If you recall in an earlier episode, we discussed the proposed changes that SBA wanted to make to the HUBZone Program. I even told you how you could voice your opinion on those proposed changes. Well, SBA has reviewed those comments and made changes to the program. Also, these changes have already gone into effect. The effective date was yesterday, December 26, 2019.
Background on Why SBA Decided To Change the Program?
It all started with an Executive Order issued by President Trump. The Executive Order (13771) directed federal agencies to reduce regulatory burdens and control regulatory costs. At first, your thought might be that this applies only to regulatory burdens and expenses within the government. But it was meant for the public as well, which resulted in SBA reviewing the HUBZone regulations for ambiguities and clarify policy and procedures.
SBA’s ultimate goal with these changes is to make the program more efficient and effective. As a result, the program should be more straightforward for small businesses to understand and comply with the program requirements. Also, it is SBA’s wish to make the program more attractive to procuring agencies. To accomplish this task, SBA decided to review regulations for possible revision or elimination. The results are the changes that we will be discussing today.
First Major Update
Did you know that the program has not received a significant update since Congress created the program? That was over twenty years ago. Congress created the HUBZone program in 1998. I am sure you will agree with me that it was time for this program to be updated.
1st Key Challenge For HUBZone Companies
The first challenge that HUBZone certified businesses face is trying to continually demonstrate that they meet the program requirements each time they bid on a HUBZone solicitation. Then again, at the time, they are awarded the contract.
SBA has changed to rule to require a small business to recertify annual and not at the time of offer or contract award. Also, this change means that eligibility would go back to the date of its certification or recertifications, not the date of the offer.
2nd Key Challenge For HUBZone Companies
A challenge for HUBZone businesses is maintaining their eligibility. HUBZone declared areas are continually changing due to changes in economic data. As a result, companies have a difficult time finding employees that reside within a HUBZone area. Furthermore, the business location is no longer within the HUBZone declare area, which causes the business to be ineligible.
The new rule treats an individual as a HUBZone resident as long as that individual worked for the business. And that individual resided in a HUBZone declared area at the time the company was certified or recertified. Also, the individual continues to work for the same company even if the area where they lived no longer qualified as a HUBZone area or the individual has moved to a non-HUBZone area.
These two significant changes to the program were not the only ones implemented by SBA. They also added, revised, and eliminated definitions. One of the definitions changed was the employee. SBA know states that employee means all individuals employed on a full-time, part-time, or other bases, so long as the individual works a minimum of 40 hours during the four weeks immediately before the relevant date of the review. The review is either date the business submits its application or the date of recertification.
Attempt To Maintain
SBA has updated the definition for “Attempt to Maintain.” The result is to clarify what happens if a HUBZone company loses a significant number of employees that reside in a HUBZone location. SBA states that falling below 20% of HUBZone residency during the performance on a HUBZone contract is a failure to maintain.
HUBZone Employee Definition
Now, you may be asking yourself how SBA determines if someone is an employee? Well, that is not as clear as it could be. SBA states that they will review the totality of the circumstances, to include IRS regulations in determining if an individual qualifies as an employee. No, this is not the total definition for an employee. But it does play a significant role in a small business.
Today, we covered just a small segment of the changes that SBA made to the HUBZone program. Any small business owner that is HUBZone certified must review the regulation to ensure that they are eligible. Remember that it is your responsibility to determine if you meet the program requirements.
Did SBA meet its goal of reducing ambiguities and clarify policy and procedures? That is up to you to determine. My thoughts are that these changes help but more is needed. However, I wish they would review the programs every few years to refine and clarify them.
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