HUBZone status helps snag federal contracts

All of Kootenai County, parts of Spokane qualify as “historically underutilized”

By Addy Hatch

http://spokanejournal.com/spokane_id=article⊂=1839

Mark Gantar made news recently when he moved his Spokane Valley manufacturing company, All Seasons Apparel Inc., to Post Falls.

Idaho’s lower minimum wage was one factor in the move, Gantar says, but an equally important motivation was to locate All Seasons in a federal HUBZone.

The term HUBZone stands for historically underutilized business zone, a program launched during the Clinton administration to give preference on federal contracts to small companies that are located in disadvantaged areas.

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Thanks to Dave Gibson for passing along this map of the HUBZones in Montana:

http://map.sba.gov/hubzone/hzqry.asp?state=mt

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All of Kootenai County is a HUBZone, as are parts of the city of Spokane and all American Indian reservations, says Ted Anderson, a loan specialist with the U.S. Small Business Administration here, the government arm that certifies businesses for the program. To be designated a HUBZone, an area must have high unemployment and a median household income that’s less than 80 percent of the state median. Businesses can check their location’s eligibility online, at https://eweb1.sba.gov/hubzone/internet/, by typing in their address, Anderson says.

Gantar says his apparel-making business couldn’t compete on price with low-cost manufacturers overseas, so “we had to convert to a government contractor” to stay in business. “Being in Post Falls puts me in a HUBZone, which gives us a tremendous amount of leverage in competing on government contracts.”

Gantar previously was located in the Spokane Business & Industrial Park, which is not in a HUBZone.

The HUBZone program is reserved for small businesses, but the size of a “small business” under the program varies depending on the industry, Anderson says. Generally speaking, however, for manufacturers it’s 500 employees or less, and for wholesalers 100 employees or less. For retail and service businesses, the threshold is $6 million in sales annually, he says.

In addition, a company that wants to become certified under the HUBZone program must be owned by a U.S. citizen, have its principal office located in a HUBZone, and at least 35 percent of its employees must live in a HUBZone, although it doesn’t have to be the same one where the company is based.

If a company meets those requirements, it qualifies for preferences on federal contracts from all U.S. government agencies, Anderson says. On some contracts, the preference applies when the lowest qualified bid comes from a large company and the next-highest bid is from a HUBZone company—in those cases, the government would pay up to 10 percent above the low bid so that it could award the contract to the HUBZone company, he says. Additionally, some contracts are set aside specifically for HUBZone businesses.

Every federal agency now is required to issue 3 percent of all of its contracts to HUBZone-certified companies, which would add up to about $6 billion a year, documents on the HUBZone Web site say.

Participation has lagged somewhat, however, according to the program’s most recent report to Congress, which details its results in 2001. That year, HUBZone businesses received $1.6 billion in federal contracts, a 138 percent increase from 2000, but only 0.72 percent of all federal contracts—far short of the 2 percent goal that year.

Anderson cautions that being part of the HUBZone program won’t guarantee that a company lands federal contracts.

“They still have to find their own (contracts),” he says. “This is not a program that’s going to go out and find your contracts for you. The purpose of the program is to funnel money into economically distressed areas.”

Companies must apply for HUBZone certification online. It doesn’t cost anything, and it takes 30 to 45 days to receive certification if a company qualifies, Anderson says. Once they’re certified, businesses must keep good records to ensure they can pass a government audit of their qualifications, which the SBA conducts randomly, he says.

About 25 companies in Spokane County have become HUBZone certified, while about 60 have received that designation in Kootenai County, according to the HUBZone Web site.

There are more Kootenai County companies because the entire county qualifies as a HUBZone, Anderson says. Spokane’s HUBZone generally is located from Riverside State Park east to Hillyard, he says.

Eastern Washington and North Idaho “have one of the highest concentrations of HUBZone companies in the entire country,” Anderson says, because so many areas are considered economically distressed.

Still, he says, it’s such a good deal, “it surprises me that not more people know about it.”