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Federal Market Intelligence for Small Business |
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Set-Aside Alert exclusive research:Most states lose HUBZone firms--but CA, DC, MD, VA, others gainTotal number of firms certified for HUBZone set-asides fallingThe number of small businesses certified as eligible for HUBZone federal set-aside contracts has fallen dramatically in many states. In Wisconsin, there was a 70% decline in such firms in the last five years; and in Pennsylvania, a 67% drop, according to Set-Aside Alert’s analysis of federal data. Alabama, Idaho and Kentucky saw decreases of 50% or more. Overall, the total number of HUBZone firms has fallen by 22% in the last five years, from 6,056 firms to 4,750 firms, the analysis showed. But in a surprising trend, in California, District of Columbia, Maryland, Virginia and several other states, the number of certified HUBZone small businesses has expanded. The District of Columbia’s and Maryland’s number of HUBZone firms nearly doubled, Virginia’s rose by 39% and California’s by 8%, in the five-year period, Set-Aside Alert has found. Census changes Federal officials have been aware of the sliding number of HUBZone firms for several years, but little data has been publicized about the number of such firms in each state or about increases in some states. The government has attributed the reductions primarily to changes resulting from the 2010 census, which redrew the maps of which geographic areas are impoverished and eligible to be HUBZones. The drop in HUBZone firms likely has added to the difficulties that the government has had in meeting its 3% goal for federal contracting with small businesses certified as being in Historically-Undertilized Business Zones (HUBZones). HUBZone awards totaled 1.82% of eligible contract spending in fiscal 2015, according to the government’s latest Small Business Goaling Report. Total HUBZone awards peaked in fiscal 2009 and have fallen fairly consistently since then. Some observers say the drop in the number of HUBZone firms has contributed to the drop in the awards because contracting officers fear there may not be two or more HUBZone firms capable of fulfilling the contract. Set-Aside Alert’s research Set-Aside Alert compiled state-by-state data on the number of HUBZone-certified small firms from the Dynamic Small Business Search federal database. We made those data collections in October 2010 and January 2016. We selected only those firms that had been certified or recertified in the previous three years. We removed companies with expired certifications from the database. State-by-state trends In many states, the number of HUBZone firms fell sharply between October 2010 and January 2016. Among the states with larger numbers of HUBZone firms, Idaho lost 129 firms; Oregon, 125; Pennsylvania, 123; Washington State, 122; and North Carolina, 116. Percentagewise, the largest decreases in such states were in Wisconsin, down 70%; Pennsylvania, down 67%; Idaho, down 59%; Kentucky, down 51% Oregon and Alabama, down 50%; Washington State, down 49%; and Louisiana and North Carolina, down 45%. Among the states with smaller numbers of HUBZone firms, the steepest reductions were in Iowa, down 78%; Wyoming, down 76%; Maine, down 73%; and Indiana, 68%. There is no simple explanation for the reductions. Officials have attributed the drop in the number of HUBZone firms in part to improved economic conditions, as fewer areas may be designated as impoverished. At the same time, it could mean fewer new firms were being established in the existing HUBZones. Gains in HUBZone firms The surprising trend is that a number of states have seen strong growth in the number of HUBZone firms. DC’s HUBZone firms nearly doubled, from 105 to 205; Maryland’s also nearly doubled, from 111 to 217; while Virginia’s increased by 39%, from 245 to 341. California added 8% more HUBZone firms, bringing its total to 445. Several states added HUBZone firms in 2016, after reporting few or no such firms in 2010: Tennessee added 99, from zero; Mississippi added 91, from zero; and Delaware added three, from one. Other states with increases were Nebraska, up 32%; Hawaii, up 29%; Massachusetts, up 21%; and Connecticut, up 17%. The reason for the increases is not well understood. Given the generally stable economic growth in the DC-MD-VA area in recent years, it seems likely that a significant share of the rise in HUBZone firms was due to new HUBZone firms being created in existing zones. Since the DC-MD-VA area benefits from proximity to many federal agency headquarters, it is likely that proximity to federal offices also was a factor in where new HUBZone firms chose to locate. October 2010 to January 2016
Source: Dynamic Small Business Search (dsbs.sba.gov)
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