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The U.S. Small Business Administration (SBA) has announced it is taking steps to curb abuses of the HUBZone program. The program is for the aid of businesses in historically underutilized areas - those places marked by high poverty, high unemployment, or low income - and provides them with set-aside contracts and certain other benefits.
The specific abuses SBA is increasing scrutiny on are abuses of the HUBZone certification criteria relating to providing "legitimate employment opportunities" to residents of a HUBZone. HUBZone businesses must make "substantive and documented efforts" to retain 35 percent employment of HUBZone residents. However, SBA has detected some HUBZone businesses in which HUBZone residents were kept on payroll without performing work for the HUBZone business, as a means of retaining certification. As a consequence, SBA is pursuing decertification and potential debarment of such firms, as well as increasing auditing of HUBZone firms generally.
The SBA also published Information Notice 6000-849335 as part of its announcement of stricter scrutiny. The Notice goes into detail about the employment requirements HUBZone firms must abide by to retain their certification. It clarifies that a firm that falls below 20 percent HUBZone employment has reached a floor under which its efforts to hit the 35 percent target have failed, although being between 20 and 35 percent is not a guarantee that a HUBZone firm's efforts to hit the 35 percent target will be found acceptable. Additionally, the Notice clarifies that "employee" refers to an employee who is working a 40-hour work-week, and that HUBZone firms must be prepared to provide evidence of the employees' work, including job descriptions, timesheets, communication between the employee and employer, and the like.
"The actions we are taking reflect our commitment to protecting the integrity and mission of vital programs, such as the HUBZone program, that support small business owners," said Larry Stubblefield, SBA Acting Associate Administrator for Government Contracting and Business Development, in a statement.
Read the press release from the SBA at https://www.sba.gov/article/2023/09/20/us-small-business-administration-acts-safeguard-integrity-hubzone-program.
Find Information Notice 6000-849335 at https://www.sba.gov/sites/sbagov/files/2023-08/6000-849335%20HZ%20Info%20Notice%20%281%29.pdf.
