Historically Underutilized Business Zone Program 13 CFR part 126 FAR subpart /9/16 1

2 1.OVERVIEW 2.HUBZONE SET-ASIDES (13 CFR , FAR ) AND SOLE SOURCE AWARDS (13 CFR , FAR ) 3.SET ASIDE OF ORDERS 4.HUBZONE PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (13 CFR , FAR ) 5.LIMITATIONS ON SUBCONTRACTING (13 CFR , FAR ) AND NONMANUFACTURER RULE (13 CFR , FAR )

 Status as a HUBZone small business concern (SBC) is determined by SBA, pursuant to 13 CFR part 126  A firm must apply to SBA for HUBZone certification (13 CFR to )  If SBA determines that a concern is a HUBZone SBC, it will issue a certification to that effect and will add the concern to the List of Qualified HUBZone Small Business Concerns at  Only firms on the List are HUBZone SBCs and eligible for HUBZone contracting preferences and awards 3 SBA ADMINISTERS THE HUBZONE PROGRAM

4 HUBZONE CONTRACTS (13 CFR ) HUBZone contracts (including Multiple Award Contracts) are those awarded through:  Sole source awards to qualified HUBZone SBCs  Set-aside awards, including partial set-asides, based on competition restricted to qualified HUBZone SBCs  Awards to qualified HUBZone SBCs through full and open competition after a price evaluation preference is applied  Awards based on a reserve for HUBZone SBCs in a solicitation for a Multiple Award Contract  Orders set-aside for HUBZone SBCs against a Multiple Award Contract that was awarded in full and open competition

REQUIREMENTS TO BID ON A HUBZONE CONTRACT (13 CFR ) At the time a certified HUBZone SBC submits its initial offer on a specific HUBZone contract, it must certify to the CO that:  It is a qualified HUBZone SBC that appears on SBA’s List;  There has been no material change in its circumstances that could affect its HUBZone eligibility since the date of certification;  It is small under the NAICS code assigned to the procurement; and  It will “attempt to maintain” the required percentage of employees who are HUBZone residents during the performance of a HUBZone contract. 5

STATUS AS A HUBZONE SMALL BUSINESS CONCERN  To be eligible for a HUBZone contract, a concern must be a HUBZone SBC both at the time of its initial offer and at the time of contract award (13 CFR (c))  In general, a joint venture may be considered a HUBZone SBC if both joint venturers are certified HUBZone SBCs and each concern is small under the NAICS code assigned to the contract (13 CFR )  NOTE: On February 5, 2015, SBA published a proposed rule that would change this requirement. 80 FR Under the proposed rule, a HUBZone SBC may joint venture with a non-HUBZone SBC if each concern is small under the NAICS code assigned to the contract, and other requirements are met. 6

HOW TO LOCATE HUBZONE CONTRACTORS USING THE DYNAMIC SMALL BUSINESS SEARCH (DSBS)DSBS 7

DSBS – How HUBZone certification is displayed 8  Each firm’s DSBS profile has two fields relevant to HUBZone certification:  “HUBZone Certified? [ ] Yes [ ] No”  “HUBZone Certification Date”  "HUBZone Certified? [X] Yes [ ] No” indicates the firm is currently HUBZone certified  "HUBZone Certified? [ ] Yes [X] No” indicates the firm is NOT currently HUBZone certified  “HUBZone Certification Date” indicates the initial date of certification and does not reflect the dates of any recertification process, which are internal to SBA  NOTE: An approval letter or recertification letter is NOT valid evidence that a firm is currently HUBZone certified, since a firm may have been decertified since the notice was issued.

