Not a HUBZone Business? No Longer a Problem: Equal Footing for Small Business Set-Asides
This post was written by Leslie A. Peterson.
The Small Business Jobs Act of 2010 (“the Act”), signed by President Obama on September 27, 2010, quashed the argument that Historically Underutilized Business Zone (“HUBZone”) small businesses are entitled to absolute contracting priority. Section 1347 of the Act establishes parity among the Small Business Administration’s (“SBA”) various small business contracting programs. Passage of the Act eliminates the requirement that contracting officers must first check for eligible HUBZone companies to perform work before looking to other types of small businesses.
Contracting officer discretion to treat the SBA’s programs equally when awarding set-asides had been heavily debated after recent decisions from the Government Accountability Office and the U.S. Court of Federal Claims established a preference for HUBZone small businesses. In Mission Critical Solutions v. U.S., the Court of Federal Claims held that the Small Business Act requires contract opportunities to be set aside for HUBZone firms whenever two HUBZone firms are available to perform the contract. The court based its decision on the use of the word “shall” to describe contracting officer requirements with regard to awarding HUBZone set-asides. Under the court’s interpretation of the language, HUBZone small businesses were to get first preference over other categories of small business programs, such as minority-owned businesses and veteran-owned businesses.
The new Act eliminates preferential treatment for the HUBZone program by changing the language of the Small Business Act from "shall" to "may," to mirror the language used to describe contracting officer requirements with regard to other SBA programs. As a result, contracting officers are no longer required to give preference to HUBZone firms and are able choose which small business contracting program to utilize when making set-asides.
The attorneys at Reed Smith will continue to monitor any developments associated with the Small Business Jobs Act of 2010.
