Small Business Administration
HUBZone Program
Updated May 24, 2021
Congressional Research Service
https://crsreports.congress.gov
R41268

Small Business Administration HUBZone Program

Summary
The Historical y Underutilized Business Zone Empowerment Contracting (HUBZone) program
provides participating smal businesses located in areas with low income, high poverty, or high
unemployment with contracting opportunities in the form of set-asides, sole-source awards, and
price-evaluation preferences. Its primary objectives are job creation and increased capital
investment in distressed communities. Firms must be certified by the SBA to participate in the
program. As of May 24, 2021, the SBA’s Dynamic Smal Business Search database included
7,740 firms with active HUBZone certifications.
In FY2019, the federal government awarded $11.5 bil ion to HUBZone-certified businesses.
About $2.0 bil ion of that amount was awarded with a HUBZone preference ($1.9 bil ion through
a HUBZone set-aside, $95.0 mil ion through a HUBZone sole-source award, and $72.5 mil ion
through a HUBZone price-evaluation preference). About $2.8 bil ion was awarded to HUBZone-
certified businesses in open competition with other firms. The remaining $6.7 bil ion was
awarded with another smal business preference (e.g., for smal businesses general y or for 8(a),
women-owned, and service-disabled veteran-owned smal businesses).
The HUBZone program’s administrative cost is about $11.7 mil ion annual y. It received an
appropriation of $3.0 mil ion for FY2021, with the additional cost of administering the program
provided by the SBA’s appropriation for salaries and general administrative expenses.
Congressional interest in the HUBZone program has increased in recent years, primarily because
the program has had difficulty reaching its 3% contracting goal.
This report examines arguments both for and against targeting assistance to geographic areas with
specified characteristics as opposed to providing assistance to people or businesses with specified
characteristics. It then assesses the arguments both for and against the program’s continuation.
The report also discusses the HUBZone program’s structure and operation, focusing on the
definition of HUBZone areas and HUBZone smal businesses and the program’s performance
relative to federal contracting goals. It includes an analysis of the SBA’s administration of the
program and the SBA’s performance measures.
This report also examines HUBZone-related legislation, including P.L. 115-91, the National
Defense Authorization Act for Fiscal Year 2018, which, among other provisions, al ows smal
businesses that have HUBZone status on or before December 31, 2019, to retain that status until
the SBA prepares an updated online tool depicting HUBZone qualified areas based on the 2020
Census (anticipated by the SBA to take place on June 30, 2023). Once operational, the new online
tool (currently cal ed the HUBZone map) must be updated every five years for qualified census
tracts and nonmetropolitan counties and when a change in status takes place for other HUBZone
types (e.g., when an area becomes or ceases to be a redesignated area or a base closure area).
Also, governors, as of January 1, 2020, may petition the SBA each year to designate areas located
in nonurban areas, with a population of 50,000 or fewer, and an average unemployment rate at
least 120% of the national or state average, whichever is lower, as HUBZones. The SBA is also
required, not later than one year after enactment, to publish performance metrics measuring the
HUBZone program’s success in promoting economic development in economical y distressed
areas.
Congressional Research Service

Small Business Administration HUBZone Program

The HUBZone Program
The Smal Business Administration (SBA) administers several programs to support smal
businesses, including the Historical y Underutilized Business Zone Empowerment Contracting
(HUBZone) program. The HUBZone program is “a place-based contracting assistance program
whose primary objective is job creation and increasing capital investment in distressed
communities.”1 It was authorized in 1997 (P.L. 105-135, the HUBZone Act of 1997; Title VI of
the Smal Business Reauthorization Act of 1997), and the SBA began accepting applications from
interested smal businesses on March 22, 1999.2
The HUBZone program provides participating small businesses located in areas with low income,
high poverty, or high levels of unemployment with contracting opportunities in the form of set-
asides, sole-source awards, and price-evaluation preferences. The Competition in Contracting
Act of 1984 general y requires “full and open competition” for government procurement
contracts.3 However, procurement set-asides are permissible competitive procedures.
A set-aside restricts competition for a federal contract to specified contractors. Set-asides can be
exclusive or partial, depending upon whether the entire procurement or just part of it is so
restricted. A sole-source award is a federal contract awarded, or proposed for award, without
competition.
When a contract’s anticipated total value, including any options, does not exceed $4.5 mil ion
($7.5 mil ion for manufacturing contracts), the contracting officer may award a qualified
HUBZone smal business a sole source contract without competition.4 In contrast, when the
contract’s anticipated value exceeds these thresholds, the contract general y must be awarded via
a set-aside with competition limited to qualified HUBZone smal businesses so long as there is a
reasonable expectation that at least two eligible and responsible HUBZone smal businesses wil
submit offers and the award can be made at fair market price.5
In addition, in any full and open competition for a federal contract bids from qualified HUBZone
smal businesses “shal be deemed as being lower than the price offered by another offeror (other
than another smal business concern), if the price offered by the qualified HUBZone smal
business concern is not more than 10% higher than the price offered by the otherwise lowest,
responsive, and responsible offeror.”6

1 U.S. Small Business Administration (SBA), FY2012 Congressional Budget Justification and FY2010 Annual
Perform ance Report, p. 29, at https://www.sba.gov/sites/default/files/
FINAL%20FY%202012%20CBJ%20FY%202010%20APR_0.pdf .
2 See Rep. James M. T alent, “Conference Report on H.R. 4577, Departments of Labor, Health and Human Services,
and Education, and Related Agencies Appropriations Act, 2001,” Extensions of Remarks in the House, Congressional
Record, vol. 146, part 156 (January 2, 2001), p. E2244; U.S. Congress, House Committee of Conference, Enactm ent of
Certain Sm all Business, Health, Tax, and Minim um Wage Provisions, conference report to accompany H.R. 2614, 106th
Cong., 2nd sess., October 26, 2000, H.Rept. 106-1004 (Washington: GPO, 2000), p. 639; and U.S. Congress, Senate
Committee on Small Business, Sm all Business Reauthorization Act of 2000 , report to accompany S. 3121, 106th Cong.,
2nd sess., September 27, 2000, S.Rept. 106-422 (Washington: GPO, 2000), p. 20.
3 41 U.S.C. §253(b)(1); and 41 U.S.C. §259(b).
4 15 U.S.C. §657a(c)(2)(A); and Federal Acquisition Regulations (FAR) §19.1306. T he Federal Acquisition Regulatory
Council adjusts each acquisition-related dollar threshold (including those for the 8(a), HUBZone, Service-Disabled
Veteran-Owned, and Women-Owned small business contracting programs), on October 1, of each year that is evenly
divisible by five. T he next inflation adjustment will take place on October 1, 2025. See 41 U.S.C. §1980.
5 FAR §19.1305; and 41 U.S.C. §1980.
6 15 U.S.C §657a(b)(3); and Henry Beale and Nicola Deas, “T he HUBZone Program Report,” Washington, DC:
Congressional Research Service

