# Subpart 19.13 - Historically Underutilized Business Zone (HUBZone) Program

## 19.1301 General.

1. (a) The Historically Underutilized Business Zone (HUBZone) Act of 1997 (15 U.S.C.631 note) created the HUBZone Program.

2. (b) The purpose of the HUBZone Program is to provide Federal contracting assistance for qualified small business concerns located in historically underutilized business zones, in an effort to increase employment opportunities, investment, and economic development in those areas.

## 19.1302 Applicability.

The procedures in this subpart apply to all Federal agencies that employ one or more contracting officers.

## 19.1303 Status as a HUBZone small business concern.

1. (a) Status as a HUBZone small business concern is determined by the Small Business Administration (SBA) in accordance with 13 CFR Part 126.

2. (b) If the SBA determines that a concern is a HUBZone small business concern, it will issue a certification to that effect and will add the concern to the List of Qualified HUBZone Small Business Concerns at http://dsbs.sba.gov/dsbs/search/dsp_searchhubzone.cfm. Only firms on the list are HUBZone small business concerns, eligible for HUBZone preferences. HUBZone preferences apply without regard to the place of performance. Information on HUBZone small business concerns can also be obtained at www.sba.gov/hubzone or by writing to the Director for the HUBZone Program (Director/HUB) at U.S. Small Business Administration, 409 3 rd Street, SW., Washington, DC 20416 or at hubzone@sba.gov.

3. (c) A joint venture may be considered a HUBZone small business concern if it meets the criteria in 13 CFR 121.103(h).

4. (d) To be eligible for a HUBZone contract under this section, a HUBZone small business concern must be a HUBZone small business concern both at the time of its initial offer and at the time of contract award.

## 19.1304 Exclusions.

This subpart does not apply to-

1. (a) Requirements that can be satisfied through award to-

   1. (1) Federal Prison Industries, Inc. (see subpart 8.6); or

   2. (2) AbilityOne participating non-profit agencies for the blind or severely disabled (see subpart 8.7);

2. (b) Orders under indefinite-delivery contracts (see subpart 16.5). (But see 16.505(b)(2)(i)(F) for discretionary set-asides of orders);

3. (c) Orders against Federal Supply Schedules (see subpart 8.4). (But see 8.405-5 for discretionary set-asides of orders);

4. (d) Requirements currently being performed by an 8(a) participant or requirements SBA has accepted for performance under the authority of the 8(a) program, unless SBA has consented to release the requirements from the 8(a) program;

5. (e) Requirements that do not exceed the micro-purchase threshold; or

6. (f) Requirements for commissary or exchange resale items.

## 19.1305 HUBZone set-aside procedures.

1. (a) The contracting officer-

   1. (1) Shall comply with 19.203 before deciding to set aside an acquisition under the HUBZone Program;

   2. (2) May set aside acquisitions exceeding the micro-purchase threshold for competition restricted to HUBZone small business concerns when the requirements of paragraph (b) of this section can be satisfied; and

   3. (3) Shall consider HUBZone set-asides before considering HUBZone sole source awards (see 19.1306) or small business set-asides (see subpart 19.5).

2. (b) To set aside an acquisition for competition restricted to HUBZone small business concerns, the contracting officer must have a reasonable expectation that-

   1. (1) Offers will be received from two or more HUBZone small business concerns; and

   2. (2) Award will be made at a fair market price.

3. (c) If the contracting officer receives only one acceptable offer from a qualified HUBZone small business concern in response to a set aside, the contracting officer should make an award to that concern. If the contracting officer receives no acceptable offers from HUBZone small business concerns, the HUBZone set-aside shall be withdrawn and the requirement, if still valid, set aside for small business concerns, as appropriate (see 19.203).

4. (d) The procedures at 19.202-1 and, except for acquisitions not exceeding the simplified acquisition threshold, at 19.402 apply to this section.

