The U.S. Small Business Administration (SBA) recently announced continuing measures to root out abuse and fortify the integrity of the HUBZone program.
The announcement follows an SBA internal investigation resulting from improved processes and compliance controls that uncovered multiple firms misusing the HUBZone program. In response, the SBA immediately initiated decertification proceedings to remove ineligible firms from the HUBZone program. Decertified firms lose access to HUBZone set-aside contracts and all other program benefits.
“The SBA remains focused on serving America’s small business owners and being good stewards of taxpayer funds,” said Larry Stubblefield, SBA Acting Associate Administrator for Government Contracting and Business Development. “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 – the economic engine of our economy.”
The HUBZone program is designed to promote economic development in historically underutilized areas. HUBZone-certified businesses —which must be located in and employ workers who reside in areas marked by high poverty, high unemployment or low income—may receive federal contracting preferences. SBA HUBZone analysts identified a pattern in which firms kept HUBZone residents who did not perform work for the company on their payroll in order to claim them as employees and appear to qualify for the program.
In addition to decertification, the SBA is pursuing debarment where appropriate and taking additional measures to reinforce the integrity of the HUBZone Program. Key actions include:
- Decertification of Wrongdoers: The SBA has removed all participants and prevented all new applicants found to have relied on non-working employees from participating in the HUBZone program.
- Proposed Debarment of Wrongdoers: SBA is pursuing removal of firms and individuals from broader federal government procurement activities, where appropriate.
- Strengthening of Regulations: The SBA will announce proposed revisions to the HUBZone regulations in the coming months to further clarify and strengthen requirements with respect to employing HUBZone residents.
- Increased Auditing and Monitoring: The SBA stepped-up auditing activities and requirements regarding part-time employees to prevent abuse.
- Formal Notification: The SBA published Information Notice 6000-849335 to remind existing HUBZone-certified firms and applicants about the requirement to provide legitimate employment opportunities to HUBZone residents.
While the vast majority of HUBZone-certified small businesses continue to play by the rules and embody the spirit of the program’s intent to revitalize underserved rural and urban communities, SBA is committed to ensuring its programs fulfill their intended purpose.
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