1

Small Business Administration HUBZone Program

In FY2019, the federal government awarded $11.5 bil ion to HUBZone-certified businesses.
About $2.0 bil ion of that amount was awarded with a HUBZone preference ($1.9 bil ion through
a HUBZone set-aside, $95.0 mil ion through a HUBZone sole-source award, and $72.5 mil ion
through a HUBZone price-evaluation preference). About $2.8 bil ion was awarded to HUBZone-
certified businesses in open competition with other firms. The remaining $6.7 bil ion was
awarded with another smal business preference (e.g., set aside and sole source awards for smal
businesses general y or for 8(a), women-owned, and service-disabled veteran-owned smal
businesses).7
The program’s administrative cost is about $11.7 mil ion annual y.8 The program received an
appropriation of $3.0 mil ion for FY2021, with the additional cost of administering the program
provided by the SBA’s appropriation for salaries and general administrative expenses.9
Congressional interest in the HUBZone program has increased in recent years, primarily because
the program has had difficulty reaching its 3% contracting goal.
This report
 examines arguments presented both for and against targeting assistance to
geographic areas with specified characteristics as opposed to providing assistance
to people or businesses with specified characteristics;
 assesses arguments presented both for and against the creation and continuation
of the HUBZone program, starting with the arguments presented during
consideration of P.L. 105-135, which authorized the program;
 discusses the HUBZone program’s structure and operation, focusing on the
definitions of HUBZone areas and HUBZone smal businesses and the program’s
performance relative to federal contracting goals; and
 provides an analysis of the SBA’s administration of the HUBZone program and
the SBA’s performance measures.
This report also examines HUBZone-related legislation, including
 P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, which
expanded the definition of a Base Realignment and Closure Act (BRAC) military
base closure area to make it easier for businesses located in those areas to meet
the HUBZone program’s requirement that at least 35% of its employees reside in
a HUBZone area. It also extended BRAC base closure area HUBZone eligibility
from five years to not less than eight years, provided HUBZone eligibility to
qualified disaster areas, and added Native Hawai an Organizations to the list of
HUBZone eligible smal business concerns.
 P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018, among
other provisions, al ows smal businesses that have HUBZone status on or before
December 31, 2019, to retain that status until the SBA prepares an updated online

Microeconomic Applications, Inc., prepared for the SBA, Office of Advocacy, May 2008, p. i, at https://www.sba.gov/
content/hubzone-program-report.
7 U.S. General Services Administration (GSA), Federal Procurement Data System—Next Generation, August 13, 2020,
at https://www.fpds.gov/fpdsng/.
8 SBA, FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 16, at
https://www.sba.gov/document/report —congressional-budget-justification-annual-performance-report.
9 SBA, FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 11.
Congressional Research Service

2

Small Business Administration HUBZone Program

tool depicting HUBZone qualified areas based on the 2020 Census (anticipated
by the SBA to take place on June 30, 2023).10 Once operational, the new online
tool (currently cal ed the HUBZone map) must be updated every five years for
qualified census tracts and nonmetropolitan counties and when a change in status
takes place for other HUBZone types (e.g., when an area becomes, or ceases to
be, a redesignated area or a base closure area). The act also al ows governors, as
of January 1, 2020, to petition the SBA each year to designate areas located in
nonurban areas, with a population of 50,000 or fewer, and an average
unemployment rate at least 120% of the national or state average, whichever is
lower, as HUBZones; requires the SBA to process HUBZone certification
applications with sufficient and complete documentation within 60 days of
receipt; ensures that HUBZone-eligible BRAC areas receive HUBZone eligibility
for a full eight years, beginning on the date they are designated a BRAC; and
requires the SBA, not later than one year after enactment, to publish performance
metrics measuring the HUBZone program’s success in promoting economic
development in economical y distressed areas.
In addition, P.L. 114-187, the Puerto Rico Oversight, Management and Economic Stability Act
(PROMESA), includes a provision exempting Puerto Rico from the 20% population cap on
qualified census tracts (QCTs) located in metropolitan statistical areas (MSAs) for 10 years, or
until the date on which the Financial Oversight and Management Board for Puerto Rico, created
by PROMESA, ceases to exist, whichever comes first.11 The act also requires the SBA to
implement a risk-based approach to requesting and verifying information from firms applying to
be designated or recertified as a qualified HUBZone smal business.
Several bil s are also discussed that would have increased the federal government’s smal
business contracting goals. For example, during the 113th Congress, S. 259, the Assuring
Contracting Equity Act of 2013, would have increased the federal government’s 23% contracting
goal for smal businesses general y to 25%, the 5% contracting goals for smal disadvantaged
businesses and women-owned smal businesses to 10%, and the 3% contracting goals for
HUBZone-certified smal businesses and service-disabled veteran-owned smal businesses to 6%.
The bil ’s provisions were reintroduced in both the House and Senate during the 114th Congress
(H.R. 3175 and S. 1859) and the 115th Congress (H.R. 2362 and S. 1061). Also, H.R. 273, the

10 P.L. 115-91 included provisions from several bills introduced during the 115th Congress, including S. 929, the Invest
in Rural Small Business Act of 2017, and H.R. 3294, the HUBZone Unification and Business Stability Act of 2017.
For information related to when the online HUBZone tool (map) will be available, see SBA, “HUBZone Program:
Extending Map Freeze,” 86 Federal Register 23863, May 5, 2021.
11 Prior to enactment, the SBA’s district office in Puerto Rico issued a press release (on June 16, 2016) announcing that
the SBA would no longer apply the national 20% population cap on QCT s in MSAs. T he SBA later confirmed that it
had administratively eliminated the 20% population cap earlier in the year, but had not formally announced the action.
SBA’s legal justification for taking this action is contained in SBA, Office of General Council, Office of Procurement
Law, “Memorandum from John W. Klein, Associate General Counsel for Procurement Law to Mariana Pardo,
Director, HUBZone Program: HUBZone Designations,” June 10, 2016. Also see SBA, “ SBA Announces New
Qualified HUBZones in Puerto Rico,” at https://www.sba.gov/content/sba-announces-new-qualified-hubzones-puerto-
rico. On October 23, 2017, the SBA announced that unless significant adverse comment is received by November 22,
2017, it would apply PROMESA’s statutory language (which effectively re-instates the 20% population cap on QCT s
located in MSAs and exempts Puerto Rico from the cap for 10 years, or until the date on which the Financial Oversight
and Management Board for Puerto Rico ceases to exist, whichever comes first ) on December 22, 2017. T he SBA
indicated that the statutory language “ is specific, limited, and requires no interpretation.” See SBA, “ HUBZone and
Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) Amendments,” 82 Federal Register
48903, October 23, 2017.
Congressional Research Service

