 2014, also 1.82% of eligible contract spending. For the previous two years, HUBZone awards had grown modestly from a low of $6.1 billion in fiscal 2012. HUBZone set-asides limitedOnly a relatively small portion of the HUBZone awards are due to HUBZone-specific set-asides, which totaled $1.7 billion in fiscal 2014, according to a Congressional Research Service report. The remaining HUBZone awards are from HUBZone firms winning awards either in full and open competitions or as small business set-asides or another type of set-aside. Lagging Behind Established by Congress in 1998 to target federal contracts to low-income communities, the Historically-Underutilized Business Zone (HUBZone) program has been lagging behind in contract awards for several years, in comparison to the other federal set-aside programs for small businesses--for disadvantaged, women-owned and veteran-owned. With frequent changes in eligibility due to census updates, and with a hard-to-meet requirement that 35% of employees must live in the zone at all times, the HUBZone program has been struggling for years. Most notably, the program lost many firms following the 2010 census. Currently, there are about 4,600 firms in the program, according to the Government Accountability Office. In December 2013, there were nearly 5,800. Despite the shortcomings in awards, there are advantages for HUBZone vendors. For one, there still is a 10% HUBZone price preference on contracts that are not set aside. In addition, some local communities offer advantages to firms located in HUBZones. A peak, then downward HUBZone awards climbed steadily through the George W. Bush Administration, from $6.2 billion in fiscal 2005 to $9.8 billion in fiscal 2008. The peak year for HUBZones was fiscal 2009, when awards hit $12.4 billion. The next two years were good, too, with $12 billion and $10 billion in HUBZone awards, boosted by Recovery Act spending. Then came the big drop - down to $6.1 billion in fiscal 2012, once the Recovery Act contracts were done. There was modest growth to $6.7 billion by fiscal 2014, and now another slight fall to $6.4 billion in fiscal 2015. Fewer set-asides?HUBZone firms have suggested to Set-Aside Alert that the reason for the reduced awards is that there appear to be relatively few HUBZone set-asides to bid on. However, Set-Aside Alert has found that the trend in HUBZone contract activity is the same as the trend in HUBZone award dollars, based on data from the FBO.gov website. To measure HUBZone contract activity, Set-Aside Alert counted the total number of presolicitations, solicitations, sources sought and awards notices posted on FBO.gov targeted to HUBZone firms in recent years:
Based on this data, it appears that HUBZone contract activity peaked in fiscal 2009--the same year as for HUBZone awards--and has dropped since then. It also shows that HUBZone contract activity recently rose for two years, but then stalled in fiscal 2015. That also roughly mirrored the trend in award dollars, which rose in fiscal 2013 and fiscal 2014 and then lost momentum in fiscal 2015. Explaining the trends Observers have noted a “chicken and egg” problem with HUBZones: As the number of HUBZone firms shrinks due to census changes, federal agencies may offer fewer HUBZone set-asides because they are uncertain whether there are enough HUBZone firms to compete for them. To address that, the Small Business Administration launched the Destination:HUB program two years ago to recruit more firms and raise awareness of the program. Observers also have suggested that HUBZone vendors may have gotten “lost in the shuffle” as federal agencies have made a big push to meet goals for small business contracting by women and by service-disabled veterans, and to meet the overall 23% small business contracting goal. The government in recent years met its goals in those three programs for the first time: small businesses overall and veteran-owned, in fiscal 2013, and women-owned, in fiscal 2015.
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