DSBS – EXAMOPLE OF CURRENTLY CERTIFIED HUBZONE SBC 9

DSBS – EXAMPLE OF DECERTIFIED SBC 10

DSBS – EXAMPLE OF NON-HUBZONE SBC 11

RELATIONSHIP AMONG SMALL BUSINESS PROGRAMS (FAR )  There is no order of precedence among the 8(a) Program, HUBZone Program, Service-Disabled Veteran-Owned Small Business Procurement Program, or the Women-Owned Small Business (WOSB) Program  In determining which socioeconomic program to use, the contracting officer should consider, at a minimum—  Results of market research  Agency progress in fulfilling small business goals 12

HUBZONES AND PARITY BELOW OR AT SAT ($3,500 - $150,000) The acquisition is automatically reserved exclusively for small business. FAR (a). The CO may award as a small business set-aside or may award to a small business under the HUBZone, 8(a), SDVO, or WOSB program. ABOVE SAT The acquisition must be set aside for small business if the “Rule of 2” is met. The Rule of 2 is met if— The CO expects to receive offers from at least 2 responsible small businesses; and Award will be made at a fair price. HOWEVER, before using a small business set-aside, the CO must first consider an acquisition for the 8(a), HUBZone, SDVOSB, or WOSB Program. EXCEPTION: If a requirement has been accepted by SBA under the 8(a) Program, it must remain in the 8(a) Program unless SBA agrees to its release. 13

1.OVERVIEW 2.HUBZONE SET-ASIDES (13 CFR , FAR ) AND SOLE SOURCE AWARDS (13 CFR , FAR ) 3.SET ASIDE OF ORDERS 4.HUBZONE PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (13 CFR , FAR ) 5.LIMITATIONS ON SUBCONTRACTING (13 CFR , FAR ) AND NONMANUFACTURER RULE (13 CFR , FAR ) 14

HUBZONE SET-ASIDE PROCEDURES (13 CFR , FAR )  The CO—  May set-aside acquisitions exceeding the micro-purchase threshold for competition restricted to HUBZone SBCs;  For acquisitions exceeding the SAT, shall consider HUBZone set-asides before considering HUBZone sole source awards or small business set-asides.  To do a HUBZone set-aside, the CO must have a reasonable expectation that—  Offers will be received from 2 or more HUBZone SBCs; and  Award will be made at a fair market price. 15

HUBZONE SET-ASIDE – ONLY ONE OFFER or NO OFFERS (FAR (c)) If the CO receives only one acceptable offer from a qualified HUBZone SBC, the CO should make an award to that concern If the CO receives no acceptable offers from HUBZone SBCs, the HUBZone set-aside shall be withdrawn and the requirement set aside for small business concerns, as appropriate (see FAR ) 16

HUBZONE SOLE SOURCE AWARDS (13 CFR , FAR )  A CO may award a contract to a HUBZone SBC on a sole source basis (before considering a small business set-aside) if—  The CO does not have a reasonable expectation that offers would be received from 2 or more HUBZone SBCs  The anticipated price of the contract (including options) will not exceed—  $7 M for a requirement assigned a manufacturing NAICS code; or  $4 M for all other requirements  The requirement neither is currently being performed by an 8(a) participant nor has been accepted as an 8(a) requirement by SBA  The acquisition is greater than the simplified acquisition threshold  The HUBZone SBC has been determined to be a responsible contractor with respect to performance  Award can be made at a fair and reasonable price  SBA has the right to appeal the contracting officer’s decision not to make a HUBZone sole source award 17 Check for FAR inflation change

1.OVERVIEW 2.HUBZONE SET-ASIDES (13 CFR , FAR ) AND SOLE SOURCE AWARDS (13 CFR , FAR ) 3.SET ASIDE OF ORDERS 4.HUBZONE PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (13 CFR , FAR ) 5.LIMITATIONS ON SUBCONTRACTING (13 CFR , FAR ) AND NONMANUFACTURER RULE (13 CFR , FAR ) 18