3

Small Business Administration HUBZone Program

Minority Smal Business Enhancement Act of 2015, would have increased the federal
government’s 23% contracting goal for smal businesses general y to 25% and the 5% contracting
goals for smal disadvantaged businesses and women-owned smal businesses to 10%.
Targeting Assistance to Geographic Areas
The HUBZone program was authorized by P.L. 105-135.12 Senator Christopher S. “Kit” Bond,
the legislation’s sponsor, described it as a “jobs bil and a welfare-to-work bil ” designed to
“create realistic opportunities for moving people off of welfare and into meaningful jobs” in
“inner cities and rural counties that have low household incomes, high unemployment, and whose
communities have suffered from a lack of investment.”13 Its enactment was part of a broader
debate that had been under way since the late 1970s concerning whether the federal government
should target assistance to geographic areas with specified characteristics as opposed to providing
assistance to people or businesses with specified characteristics.
Discussion
The idea that targeting government assistance to geographic areas with specified characteristics,
as opposed to targeting government assistance to people or businesses with specified
characteristics, would result in more effective outcomes had its origins in a British experiment in
urban revitalization started during the late 1970s. In 1978, Sir Geoffrey Howe, a Conservative
Member of Parliament, argued for the establishment of market-based enterprise zones that would
provide government regulatory and tax relief in economical y distressed areas as a means to
encourage entrepreneurs “to pursue profit with minimum governmental restrictions.”14 With the
support of Prime Minister Margaret Thatcher’s Conservative government (1979-1990), by the
mid-1980s, more than two dozen enterprise zones were operating in England. Evaluations of the
British enterprise zones’ potential for having a positive effect on the long-term economic growth
of economical y distressed areas suggested that providing tax incentives and implementing
regulatory relief in those areas were “useful but not decisive economic development tools for
distressed communities.”15
In the United States, the idea of targeting regulatory and tax relief to economical y distressed
places appealed to some liberals who had become frustrated by the lack of progress some
economical y distressed communities had experienced under conventional government assistance
programs, such as federal grant-in-aid programs. They tended to view the idea as a supplement to
existing government assistance programs. Some conservatives also supported the idea of

12 T he SBA officially established the HUBZone program on March 22, 1999, when it began to accept applications from
businesses interested in participating in the program. T he SBA certified its first HUBZone business on March 24, 1999 ,
and issued the first HUBZone contract on April 8, 1999. See U.S. Congress, Senate Committee on Small Business,
Sm all Business Reauthorization Act of 2000 , report to accompany S. 3121, 106th Cong., 2nd sess., September 27, 2000,
S.Rept. 106-422 (Washington: GPO, 2000), p. 20.
13 U.S. Congress, Senate Committee on Small Business, Small Business Reauthorization Act of 1997, report to
accompany S. 1139, 105th Cong., 1st sess., August 19, 1997, S.Rept. 105-62 (Washington: GPO, 1997), p. 25.
14 Marilyn Marks Rubin, “Can Reorchestration of Historical T hemes Reinvent Government? A Case Study of the
Empowerment Zones and Enterprise Communit ies Act of 1993,” Public Adm inistration Review, vol. 54, no. 2
(March/April 1994), p. 162. Note: Sir Peter Geoffrey Hall, the Bartlett Professor of Planning and Regeneration at the
Bartlett School of Architecture and Planning, University College London, is often credited for developing the concept
of empowerment zones.
15 Marilyn Marks Rubin, “Can Reorchestration of Historical T hemes Reinvent Government? A Case Study of the
Empowerment Zones and Enterprise Communities Act of 1993,” p. 162.
Congressional Research Service

4

Small Business Administration HUBZone Program

providing additional regulatory and tax relief to geographic areas because it general y aligned
with their views on reducing government regulation and taxes. They tended to view this approach
as a replacement, as opposed to a supplement, for existing government assistance programs.16 As
a result, support for targeting federal assistance to economical y distressed places came from a
diverse group of individuals and organizations that were often on opposing sides in other issue
areas. Some of its leading proponents were the Congressional Black Caucus; the National Urban
League; the National League of Cities; the National Association for the Advancement of Colored
People; President Ronald Reagan; Republican Representative Jack Kemp, who introduced the
first enterprise zone bil in Congress in May 1980 (H.R. 7240, the Urban Jobs and Enterprise
Zone Act of 1980); and Democratic Representative Robert Garcia, who cosponsored with
Representative Kemp H.R. 3824, the Urban Jobs and Enterprise Zone Act of 1981.17
Opponents noted that targeting government assistance, in this case regulatory and tax relief, to
economical y distressed places would “provide incentives in designated areas, regardless of the
nature of the industry which would benefit from the incentives.”18 They argued that it would be
more efficient and cost effective to target federal assistance to businesses that offer primarily
high-wage, full-time jobs with benefits and have relatively high multiplier effects on job creation
than to offer the same benefits to al businesses, including those that offer primarily low -wage,
part-time jobs with few or no benefits and have relatively low multiplier effects on job creation.19
Others opposed the idea because they viewed it as a partisan extension of supply-side
economics.20 Stil others, including the National Federation of Independent Businesses, an
organization representing the interests of the nation’s smal businesses, were not convinced that
providing “marginal rate reductions or marginal reductions in taxes” would “stimulate the entry
of new businesses into depressed areas.”21 Further, some economists argued that it would be more
efficient to let the private market determine where businesses locate rather than to have the
government enact policies that encourage businesses to locate, or relocate, in areas they would
otherwise avoid. In this view, “the locational diversion of economic activity reduces or may
outweigh gains from the creation of economic activity.”22

16 Stuart M. Butler, Enterprise Zones: Greenlining the Inner Cities (New York: Universe Books, 1981).
17 Stuart M. Butler, Enterprise Zones: Greenlining the Inner Cities; U.S. Congress, House Committee on Ways and
Means, The Enterprise Zone Tax Act of 1982, Message from the P resident of the United States transmitting proposed
legislation entitled, “T he Enterprise Zone T ax Act of 1982”, 97 th Cong., 2nd sess., March 23, 1982, H.Doc. 97-157
(Washington: GPO, 1982), pp. 1-5; and U.S. Congress, House Committee on Banking, Finance, and Urban Affairs,
Subcommittee on the City, Urban Revitalization and Industrial Policy, 96th Cong., 2nd sess., September 17, 1980, Serial
No. 96-72 (Washington: GPO, 1980), pp. 205 -224.
18 U.S. Congress, House Committee on Banking, Finance, and Urban Affairs, Subcommittee on the City, Urban
Revitalization and Industrial Policy, 96th Cong., 2nd sess., September 17, 1980, Serial No. 96 -72 (Washington: GPO,
1980), p. 283.
19 U.S. Congress, House Committee on Banking, Finance, and Urban Affairs, Subcommittee on the City, Urban
Revitalization and Industrial Policy, p. 283.
20 Marilyn Marks Rubin, “ Can Reorchestration of Historical T hemes Reinvent Government? A Case Study of the
Empowerment Zones and Enterprise Communities Act of 1993, ” Public Adm inistration Review, vol. 54, no. 2
(March/April 1994), p. 163.
21 U.S. Congress, House Committee on Small Business, Subcommittee on T ax, Access to Equity Capital and Business
Opportunities, Job Creation and the Revitalization of Sm all Business, 97th Cong., 1st sess., September 15, 1981
(Washington: GPO, 1981), pp. 22, 23.
22 Herbert Grubel, “Review of Enterprise Zones: Greenlining the Inner Cities, by Stuart M. Butler,” Journal of
Econom ic Literature, vol. XX (December 1982), p. 1616.
Congressional Research Service

