The HUBZone Program: Six Myths Debunked By Steven J. Koprince PilieroMazza PLLC With all the recent hoopla over the new 8(a) program rules and the beginning of set-aside contracts in the women-owned small business program, less attention has been focused on the HUBZone program of late. However, the HUBZone program continues to be an important source of set-aside work for small government contractors, with a reported $11.97 billion in awards in 2010. The HUBZone program contains a number of unique rules, which have given rise to some confusion among HUBZone participants. Failing to fully understand the rules can lead to decertification or a successful HUBZone eligibility protest. Below are six common misconceptions, or myths, about how the HUBZone program works, along with the corresponding realities. Myth No. 1: My eligibility for a HUBZone set-aside contract is determined as of the date of my initial priced offer on the solicitation. Reality: Unlike size, HUBZone eligibility is determined both at the date of the initial priced offer and the date of award. Even if you were eligible for a HUBZone contract when you submitted your initial priced offer, you cannot receive the contract if your eligibility lapses by the award date. Myth No. 2: I can receive a HUBZone set-aside contract award so long as I am “attempting to maintain” compliance with the 35% employee residency requirement. Reality: Once your company has been certified as a HUBZone participant, it can maintain its certification so long as it attempts to maintain compliance with the 35% residency requirement, and can continue performing existing HUBZone contracts. However, you are not eligible to bid on or receive a new HUBZone contract unless you are actually in compliance with the 35% residency requirement, not merely attempting to meet it. Myth No. 3: So long as my HUBZone certification is active when I am awarded a HUBZone set-aside contract, my eligibility for that contract cannot be protested. Reality: An active certification does not prevent your competitors from protesting your HUBZone status. If your company no longer meets the HUBZone program criteria, the protest will likely succeed. For example, if 40% of your employees resided in HUBZones when you obtained your certification but the number has slipped to 25%, you will be vulnerable to a HUBZone eligibility protest. Of course, the reverse is also true—you may protest the eligibility of a HUBZone-certified competitor. Myth No. 4: Most of my employees work on jobsites (like at construction project sites) rather than at one of my offices. I do not need to count my jobsite employees when making my 35% HUBZone employee residency count. Reality: So-called “jobsite employees” can be excluded from the principal office calculation in some cases, but cannot be excluded when it comes to the 35% residency requirement. For the 35% residency requirement, you must count all your employees, even those working on jobsites. Myth No. 5: The office named in my Central Contractor Registration profile is my “principal office” for HUBZone purposes. Reality: Your principal office is the location where the greatest number of your employees at any one location work, excluding jobsite employees (if applicable). Your principal office can shift over time if one office starts out as larger, but another one grows to have more employees. To maintain your HUBZone status, you must make sure that you have more employees working out of one of your HUBZone offices than out of any non-HUBZone office. Myth No. 6: My general construction company just won a HUBZone competitive set-aside contract. I can subcontract up to 85% of the work to a large business. Reality: The HUBZone program has a unique performance of work rule. For all HUBZone contracts, including general and specialty trade construction contracts, at least 50% of the cost of the contract incurred for personnel must be expended on employees of HUBZone firms, either at the prime contract or subcontract level. For example, on a general construction contract, you might meet the requirement by expending 20% of the personnel costs on your own employees, 30% on the employees of a HUBZone subcontractor, and the remaining 50% on the employees of a large business. The contracting officer has the ability to waive this rule, but only if no other HUBZone companies are available to perform portions of the work. HUBZone contractors are often tripped up by one or more of these six common misconceptions. Now that you know the realities, you will be better prepared to grow and succeed in the HUBZone program. Steven J. Koprince, an associate with PilieroMazza PLLC in Washington, practices in the areas of government contracts and small business law. Mr. Koprince counsels clients in a wide variety of matters, including compliance with the Federal Acquisition Regulation and the rules and regulations governing eligibility and participation in the federal government’s programs for small, disadvantaged businesses, such as the 8(a) Business Development Program, the HUBZone Program, the Service-Disabled Veteran-Owned Small Business Program, and the Women-Owned Small Business Program. He can be reached at skoprince@pilieromazza.com.