HUBZone Compliance, Protests, and Affiliates

Business Insights

HUBZone Compliance, Protests, and Affiliates

Mar 9, 2022 | Business Insights

What Happens if my Employees Move Out of a HUBZone After Certification? What Happens If my Business Merges with Another Company?

Once certified, a HUBZone contractor must monitor the residences of its employees to ensure compliance with the Small Business Administration (SBA)’s regulations. Because employees move – and not necessarily with the approval of their employers! – the regulations allow for some flexibility once an employee establishes a residence in a HUBZone and later moves.

If an employee lived in a HUBZone for at least 180 days after the certification of the HUBZone contractor, then such employee will continue to count as a HUBZone resident, including for recertification purposes, even if they subsequently move outside of a HUBZone.

However, if the employee moved outside of a HUBZone prior to 180 days after the certification of the HUBZone contractor, the employee will not be counted as a HUBZone resident for recertification. Thus, the business must “attempt to maintain” their 35% status by seeking out additional employees.

If a HUBZone certified business falls below 20% total employees residing in a HUBZone, they will be deemed to have failed to “attempt to maintain” the residency requirement. Additionally, if the business drops below the 20% mark, they must notify SBA within 30 days.

If a HUBZone business acquires, is acquired by, or mergers with another firm after certification, the business must notify SBA within 30 days of the transaction becoming final. To remain HUBZone certified, the merged business must be able to demonstrate to the SBA that it continues to meet the HUBZone eligibility requirements, including being United States citizen-owned, maintaining a principal place of business in a HUBZone, and attempting to maintain at least 35% employees living in a HUBZone.

Protests : Who May (and how to) Protest a Proposed Awardee’s Status as a HUBZone Certified Business?

The government’s Historically Underutilized Business Zone (HUBZone) program is intended to designate federal contracting dollars to promote the interests of small disadvantaged businesses in urban and rural areas. HUBZone firms must meet certain requirements regarding the percentage of employee residences in a HUBZone and maintaining a “principal office” in a HUBZone. Additionally, HUBZone firms must be small for their applicable NAICS code.

In the event you lose out on a HUBZone award and believe that the winning bidder failed to meet any of the requirements, you may be able to protest the award and have the contract award overturned.

Any interested party may protest a successful bidder’s status as a certified HUBZone small business. An “interested party” includes any business that submits an offer for a HUBZone contract, or any business that submits an offer for an award that will be affected by a price evaluation preference given to a HUBZone business. In other words, any business that is competing for business with a HUBZone small business may protest a HUBZone award.

To do so, the interested party must submit a written protest to the contracting officer, setting forth specific facts and allegations to support their claim. The written protest must be submitted within five (5) business days after notification of the successful offeror, or in the case of a sealed bid, within five (5) business days after bid opening.

Upon receipt of the protest, if the SBA determines the protest is timely and sufficiently specific, they will notify the protested business and request responsive information, defending the claim, within five (5) business days. Upon receipt of information from the protested business, SBA will decide within fifteen (15) days and notify all affected parties.

Appeals regarding the SBA’s determination may be made to the Associate Administrator, Office of Government Contracting & Business Development.

Do a Firm’s Affiliates Affect HUBZone Eligibility based on Size and Employees Residing in HUBZones?

The short answer is yes. A business’s affiliates count towards the size of a business for HUBZone certification purposes. In other words, the SBA will consider a business’s affiliates when determining whether the business qualifies as a “small business” under the size standard guidelines.

The affiliates of a business also affect consideration of what percentage of employees live within a HUBZone. Employees of an affiliate may be considered employees, if the totality of the circumstances shows that there is no clear line of facture between the HUBZone applicant and its affiliate(s). This is a critical consideration when a HUBZone applicant (or re-certifying HUBZone business) is ensuring they employ at least 35% of individuals living in a HUBZone.

If you need assistance or have questions regarding HUBZone compliance, please contact Harrison Clinton at (703) 526-5587 or or your current Bean, Kinney & Korman attorney.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.


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