5

Small Business Administration HUBZone Program

These disagreements may have had a role in delaying the enactment of the first fully functional
federal enterprise zone program until 1993 (P.L. 103-66, the Omnibus Budget Reconciliation Act
of 1993).23 In the meantime, 37 states and the District of Columbia had initiated their own
enterprise zone programs.24 Evaluations of their effect on job creation and the economic status of
the targeted distressed areas “provided conflicting conclusions, with some finding little or no
program-related impacts, and others finding gains in the zones associated with the enterprise zone
incentives.”25 Evaluations of federal enterprise zones would later report similarly mixed
findings.26
The Debate over HUBZones
The federal enterprise zone program’s enactment in 1993 established a precedent for the
enactment of other programs, such as the HUBZone program, that target federal assistance, in this
case government contracts, to places with specified characteristics. For example, the Senate
Committee on Smal Business’s report accompanying the HUBZone program’s authorizing
legislation in 1997 presented many of the same arguments for adopting the HUBZone program
that had been put forth for adopting the federal enterprise zone program:
Creating new jobs in economically distressed areas has been the greatest challenge for
many of our nation’s governors, mayors, and community leaders. The trend is for business
to locate in areas where there are customers and a skilled workforce. Asking a business to
locate in a distressed area often seems counter to its potential to be successful. But without
businesses in these communities, we don’t create jobs, and without sources of new jobs,
we are unlikely to have a successful revitalization effort.
The HUBZone program attempts to utilize a valuable government resource, a government
contract, and make it available to small businesses who agree in return to locate in an
economically distressed area and employ people from these areas…. Contracts to smal

23 In 1987, T itle VII of P.L. 100-242, the Housing and Community Development Act, authorized the U.S. Department
of Housing and Urban Development (HUD) to coordinat e the community development block grant, urban development
action grant, and other HUD programs and to provide the waiver or modification of housing and community
development rules in up to 100 HUD-designated enterprise zone communities. No enterprise zone designations were
subsequently made. See Marilyn Marks Rubin, “ Can Reorchestration of Historical T hemes Reinvent Government? A
Case Study of the Empowerment Zones and Enterprise Communities Act of 1993, ” Public Adm inistration Review, vol.
54, no. 2 (March/April 1994), p. 162.
24 Marilyn Marks Rubin, “Can Reorchestration of Historical T hemes Reinvent Government? A Case Study of the
Empowerment Zones and Enterprise Communities Act of 1993 , p. 162; and Sarah F. Liebschutz, “ Empowerment
Zones and Enterprise Communities: Reinventing Federalism for Distressed Communities,” Publius: The Journal of
Federalism , vol. 25, no. 3 (Summer 1995), p. 127.
25 Marilyn Marks Rubin, “Can Reorchestration of Historical T hemes Reinvent Government? A Case Study of the
Empowerment Zones and Enterprise Communities Act of 1993, ” p. 164. Also see Sarah F. Liebschutz, “ Empowerment
Zones and Enterprise Communities: Reinventing Federalism for Distressed Communities,” p. 128; and Edward L.
Glaeser and Joshua D. Gottlieb, “ T he Economics of Place-Making Policies,” Brookings Papers on Econom ic Activity
(spring 2008), p. 157.
26 U.S. Government Accountability Office (GAO), Community Development: Federal Revitalization Programs Are
Being Im plem ented, but Data on the Use of Tax Benefits Are Lim ited , GAO-04-306, March 5, 2004, at
http://www.gao.gov/new.items/d04306.pdf; GAO, Em powerm ent Zone and Enterprise Com m unity Program :
Im provem ents Occurred in Com m unities, but the Effect of the Program Is Unclear, GAO-06-727, September 22, 2006,
at http://www.gao.gov/new.items/d06727.pdf; and GAO, Revitalization Program s: Em powerm ent Zones, Enterprise
Com m unities, and Renewal Com m unities, GAO-10-464R, March 12, 2010, at http://www.gao.gov/new.items/
d10464r.pdf.
Congressional Research Service

6

Small Business Administration HUBZone Program

businesses in HUBZones can translate into thousands of job opportunities for persons who
are unemployed or underemployed.27
HUBZone opponents expressed many of the same arguments that were raised in opposition to
federal enterprise zones. For example, some Members opposed contract set-asides because they
“unfairly discriminate against more efficient producers” and argued that “lower taxes, fewer
mandates and freer markets are what stimulate the growth of smal business.”28 Others contended
that the experiences under enterprise zones suggested that HUBZones would have, at best, a
limited impact on the targeted area’s economic prospects:
the record of enterprise zones demonstrates that businesses that locate in an area because
of tax breaks or other artificial inducements (such as HUBZone contract preferences),
instead of genuine competitive advantages, generally prove not to be sustainable…. Thus,
the incentives generally go to businesses that would have located in and hired from the
target area anyway…. Therefore, we should be realistic about the impact the HUBZone
legislation will have on business relocation decisions.29
HUBZone critics also argued that the program would compete with, and potential y diminish the
effectiveness of, the SBA’s Minority Smal Business and Capital Ownership Development 8(a)
program.30
The 8(a) program provides participating smal businesses with training, technical assistance, and
contracting opportunities in the form of set-asides and sole-source awards. Eligibility for the 8(a)
program is general y limited to smal businesses “unconditional y owned and controlled by one or
more social y and economical y disadvantaged individuals who are of good character and citizens
of the United States” that demonstrate “potential for success.”31 Smal businesses owned by
Indian tribes, Alaska native corporations, native Hawai an organizations, and community
development corporations are also eligible for the 8(a) program under somewhat different terms.
In FY2019, about 8,000 firms participated in the 8(a) program and over 3,800 of them were
awarded federal contracts, totaling more than $30.4 bil ion.
Others argued that the HUBZone self-certification process “while laudable in its effort to reduce
certification costs and delays, invites inadvertent or deliberate abuses.”32
As wil be discussed in greater detail, the SBA’s administration of the HUBZone program and the
program’s effectiveness in assisting economical y distressed areas has been criticized. For
example, GAO has argued that the program is subject to fraud and abuse and has recommended

27 U.S. Congress, Senate Committee on Small Business, Small Business Reauthorization Act of 1997, report to
accompany S. 1139, 105th Cong., 1st sess., August 19, 1997, S.Rept. 105-62 (Washington: GPO, 1997), p. 26.
28 U.S. Congress, Senate Committee on Small Business, S. 208, The HUBZone Act of 1997, 105th Cong., 1st sess.,
February 27, 1997, S.Hrg. 105-64 (Washington: GPO, 1997), p. 68.
29 U.S. Congress, Senate Committee on Small Business, S. 208, The HUBZone Act of 1997, S.Hrg. 105-64, p. 36.
30 U.S. Congress, Senate Committee on Small Business, S. 1574, The HUBZone Act of 1996: Revitalizing Inner Cities
and Rural Am erica, 104th Cong., 2nd sess., March 21, 1996, S.Hrg. 104-480 (Washington: GPO, 1996), p. 17; U.S.
Congress, Senate Committee on Small Business, S. 208, The HUBZone Act of 1997, 105th Cong., 1st sess., February 27,
1997, S.Hrg. 105-64 (Washington: GPO, 1997), p. 15; and U.S. Congress, Senate Committee on Small Business, S.
208, The HUBZone Act of 1997, 105th Cong., 1st sess., April 10, 1997, S.Hrg. 105-103 (Washington: GPO, 1997), pp.
20, 23, 26, 27, 33, 35, 77, 147, 149, 153 -157.
31 13 C.F.R. §124.101.
32 U.S. Congress, Senate Committee on Small Business, S. 208, The HUBZone Act of 1997, 105th Cong., 1st sess.,
February 27, 1997, S.Hrg. 105-64 (Washington: GPO, 1997), p. 36.
Congressional Research Service