   1. (1) When the SBA intends to appeal a contracting officer’s decision to reject a recommendation of the SBA procurement center representative (or, if a procurement center representative is not assigned, see 19.402(a)) to set aside an acquisition for competition restricted to HUBZone small business concerns, the SBA procurement center representative shall notify the contracting officer, in writing, of its intent within 5 business days of receiving the contracting officer’s notice of rejection.

   2. (2) Upon receipt of notice of SBA’s intent to appeal, the contracting officer shall suspend action on the acquisition unless the head of the contracting activity makes a written determination that urgent and compelling circumstances, which significantly affect the interests of the Government, exist.

   3. (3) Within 15 business days of SBA’s notification to the contracting officer, SBA must file its formal appeal with the head of the agency, or the appeal will be deemed withdrawn. The head of the agency shall reply to SBA within 15 business days of receiving the appeal. The decision of the head of the agency shall be final.

## 19.1306 HUBZone sole source awards.

1. (a) A contracting officer shall consider a contract award to a HUBZone small business concern on a sole source basis (see 6.302-5(b)(5)) before considering a small business set-aside (see 19.203 and subpart 19.5), provided none of the exclusions at 19.1304 apply; and-

   1. (1) The contracting officer does not have a reasonable expectation that offers would be received from two or more HUBZone small business concerns;

   2. (2) The anticipated price of the contract, including options, will not exceed-

      1. (i) $7 million for a requirement within the North American Industry Classification System (NAICS) codes for manufacturing; or

      2. (ii) $4 million for a requirement within all other NAICS codes;

   3. (3) The requirement is not currently being performed by an 8(a) participant under the provisions of subpart 19.8 or has been accepted as a requirement by SBA under subpart 19.8;

   4. (4) The acquisition is greater than the simplified acquisition threshold (see part 13);

   5. (5) The HUBZone small business concern has been determined to be a responsible contractor with respect to performance; and

   6. (6) Award can be made at a fair and reasonable price.

2. (b) The SBA has the right to appeal the contracting officer’s decision not to make a HUBZone sole source award.

## 19.1307 Price evaluation preference for HUBZone small business concerns.

1. (a) The price evaluation preference for HUBZone small business concerns shall be used in acquisitions conducted using full and open competition. The preference shall not be used-

   1. (1) Where price is not a selection factor so that a price evaluation preference would not be considered (e.g., Architect/Engineer acquisitions);

   2. (2) Where all fair and reasonable offers are accepted (e.g., the award of multiple award schedule contracts); or

   3. (3) For the reserved portion of a solicitation for a multiple-award contract (see 19.503).

2. (b) The contracting officer shall give offers from HUBZone small business concerns a price evaluation preference by adding a factor of 10 percent to all offers, except-

   1. (1) Offers from HUBZone small business concerns that have not waived the evaluation preference; or

   2. (2) Otherwise successful offers from small business concerns.

3. (c) The factor of 10 percent shall be applied on a line item basis or to any group of items on which award may be made. Other evaluation factors, such as transportation costs or rent-free use of Government property, shall be added to the offer to establish the base offer before adding the factor of 10 percent.

4. (d) When the two highest rated offerors are a HUBZone small business concern and a large business, and the evaluated offer of the HUBZone small business concern is equal to the evaluated offer of the large business after considering the price evaluation preference, the contracting officer shall award the contract to the HUBZone small business concern.

## 19.1308 Limitations on subcontracting and nonmanufacturer rule.

1. (a) Definitions. See 13 CFR 125.1 for definitions of terms used in paragraph (b) of this section.

