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and Construction Matters Since 1893.
Oles Morrison

Government Contracts Law Update: HUBZone Firms Lose Priority Status

Mon Jan 3, 2011

On August 6, we discussed the ruling by the U.S. Court of Federal Claims in Mission Critical Solutions v. United States, which held that federal contracting officers must give priority to companies in the Small Business Administration (SBA) Historically Under Utilized Business Zone (HUBZone) program before offering contracts to SBA 8(a) and other firms qualified for set aside programs under the SBA regulations.  
The priority afforded HUBZone firms set forth in Mission Critical Solutions ended Monday when President Obama signed the Small Business Jobs Act of 2010.   Among other things, the Act relegated the HUBZone program to a position equal with other small business programs, such as the 8(a), service disabled veteran-owned, and pending women-owned small business programs.  As such, federal contracting officers administering set-aside procurements need not consider whether HUBZone firms can satisfy agency needs prior to considering firms qualifying under other SBA programs.

The Act also:

  • Authorizes the SBA to establish mentor-protégé programs to assist small businesses owned and controlled by service-disabled veterans, women, and those operating in HUBZones.  These programs would be modeled after the 8(a) mentor-protégé program.
  • Requires OMB’s Office of Federal Procurement Policy to establish a government-wide policy aimed at the reduction of contract bundling – a process in which several small contracts are consolidated and awarded to one firm, often beyond the capability of small businesses.  Prior to bundling a contract, the agency’s senior procurement executive must render a determination that consolidation is necessary and justified.  The rationale for bundling then would be publicly disclosed.
  • Instructs OFPP to develop guidance that would allow agencies to set aside parts of a multiple award contract for small business concerns.  The policy would apply to indefinite delivery-indefinite quantity contracts and task and delivery-order awards.
  • Establishes the Small Business Teams Pilot Program under which the SBA Administrator may make grants to eligible organizations to provide assistance and guidance to teams of small business concerns seeking to compete for larger procurement contracts.
  • Mandates small businesses recertify their size status annually. The Act also establishes a government-wide policy for prosecuting companies that fraudulently disclose themselves to be a small business.
  • Requires prime contractors to notify the contracting officer if certain subcontractors are paid a reduced price or payment is made more than 90 days past due.  The unjustified failure by a prime contractor to make a full and timely payment to a subcontractor will be considered in evaluating the performance of the prime.

Although described by SBA representatives as a “clarification” to existing law, the re-establishment of contracting parity among the SBAs programs is significant; in fact, some HUBZone firms are concerned that, absent priority over other SBA programs, the HUBZone program will not long survive.
We can expect to see changes to the FAR and related agency regulations implementing these various directives in the near future.