7

Small Business Administration HUBZone Program

that the SBA “take additional actions to certify and monitor HUBZone firms as wel as to assess
the results of the HUBZone program.”33
Several Members of Congress have also questioned the program’s effectiveness. For example, in
2009, Representative Nydia M. Velázquez argued that
When first introduced, the HUBZone program promised to create opportunities for smal
businesses in low-income communities. It was designed to do this by helping entrepreneurs
access the Federal marketplace. In theory, the benefits will be twofold; HUBZones will not
only bolster the small business community, but will also breathe new life into struggling
neighborhoods. However, the program has been undermined by chronic underfunding,
inherent program flaws and sloppy management. Instead of being incubators for growth
and development, HUBZones have become breeding grounds for fraud and abuse.34
HUBZone Areas Defined
Six HUBZone types (or classes) currently exist:
 qualified census tracts (QCTs),
 qualified nonmetropolitan counties,
 qualified Indian reservations/Indian Country,
 military bases closed under the BRAC,
 governor’s designated covered areas, and
 qualified disaster areas.35
In addition, QCTs and qualified nonmetropolitan counties that lose their eligibility may
temporarily retain their eligibility by becoming redesignated areas.
Qualified Census Tracts
The term qualified census tract (QCT) has the meaning given that term in Section 42(d)(5)(B)(i )
of the Internal Revenue Code of 1986. That section of the Internal Revenue code refers to QCTs

33 GAO, HUBZone Program: Fraud and Abuse Identified in Four Metropolitan Areas, GAO-09-440, March 25, 2009,
p. 5, at http://www.gao.gov/new.items/d09440.pdf. Also see GAO, Sm all Business Adm inistration: Undercover Tests
Show HUBZone Program Rem ains Vulnerable to Fraud and Abuse, GAO-10-759, June 25, 2010, pp. 2, 4, 5, at
http://www.gao.gov/new.items/d10759.pdf; GAO, HUBZone Program : Fraud and Abuse Identified in Four
Metropolitan Areas (congressional testimony), GAO-09-519T, March 25, 2009, pp. 2-9, at http://www.gao.gov/
new.items/d09519t.pdf; and GAO, Sm all Business Adm inistration: Status of Efforts to Address Previous
Recom m endations on the HUBZone Program (congressional testimony), GAO-09-532T, March 25, 2009, pp. 1-3, at
http://www.gao.gov/new.items/d09532t.pdf.
34 U.S. Congress, House Committee on Small Business, Full Committee Hearing on Oversight of the Small Business
Adm inistration and Its Program s, 111th Cong., 1st sess., March 25, 2009, Small Business Committee Doc. 111 -012
(Washington: GPO, 2009), p. 1.
35 P.L. 105-135, the HUBZone Act of 1997 (T itle VI of the Small Business Reauthorization Act of 1997) designated
qualified census tracts, qualified counties (originally only in nonmetropolitan areas), and qualified Indian
reservation/Indian Country (originally lands within the external boundaries of an Indian reservation) as eligible. P.L.
108-447, the Consolidated Appropriations Act, 2005, provided HUBZone eligibility for five years to bases closed
under the Base Realignment and Closure Act (BRAC). P.L. 109-59, the Safe, Accountable, Flexible, Efficient
T ransportation Equity Act: A Legacy for Users, provided eligibility to difficult development areas outside of the
continental United States (DDAs). P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016 , provided
eligibility to qualified disaster areas. P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018 ,
included DDAs in the definition of qualified nonmetropolitan counties.
Congressional Research Service

8

Small Business Administration HUBZone Program

as determined by the Department of Housing and Urban Development (HUD) for its low-income
housing tax credit program and has three subparts:
(I) In general
The term “qualified census tract” means any census tract which is designated by the
Secretary of Housing and Urban Development and, for the most recent year for which
census data are available on household income in such tract, either in which 50 percent or
more of the households have an income which is less than 60 percent of the area median
gross income for such year or which has a poverty rate of at least 25 percent. If the Secretary
of Housing and Urban Development determines that sufficient data for any period are not
available to apply this clause on the basis of census tracts, such Secretary shall apply this
clause for such period on the basis of enumeration districts.
(II) Limit on MSA’s designated
The portion of a metropolitan statistical area which may be designated for purposes of this
subparagraph shall not exceed an area having 20 percent of the population of such
metropolitan statistical area.
(III) Determination of areas
For purposes of this clause, each metropolitan statistical area shall be treated as a separate
area and all nonmetropolitan areas in a State shall be treated as 1 area.36
In MSAs in which more than 20% of the population qualifies, HUD orders the census tracts in
that MSA from the highest percentage of eligible households to the lowest. HUD then designates
the census tracts with the highest percentage of eligible households as qualified until the 20%
population limit is exceeded. If a census tract is excluded because it raises the percentage above
20%, then subsequent census tracts are considered to determine if a census tract with a smal er
population could be included without exceeding the 20% limit.37
As mentioned earlier, P.L. 114-187, the Puerto Rico Oversight, Management and Economic
Stability Act (PROMESA) exempts Puerto Rico from the 20% population cap for 10 years, or
until the date on which the Financial Oversight and Management Board for Puerto Rico ceases to
exist, whichever comes first.38
The HUBZone map indicated that, as of June 1, 2018, 20.2% of al census tracts (14,980 of
74,002) had QCT status.39

36 26 U.S.C. §42(d)(5)(B)(ii)(I)-(III).
37 HUD, “Qualified Census T racts and Difficult Development Areas,” at http://www.huduser.org/portal/datasets/qct/
qct99home.html.
38 T he SBA administratively waived the 20% population cap on QCT s in MSAs in 2016. On October 23, 2017, the
SBA announced in the Federal Register that unless significant adverse comment is received by November 22, 2017, it
would apply PROMESA’s statutory language (which effectively re-instates the 20% population cap on QCT s located in
MSAs and exempts Puerto Rico from the cap for 10 years, or until the date on which the Financial Oversight and
Management Board for Puerto Rico ceases to exist, whichever comes first ) on December 22, 2017. T he SBA indicated
that the statutory language “is specific, limited, and requires no interpretation.” See SBA, “HUBZone and Puerto Rico
Oversight, Management, and Economic Stability Act (PROMESA) Amendments,” 82 Federal Register 48903, October
23, 2017.
39 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” June 4, 2018. T he number
of HUBZone-qualified census tracts was 13,635 of 73,790 in 2014, 13,795 of 73,793 in 2015, 16,368 of 74,130 in
2016, and 17,201 of 74,002 in 2017. The decline in QCT s from the 2017 to 2018 is primarily due to the reinstatement
of the 20% population cap for MSAs (other than in Puerto Rico).
Congressional Research Service