SET-ASIDES OF ORDERS  Agencies may:  set-aside orders placed against multiple-award contracts for HUBZone SBCs (FAR 19.5) and no justification for this exception to fair opportunity is required (FAR 16.5)  set aside part or parts of a multiple-award contract for HUBZone SBCs (FAR 19.5)  reserve 1+ contract awards for HUBZone SBCs under full and open multiple-award procurements (FAR 19.5)  set-aside orders and BPAs under the GSA Schedule (FAR 8.4) 19

SET-ASIDE OF ORDERS – FAR PART 19 APPLIES FAR (a)(2) states that when setting aside orders and BPAs against the GSA Schedule:  The specific small business program eligibility requirements identified in part 19 apply. FAR (b)(2)(i)(F) states that when setting aside orders for small business concerns:  The specific small business program eligibility requirements identified in part 19 apply. What does this mean? Examples:  HUBZone joint venture requirements apply  HUBZone performance of work requirements apply 20

1.OVERVIEW 2.HUBZONE SET-ASIDES (13 CFR , FAR ) AND SOLE SOURCE AWARDS (13 CFR , FAR ) 3.SET ASIDE OF ORDERS 4.HUBZONE PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (13 CFR , FAR ) 5.LIMITATIONS ON SUBCONTRACTING (13 CFR , FAR ) AND NONMANUFACTURER RULE (13 CFR , FAR ) 21

PRICE EVALUATION PREFERENCE FOR HUBZONE SBCs (13 CFR , FAR )  The price evaluation preference for HUBZone SBCs shall be used in acquisitions conducted using full and open competition  The preference shall NOT be used—  Where price is not a selection factor (e.g., Architect/Engineer acquisitions)  Where all fair and reasonable offers are accepted (e.g., the award of multiple award schedule contracts) 22 Only applied in F&O, including on non-reserved portion or non-set- aside portion

APPLYING THE PRICE EVALUATION PREFERENCE  The CO shall apply the PEP in F&O competition, when the lowest, responsive, responsible offeror is a large business  The PEP is applied by adding a factor of 10% to—  The otherwise lowest, responsive, responsible offer from a large business (AKA the large business that is the apparent successful offeror)  Offers from HUBZone SBCs that have waived the PEP  Offers from small business concerns that are not the apparent successful offeror 23 NOTE: If PEP waived, then not submitting offer as HZ SBC and do not need to meet LOS or NMR

The large business is the lowest, responsive and responsible offeror. After applying the 10% PEP, the large business is still the lowest, responsive and responsible offeror. In this example, the application of the PEP does not benefit the HUBZone SBC. The large business is the lowest, responsive and responsible offeror. After applying the 10% PEP, the large business is no longer the lowest, responsive and responsible offeror. In this example, the application of the PEP does benefit the HUBZone SBC. 24 Price evaluation preference – examples PEP APPLIED: HUBZone$113 Small$113.3 Large$110 OFFER: HUBZone$113 Small$103 Large$100 PEP APPLIED: HUBZone$100 Small$106.7 Large$104.5 OFFER: HUBZone$100 Small$97 Large$95

1.OVERVIEW 2.HUBZONE SET-ASIDES (13 CFR , FAR ) AND SOLE SOURCE AWARDS (13 CFR , FAR ) 3.SET ASIDE OF ORDERS 4.HUBZONE PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (13 CFR , FAR ) 5.LIMITATIONS ON SUBCONTRACTING (13 CFR , FAR ) AND NONMANUFACTURER RULE (13 CFR , FAR ) 25

26 Services (except construction)  Spend no more than 50% of the value of the prime contract on subcontractors that are not HUBZone SBCs Supplies (from a manufacturer)  Spend no more than 50% of the value of the prime contract on subcontractors that are not HUBZone SBCs General Construction  Spend no more than 85% of the value of the prime contract on subcontractors that are not HUBZone SBCs  Cost of materials are excluded Special Trade Construction  Spend no more than 75% of the value of the prime contract on subcontractors that are not HUBZone SBCs  Cost of materials are excluded LIMITATIONS ON SUBCONTRACTING Final Rule published May 31, 2016 (81 FR 34243) – Effective June 30, 2016  A HUBZone SBC prime contractor may subcontract part of a HUBZone contract, provided the HUBZone SBC meets the following requirements:

