HUBZone contracting gets harder

Contracting officers are likely to find it more difficult to meet their goals for contracting with HUBZone firms in 2013, as the U.S. Census in 2010 decreased the number of companies that fit the criteria.

Small Business Administration officials said the Census essentially decertified more than 2,400 firms at the start of fiscal 2012. On September 2011, agencies had 8,141 companies in Historically Underutilized Business Zones, or HUBZones, to work with. As of September, there are 5,166, a 37-percent decrease. Agencies are supposed to award 3 percent of their contracts to HUBZone businesses to meet the goal.

Officials are not able to compare fiscal 2012 contracting numbers for the HUBZone small businesses to fiscal 2011 because they are still certifying data and correcting anomalies. The process takes several months, with a potential for significant effect on the overall results. In fiscal 2011, the latest data available from SBA, the government awarded 2.35 percent of its contracting dollars to HUBZone firms, or  $9.9 billion. The prior year, HUBZone firms received 2.77 percent of the dollars.

Agency officials were already concerned about the number of available firms before the Census reduced it, said Guy Timberlake, co-founder and chief visionary officer of the American Small Business Coalition.

On top of that, “if a number of the companies that exited the program received contract awards of substance during fiscal year ‘12, it’s likely the fiscal ‘13 percentage could even decrease, unless agencies are able to successfully conduct the necessary market research and outreach to find more HUBZone companies with which to do business,” he said.

Mark Crowley, executive director of the HUBZone Contractors National Council, said contracting officers are doing what is expected of them by posting Federal Business Opportunity notices online. Agencies publish their needs—often with short deadlines though, he noted—and they expect HUBZone firms to heed the call. However, the process is hard for the small firms. Responding to solicitations takes time and resources. HUBZone firms, by their nature, have little of either, he said.

“All of this supports a need to challenge the current ‘build it and they will come’ federal contracting mentality,” he said.

Agencies are being active in meeting with HUBZones, Crowley said.

SBA officials said they conducted more than 80 HUBZone boot camps in every SBA district office over the past year. In so doing, they provided information about the program’s eligibility requirements and benefits with more than 1,000 people. The full impact of these outreach events, however, is not yet evident. SBA will continue conducting marketing and outreach in fiscal 2013, officials said.

Crowley said turnout at HUBZone matchmaking events is frustratingly low. Agencies and prime contractors come – at a recent one his group offered, there was a  40-percent increase compared to the previous year – but the HUBZone firms themselves often don’t attend.

“Participating in these events can be very effective but is prohibitively expensive for many HUBZone firms once employee time, travel expenses, and other resources are considered,” he said.

Crowley and Timberlake have some ideas to improve the situation.

Contracting officers should consider extending the response deadline for sources sought notices and requests for proposals on the FedBizOpps website, Crowley said. Ten  days is not enough time to find and then respond to a notice, he said.

One way to help companies get on top of notices as quickly as possible is through social media. He suggested upgrading FedBizOpps with push technology used by social networking sites  to get notices to contractors. Companies could subscribe based on industry codes and other parameters rather than leaving up to contractors to always search for the opportunities, he said.

On a broader platform, agencies should be willing to give new suppliers a chance to perform, even if they do not have prior federal experience, and tell their acquisition employees that HUBZone companies can do more than construction and maintenance industries, he said. For example, 13 percent of HUBZone firms are manufacturers and 8 percent are research-and-development firms.

Timberlake said agencies can minimize risk by issuing purchases via the Simplified Acquisition Procedures to test the capabilities and capacity of the companies they are unfamiliar with. Those procedures allow for more flexibility in procurement rules for smaller purchases.

“This provides an opportunity for everyone involved to get to know one another under less stressful circumstances,” he said.

On a congressional scale, Crowley suggested boosting the 3-percent HUBZone contracting goal to 5 percent, which equals the goals for companies in SBA’s 8(a) Business Development program and firms owned by women. The House’s fiscal 2013 National Defense Authorization Act (H.R. 4310) raises the overall small-business contracting goal from 23 percent to 25 percent, but does not change the procurement goals for the individual small business categories. The Senate has not passed its authorization bill. In addition, lawmakers should “amend the current uber-restrictive sole-source HUBZone provision to become an option that agencies can actually use.” The Federal Acquisition Regulation sets up six requirements, including a condition that agency officials can only find one HUBZone firm that can meet their requirement.

Finally, agencies should take advantage of industry groups. Timberlake said many of them are willing to put in some hard work “to help agencies achieve the success they seek in this area.”