9

Small Business Administration HUBZone Program

The SBA’s most recent update of QCT eligibility was released in January 2018.40 As mentioned,
the SBA has announced that the next update of QCT status wil not take place until June 30, 2023.
Those designations wil then be updated every five years thereafter, as required by P.L. 115-91,
the National Defense Authorization Act for Fiscal Year 2018.41
Qualified Nonmetropolitan Counties
A qualified nonmetropolitan county is any county that is not located in a metropolitan statistical
area as defined in Section 143(k)(2)(B) of the Internal Revenue Code of 198642 and in which
 the median household income is less than 80% of the nonmetropolitan state
median household income, based on the most recent data available from the
Bureau of the Census of the Department of Commerce;
 the unemployment rate is not less than 140% of the average unemployment rate
for the United States or for the state in which such county is located, whichever is
less, based on the most recent data available from the Secretary of Labor;43 or
 the county has been designated by the Secretary of HUD as a difficult
development area (DDA).44

40 T he SBA updated census tract and nonmetropolitan county eligibility using the latest data received prior to
December 12, 2017 (P.L. 115-91’s enactment date).
41 SBA, “T he HUBZone Maps,” at https://www.sba.gov/content/hubzone-maps.
Prior to 2010, data required for QCT eligibility purposes were only available from the decennial census long form. As a
result, QCT s changed relatively infrequently, typically as new economic data from each decennial census became
available or when the Census Bureau undertook a new delineation of census tracts. However, for the 2010 decennial
census, the long form was replaced by the American Community Survey (ACS), an ongoing mailed survey of about
250,000 households per month that gathers largely the same income data as the long form. In 2012, HUD used that data
to determine the eligibility status of census tracts for the low-income housing tax credit program. T he SBA applied the
changes in QCT status to the HUBZone program later that same year. HUD initially announced that it would update
the eligibility status of census tracts based on the release of new ACS economic data every five years but later decided
to update the eligibility status of census tracts annually. T he increased frequency of QCT status reviews led to
increased anxiety among some small business owners and their advocates who worried that more frequent QCT
reviews could adversely affect some small businesses’ HUBZone eligibility. P.L. 115-91 addressed this issue by,
among other provisions, allowing small businesses with QCT status on or before December 31, 2019, to retain that
status from January 1, 2020, until the SBA prepares an updated online tool depicting HUBZone qualified areas
(anticipated by the SBA to take place on June 30, 2023) and by requiring the SBA to update QCT status every five
years once the new online tool is operational instead of annually. See U.S. Census Bureau, “ American Community
Survey: When to use one-year, three-year, or five-year estimates,” at https://www.census.gov/programs-surveys/acs/
guidance/estimates.html; SBA, “ Small Business HUBZone Program; Government Contracting Programs,” 76 Federal
Register 43572, July 21, 2011; HUD, “ Statutorily Mandated Designation of Difficult Development Areas and Qualified
Census T racts for 2012,” 76 Federal Register 66745, October 27, 2011; and HUD, “Statutorily Mandated Designation
of Qualified Census T racts for Section 42 of the Internal Revenue Code of 1986,” 77 Federal Register 23735-23740,
April 20, 2012.
42 Section 143(k)(2)(B) of the Internal Revenue Code of 1986 indicates that “ the term ‘metropolitan statistical area’
includes the area defined as such by the Secretary of Commerce.”
43 13 C.F.R. §126.103.
44 P.L. 109-59, the Safe, Accountable, Flexible, Efficient T ransportation Equity Act: A Legacy for Users (SAFET EA),
provided HUBZone eligibility to difficult development areas (DDAs) within Alaska, Hawaii, or any territory or
possession of the United States outside the 48 contiguous states. T hese areas are designated annually, typically in
September or October, by the Secretary of HUD in accordance with Section 42(d)(5)(B)(iii) of the Internal Revenue
Code, which applies to HUD’s low-income housing tax credit program. T his section of the Internal Revenue Code
defines DDAs as “areas designated by the Secretary of Housing and Urban Development as having high construction,
land, and utility costs relative to area median gross income.” In making this determination, HUD calculates a ratio for
each metropolitan area and nonmetropolitan county of th e fair market rent (based on the 40th-percentile gross rent paid
Congressional Research Service

10

Small Business Administration HUBZone Program

As of June 1, 2018, about 18.9% (613) of the nation’s 3,242 counties had qualified
nonmetropolitan county status (30.6% of the nation’s 2,006 nonmetropolitan counties).45 This
count includes 21 counties qualified as eligible solely due to their status as a DDA.
The SBA’s most recent update of nonmetropolitan county eligibility was released in January
2018. As mentioned, the SBA has announced that the next update of nonmetropolitan county
eligibility wil not take place until June 30, 2023. Those designations wil then be updated every
five years thereafter, as required by P.L. 115-91.46
As wil be discussed, Congress created redesignated areas to delay the loss of HUBZone status
for census tracts and nonmetropolitan counties that lose HUBZone eligibility.
Qualified Indian Lands
P.L. 105-135, the HUBZone Act of 1997, provided HUBZone eligibility to “lands within the
external boundaries of an Indian reservation.” Since then, the term Indian reservation has been
clarified and expanded to include
 Indian trust lands and other lands covered under the term Indian Country as used
by the Bureau of Indian Affairs,
 portions of the state of Oklahoma designated as former Indian reservations by the
Internal Revenue Service (Oklahoma tribal statistical areas), and
 Alaska native vil age statistical areas.47
As of June 1, 2018, there were 619 HUBZone-qualified Indian lands.48 A private firm’s analysis
of Indian reservations’ economic characteristics conducted on behalf of the SBA indicated that
for the most part—and particularly in states where reservations are numerous and
extensive—mean income of reservations is far below state levels, and unemployment rates
and poverty rates are far above state levels. There are some interesting exceptions,
however, where reservations are basically on a par with the states they are in. Examples

by recent movers to live in a two-bedroom apartment) to the monthly low-income housing tax credit -based rent limit,
which was calculated as three-twelfths of 30% of 120% of the area’s very lo w-income households (which is based on
50% of area’s median gross income). T hese areas may not exceed 20% of the population of a metropolitan statistical
area or of a nonmetropolitan area. As of June 1, 2018, there were 39 HUBZone DDA counties: 21 were HUBZone
eligible solely due to their DDA status, 14 were HUBZone eligible based on both their unemployment and DDA status,
and 4 were HUBZone eligible based on their income, unemployment, and DDA status. See HUD, “ Statutorily
Mandated Designation of Difficult Development Areas and Qualified Census T racts for 2010,” 74 Federal Register
51305, October 6, 2009; and SBA, Office of Congressional and Legislative Affairs, “ Correspondence with the author,”
June 4, 2018.
45 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” June 4, 2018. T his count
does not include redesignated nonmetropolitan counties, which are discussed later.
46 Prior to P.L. 115-91, nonmetropolitan county status was updated as many as three times a year, with determinations
based on income typically taking place in January, determinations based on unemployment typically taking place in
May, and determinations based on DDA status typ ically taking place in November.
47 Henry Beale and Nicola Deas, “T he HUBZone Program Report,” Washington, DC: Microeconomic Applications,
Inc., prepared for the SBA, Office of Advocacy, May 2008, p. 16 0, at https://www.sba.gov/content/hubzone-program-
report .
48 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” June 4, 2018. T here were
659 qualified Indian reservations, Oklahoma tribal statistical areas, and Alaska Native village statistical areas on May
1, 2010, 668 on May 1, 2013, and 593 on October 3, 2016.
Congressional Research Service