27 Services (except construction)  Spend at least 50% of personnel costs on own employees or on the employees of other HUBZone SBCs Supplies  Spend at least 50% of manufacturing cost (excluding materials) on performing the contract in a HUBZone  One or more qualified HUBZone SBCs may combine to meet this percentage General Construction  Spend at least 15% of personnel costs on own employees, and  At least 50% on employees of other HUBZone SBC(s), unless waiver granted by CO Special Trade Construction  Spend at least 25% of personnel costs on own employees, and  At least 50% on employees of other HUBZone SBC(s), unless waiver granted by CO LIMITATIONS ON SUBCONTRACTING Current regulations under 13 CFR – Effective until June 29, 2016  A HUBZone SBC prime contractor may subcontract part of a HUBZone contract, provided the HUBZone SBC meets the following requirements:  The CO may waive this 50% requirement if (s)he determines that at least 2 HUBZone SBCs cannot meet it

NONMANUFACTURER RULE (NMR) (13 CFR , FAR )  A HUBZone SBC may submit an offer for supplies as a nonmanufacturer if it meets the requirements of the nonmanufacturer rule set forth at 13 C.F.R. § (b)(1) and if the small business manufacturer providing the end item is also a HUBZone SBC  NOTE: Final Rule effective June 30, 2016 eliminates the requirement that the manufacturer be a HUBZone SBC  There are no waivers to the nonmanufacturer rule for HUBZone contracts  NOTE: Final Rule effective June 30, 2016 eliminates this  For HUBZone contracts at or below $25,000 in total value, a HUBZone SBC may supply the end item of any manufacturer, as long as the product acquired is manufactured or produced in the U.S. 28

When do the HZ LOS and NMR apply?  HUBZone set-asides  Partial HUBZone set-asides  HUBZone reserves  Orders set-aside for HUBZone SBCs  F&O when HZ PEP applied What is the compliance period?  Full or partial set aside: base term and each subsequent option period  HOWEVER, CO may require concern to meet the LOS or NMR for each order  Reserve or order set-aside under F&O: term of order COMPLIANCE WITH LOS & NMR 29

1.OVERVIEW 2.HUBZONE SET-ASIDES (13 CFR , FAR ) AND SOLE SOURCE AWARDS (13 CFR , FAR ) 3.SET ASIDE OF ORDERS 4.HUBZONE PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (13 CFR , FAR ) 5.LIMITATIONS ON SUBCONTRACTING (13 CFR , FAR ) AND NONMANUFACTURER RULE (13 CFR , FAR ) 30

9/28/ HUBZONE PROGRAM INFORMATION Map – landing page Understanding – Mini-primers – Webinars Applying – Size standards Tool – 35% and principal office calculator – FAQ / Certification Application Timeline Application Guide Supporting docs Maintaining Protests Detecting Fraud, Waste & Abuse FAQs 31

9/28/ HUBZONE PROGRAM INFORMATION (HYPERLINKS) Resources & Tools HUBZone WebsiteApplying for Certification 35% and PO calculator toolMaintaining Certification HUBZone maps / designations SBA Learning Center Supporting DocumentationSBA Local Assistance HUBZone Regulations 13 CFR – Part 126 SBA Size Standards

9/28/ FOR MORE INFORMATION... Visit the HUBZone website at for the latest information, including information about:  HUBZone Office Hours – eligibility conversations via a toll free number on Tuesdays and Thursdays from 2:00 to 3:00 p.m. ET Contact the helpdesk at

9/28/ THANK YOU! Mariana Pardo Director HUBZone Program Alison Mueller Procurement Law Attorney 34