Tighter Controls Are Sought To Combat HUBZone Fraud In 2006 SBA’s inspector general reported that more than four out of five HUBZone companies dropped out of the program within three years, raising questions about whether some HUBZone set-aside contracts were awarded to ineligible companies. House Small Business Committee Chairwoman Velazquez said SBA conducts about 500 on-site examinations of HUBZone firms annually. More than 14,000 companies are certified in the program. She said more site visits are needed “to determine whether it is a viable company or a shed with a telephone and one person.” HUBZone firms are required to have their principal place of business in a HUBZone. SBA’s Carranza said the agency is developing “much more sophisticated internal controls to prevent fraud and abuse.” “It requires immediate action,” Velazquez said. Ronald Newlan, chairman of the HUBZone Contractors National Council, said, “Unfortunately, this well-designed program has been very poorly implemented by the federal agencies that buy America’s goods and services. Although Congress set a 3% goal for contracting with HUBZone firms, the government has never reached it. Last year the companies received 2.1% of prime contract dollars, according to official figures. “If I had to attribute the program’s lack of success to one thing,” Newlan testified, “I would attribute it to the procurement community’s reluctance to change their methods of doing business. For every one HUBZone set-aside competition conducted in FY 2006, there were 78 small business set-aside competitions conducted. Yet the statutes and regulations are clear – the HUBZone program is a higher priority program than the small business set-aside programs.” A House-passed bill would increase procurement goals for small disadvantaged businesses and woman-owned businesses to 8%, from the current 5%, while leaving the HUBZone goal at 3%. Newlan said the bill, now pending in the Senate, would damage HUBZone companies because agencies would be struggling to meet the higher goals in other categories.