11

Small Business Administration HUBZone Program

include Osage reservation in Oklahoma and reservations in Connecticut, Rhode Island, and
Michigan. The factors at work here may be casinos and oil.49
In accordance with P.L. 115-91, al HUBZone-qualified Indian lands designated on or before
December 31, 2019, retain that status until the SBA prepares an updated online tool depicting
HUBZone qualified areas (anticipated by the SBA to take place on June 30, 2023). The act did
not address when the SBA is required to update its new online tool to reflect changes in the status
of HUBZone-qualified Indian lands. The SBA has announced that the online tool wil be updated
immediately to reflect any change in that status.50
Military Bases Closed Under BRAC
P.L. 108-447, the Consolidated Appropriations Act, 2005, provided HUBZone eligibility for five
years to “lands within the external boundaries of a military instal ation closed through a
privatization process” under the authority of P.L. 101-510, the Defense Base Closure and
Realignment Act of 1990 (BRAC—Title XXIX of the National Defense Authorization Act for
Fiscal Year 1991); title II of P.L. 100-526, the Defense Authorization Amendments and Base
Closure and Realignment Act; and any other provision of law authorizing military base closures
or redevelopment.51 The military base’s HUBZone eligibility commences on the effective date of
the initial law (December 8, 2004) if the military base was already closed at that time or on the
date of formal closure if the military base was stil operational at that time.
During the 113th and 114th Congresses, several bil s were introduced to make it easier for
businesses located in a BRAC military base closure area to meet the HUBZone requirement of
having at least 35% of their employees reside within a HUBZone.52 As mentioned earlier, P.L.

49 Henry Beale and Nicola Deas, “T he HUBZone Program Report,” Washington, DC: Microeconomic Applications,
Inc., prepared for the SBA, Office of Advocacy, May 2008, p. 163, at https://www.sba.gov/content/hubzone-program-
report .
50 SBA, “HUBZone Program Improvements: FAQs,” February 7, 2020, at https://www.sba.gov/brand/assets/sba/
resource-partners/hz-program-improvements-faq.pdf.
51 “Base closure area means lands within the external boundaries of a military installation that were closed through a
privatization process under the authority of: (1) T he Defense Base Closure and Realignment Act of 1990 (part A of title
XXIX of division B of P.L. 101-510; 10 U.S.C. 2687 note); (2) T itle II of the Defense Authorization Amendments and
Base Closure and Realignment Act (P.L. 100-526; 10 U.S.C. 2687 note); (3) 10 U.S.C. 2687; or (4) Any other
provision of law authorizing or directing the Secretary of Defense or the Secretary of a military department to dispose
of real property at the military installation for purposes relating to base closures of redevelopment, while retaining the
authority to enter into a leaseback of all or a portion of the property for military use. ” See 13 C.F.R. §126.103.
52 During the 113th Congress, H.R. 489, the HUBZone Expansion Act of 2013, and its companion bill in the Senate (S.
206) would have expanded the area eligible for HUBZone status as a result of a BRAC military base closure to include
a military inst allation’s municipality, county, census tract, or contiguous census tract having a total population of no
more than 50,000 as determined by the most recent decennial census. S. 2410, the Carl Levin National Defense
Authorization Act for Fiscal Year 2015, included a provision that would have allowed businesses to count employees
residing in the base closure area and (1) the census tract in which the base closure HUBZone is wholly contai ned, (2)
any census tract that intersects the boundaries of the base closure HUBZone, and (3) any census tract contiguous with
those census tracts to meet the 35% employee residence threshold. T he bill also would have extended HUBZone
eligibility for BRAC base closure areas from five years to eight years. During the 114th Congress, the HUBZone
provisions included in S. 2410 were reintroduced as S. 1266, the HUBZone Expansion Act of 2015 . S. 1292, the
HUBZone Revitalization Act of 2015 (later included in the Senate-passed version of H.R. 1735), included the
provisions in S. 1266 and would have provided qualified disaster areas HUBZone eligibility for five years if the
President has declared the qualified area a major disaster and 10 years if a catastrophic incident had occurred in the
qualified area. On May 15, 2015, the House passed H.R. 1735, the National Defense Authorization Act for Fiscal Year
2016. It included a provision to expand the area that can be used by businesses located in a BRAC base closure area to
meet the HUBZone program’s 35% employee residence threshold to include lands within 25 miles of the external
boundaries of the closed military installation, excluding any lands that are not within a qualified nonmetropolitan
Congressional Research Service

12

Small Business Administration HUBZone Program

114-92 contains such a provision. The act expands BRAC HUBZone eligibility to census tracts
and nonmetropolitan counties that (1) contain a BRAC base closure area, (2) intersect with a
BRAC base closure area, (3) are contiguous with a BRAC base closure area, or (4) are contiguous
to any census tract or nonmetropolitan county described in (1) through (3). The act also extended
HUBZone eligibility for BRAC base closure areas from five years to at least eight years.53
As of June 1, 2018, there were 125 HUBZone-qualified base closure areas.54 In accordance with
P.L. 115-91, al HUBZone-qualified base closure areas designated on or before December 31,
2019, retain that status until the SBA prepares an updated online tool depicting HUBZone
qualified areas (anticipated by the SBA to take place on June 30, 2023). The act also requires the
SBA to update its new online tool immediately after an area is designated as a HUBZone-
qualified base closure area to reflect its change in status.
Governor-Designated Covered Areas
P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018, authorizes governors,
as of January 1, 2020, to petition the SBA annual y to grant HUBZone eligibility to designated
covered areas in their state (or territory) that are located outside of an urbanized area, have a
population of 50,000 or fewer, and have an unemployment rate at least 120% of the
unemployment rate for the nation or state in which it is located, whichever is less.55
On May 18, 2021, the SBA announced that Il inois was the first state to receive approval of a
Governor-Designated Covered Area request, extending HUBZone eligibility to five additional
counties and 30 additional census tracts.56

county. It would have also extended HUBZone eligibility for BRAC base closure areas from five years to at least eight
years.
53 If the BRAC base closure area was treated as a HUBZone at any time after 2010, the area retains HUBZone
eligibility until the SBA Administrator makes a final determination concerning the census tract or nonmetropoli tan
area’s eligibility for the HUBZone program after the 2020 decennial census.
54 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” June 4, 2018. T here were
123 HUBZone-qualified base closure areas as of May 1, 2013, 107 as of May 1, 2014, 100 as of May 7, 2015, and 100
as of May 1, 2016.
55 P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018, authorizes governors, starting on January
1, 2020, to submit no more than one petition each calendar year to the SBA to provide HUBZone eligibility to
designated covered areas that (1) are located outside of an urbanized area, as determined by the Bureau of the Census;
(2) have a population of 50,000 or fewer; and (3) have an average unemployment rate of at least 120% of the average
unemployment rate for the nation or the state (or territory) in which the covered area is located, whichever is less, based
on the most recent dat a available from the American Community Survey conducted by the Bureau of the Census. T he
total number of covered areas included in the petition may not exceed 10% of the total number of covered areas in the
state. If the petition is approved, the governor must submit data to the SBA, at least once a year, certifying that each
designated covered area continues to meet these requirements. In reviewing the petition, the SBA may consider the
potential for job creation and investment in the covered area, the demonstrated interest by small businesses in the
covered area to be included in the HUBZone program, how state and local government officials have incorporated the
covered area into an economic development strategy, and, if the covered area was previously a HUBZone, the impact
on the covered area if the SBA did not approve the petition . Also, see SBA, “ HUBZone Program Provisions for
Governor-Designated Covered Areas,” 84 Federal Register 62447-62449, November 15, 2019.
56 SBA, “SBA Announces New HUBZones to Expand Federal Contracting Opportunities for Small Businesses,” May
18, 2021, at https://www.sba.gov/article/2021/may/18/sba-announces-new-hubzones-expand-federal-contracting-
opportunities-small-businesses.
Congressional Research Service