2. (b) Limitations on subcontracting. To be awarded a contract or order under the HUBZone program, the HUBZone small business concern is required—

   1. (1) For services (except construction), to spend at least 50 percent of the cost of performance incurred for personnel on its own employees or on the employees of other HUBZone small business concerns;

   2. (2) For supplies or products (other than a procurement from a nonmanufacturer of such supplies or products), to spend at least 50 percent of the cost of manufacturing, excluding the cost of materials, performed by the concern or other HUBZone small business concerns;

   3. (3) For general construction—

      1. (i) To spend at least 15 percent of the cost of performance incurred for personnel on its own employees; and

      2. (ii) To spend at least 50 percent of the cost of performance incurred for personnel on its own employees or on a combination of its own employees and employees of HUBZone small business concern subcontractors; or

   4. (4) For construction by special trade contractors—

      1. (i) To spend at least 25 percent of the cost of contract performance incurred for personnel on its own employees; and

      2. (ii) To spend at least 50 percent of the cost of the contract incurred for personnel on its own employees or on a combination of its own employees and employees of HUBZone small business concern subcontractors.

3. (c) Construction. Before issuing a solicitation for general construction or construction by special trade contractors, the contracting officer shall determine if at least two HUBZone small business concerns can spend at least 50 percent of the cost of contract performance to be incurred for personnel on their own employees or subcontract employees of other HUBZone small business concerns. If the contracting officer is unable to make this determination, the contracting officer may waive the 50 percent requirement; however, the HUBZone small business concern is still required to meet the cost incurred for personnel requirements in paragraphs (b)(3)(i) and (b)(4)(i).

4. (d) Compliance period. A HUBZone small business contractor is required to comply with the limitations on subcontracting—

   1. (1) For a contract that has been set aside or awarded on a sole source basis to a HUBZone small business concern, either by the end of the base term and then by the end of each subsequent option period or by the end of the performance period for each order issued under the contract, at the contracting officer's discretion; and

   2. (2) For an order set aside for HUBZone small business concerns as described in 8.405-5 and 16.505(b)(2)(i)(F) or for an order issued directly to a HUBZone small business contractor in accordance with 19.504(c)(1)(ii), by the end of the performance period for the order.

5. (e) Nonmanufacturer rule.

   1. (1) To be awarded a contract or order for supplies as a nonmanufacturer under this subpart, a contractor is required—

      1. (i) To provide the end item of a HUBZone small business manufacturer, that has been manufactured or produced in the United States or its outlying areas;

      2. (ii) Not to exceed 500 employees;

      3. (iii) To be primarily engaged in the retail or wholesale trade and normally sell the type of item being supplied; and

      4. (iv) To take ownership or possession of the item(s) with its personnel, equipment, or facilities in a manner consistent with industry practice.

   2. (2) There are no class waivers or waivers to the nonmanufacturer rule for individual solicitations for contracts and orders awarded under the HUBZone Program.

   3. (3) For contracts and orders awarded under the HUBZone Program at or below $25,000 in total value, a HUBZone small business concern may supply the end item of any manufacturer, including a large business, as long as the product acquired is manufactured or produced in the United States.

## 19.1309 Contract clauses.

1. (a)

   1. (1) The contracting officer shall insert the clause 52.219-3, Notice of HUBZone Set-Aside or Sole Source Award, in solicitations and contracts for acquisitions that are set aside or awarded on a sole source basis to, HUBZone small business concerns under 19.1305 or 19.1306. This includes multiple-award contracts when orders may be set aside for HUBZone small business concerns as described in 8.405-5 and 16.505(b)(2)(i)(F) or when orders may be issued directly to one HUBZone small business concern in accordance with 19.504(c)(1)(ii).

   2. (2) The contracting officer shall use the clause with its Alternate I to waive the 50 percent requirement if the conditions at 19.1308(c) apply.

2. (b)

   1. (1) The contracting officer shall insert the clause at 52.219-4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns, in solicitations and contracts for acquisitions conducted using full and open competition.

   2. (2) The contracting officer shall use the clause with its Alternate I to waive the 50 percent requirement if the conditions at 19.1308(c) apply.

3. (c) For use of clause 52.219-33, Nonmanufacturer Rule, see the prescription at 19.507(h)(2).