13

Small Business Administration HUBZone Program

Qualified Disaster Areas
P.L. 114-92 provided HUBZone eligibility for qualified disaster areas, defined as “any census
tract or nonmetropolitan county for which the President has declared a major disaster under
section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C.
5170) or located in an area in which a catastrophic incident has occurred (on or after the date of
enactment) if such census tract or nonmetropolitan county ceased to be qualified [as a HUBZone]
... during the period beginning five years before the date on which the President declared the
major disaster or the catastrophic incident occurred and ending two years after such date.”57
However, the following exceptions apply: (1) in the case of a major presidential y-declared
disaster, such census tract or nonmetropolitan county may be designated a qualified disaster area
only during the five-year period beginning on the date on which the President declared the major
disaster for the area in which the census tract or nonmetropolitan county is located; and (2) in the
case of a catastrophic incident, such census tract or nonmetropolitan county may be designated a
qualified disaster area only during the 10-year period beginning on the date on which the
catastrophic incident occurred in the area in which the census tract or nonmetropolitan area is
located.58
As of June 1, 2018, there were eight designated qualified disaster areas. In accordance with P.L.
115-91, al qualified disaster areas designated on or before December 31, 2019, retain that status
until the SBA prepares an updated online tool depicting HUBZone qualified areas (anticipated by
the SBA to take place on June 30, 2023). The act also requires the SBA to update its new online
tool immediately after an area is designated as a qualified disaster area to reflect its change in
status.
Redesignated Areas
One of the implicit goals of the HUBZone program is to improve the economic standing of the
geographic areas receiving assistance so they are no longer economical y distressed areas. As a
result, it could be argued that it is a program success when a QCT or a qualified nonmetropolitan
county loses its HUBZone status when new economic data are published. However, because
smal businesses “that locate to a HUBZone may lose their eligibility in only one year due to
changes in such data” and concerned that some HUBZone areas could “shift in and out of
eligibility year after year,” Congress included a provision in P.L. 106-554, the HUBZones in
Native America Act of 2000 (Title VI, the Consolidated Appropriations Act, 2001), to address this
issue.59 The provision provided census tracts and nonmetropolitan counties that lose HUBZone
eligibility an automatic extension “for the 3-year period following the date on which the census
tract or nonmetropolitan county ceased to be so qualified.”60 The act labeled these census tracts
and nonmetropolitan counties as redesignated areas.

57 P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, Section 866. Modifications to
Requirements for Qualified HUBZone Small Business Concerns Located in a Base Closure Area.
58 SBA, “HUBZone and National Defense Authorization Act for Fiscal Year 2016 Amendments,” 81 Federal Register
51314, August 4, 2016.
59 SBA, “Small Business Size Regulations; Government Contracting Programs; HUBZone Program ,” 67 Federal
Register 3828, January 28, 2002.
60 P.L. 106-554, the HUBZones in Native America Act of 2000 (T itle VI, the Consolidated Appropriations Act, 2001 ).
Congressional Research Service

14

link to page 18 Small Business Administration HUBZone Program

As of June 1, 2018, there were 221 redesignated nonmetropolitan counties and 5,174 redesignated
census tracts.61 In accordance with P.L. 115-91, al redesignated areas on or before December 31,
2019, retain that status until the SBA prepares an updated online tool depicting HUBZone
qualified areas (anticipated by the SBA to take place on June 30, 2023). The act also requires the
SBA to update its new online tool immediately after an area becomes, or ceases to be, a
redesignated area to reflect its change in status.
Overal , as of June 1, 2018, 834 of the nation’s 3,242 counties (about 25.7%) had HUBZone
status, either as a qualified nonmetropolitan county, a DDA, or a redesignated nonmetropolitan
county and 20,154 of the nation’s 74,002 census tracts (about 27.2%) had HUBZone status, either
as a QCT or as a redesignated QCT.62
HUBZone Businesses Defined
Only firms certified by the SBA may participate in the HUBZone program. Table 1 indicates the
number of HUBZone-certified smal businesses listed in the SBA’s Dynamic Smal Business
Search database for selected dates from 2010 to 2021. The SBA’s database contains information
provided by smal businesses interested in obtaining federal contracts when they registered in the
federal System for Award Management (SAM).
The data indicate that the number of HUBZone firms increased from May 2010 to May 2011 and
then general y declined until mid-2015, with much of the reduction due to the previously
mentioned expiration of grandfathered redesignated areas on October 1, 2011. Since then, the
number of HUBZone firms has general y increased, as might be expected given the recent
introduction of governor’s designated covered areas and qualified disaster areas.
As of May 24, 2021, the SBA’s Dynamic Smal Business Search database included 7,740 firms
with active HUBZone certifications.63
Table 1. Number of HUBZone-Certified Small Businesses Listed in the SBA’s
Dynamic Small Business Search Database, Selected Dates, 2010-2021
Date
Number
May 4, 2010
7,567
May 5, 2011
8,533
December 21, 2011
6,900
July 5, 2012
6,602
December 27, 2012
5,637

61 T here were 326 HUBZone redesignated nonmetropolitan counties as of May 1, 2013, 250 as of May 1, 2014, 196 as
of May 1, 2015, 200 as of May 1, 2016, and 218 as of July 1, 2017 . T here were 1,251 redesignated QCT s as of May 1,
2013, 1,251 as of May 1, 2014, 2,290 as of May 1, 2015, 1,845 as of May 1, 2016, and 2,257 as of January 1, 2017.
62 During the 114th Congress H.R. 5250, the Growing and Reviving Rural Economies T hrough T ransitioning HUBZone
Redesignation Act of 2016, and S. 2838, the Small Business T ransforming America’s Regions Act of 2016, would
have extended the eligibility of redesignated HUBZones to seven years from three years. During the 115th Congress,
H.R. 2013, the Growing and Reviving Rural Economies T hrough T ransitioning HUBZone Redesignation Act of 2017,
and S. 690, the HUBZone Investment Protection Act, would have extended the eligibility of redesignated HUBZones to
seven years from three years; H.R. 2592, the Expanding the Impact of the HUBZone Program Act of 2017, would have
extended HUBZone eligibility to not more than 10 years; and H.R. 3294, the HUBZone Unification and Business
Stability Act of 2017, would have provided HUBZone eligibility for at least five years beginning on January 1, 2020 .
63 SBA, “Dynamic Small Business Search Database,” May 24, 2021, at http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm.
Congressional Research Service

15

Small Business Administration HUBZone Program

Date
Number
July 11, 2013
5,788
December 17, 2013
5,799
July 24, 2014
5,808
December 22, 2014
5,510
July 13, 2015
5,207
December 3, 2015
5,397
July 6, 2016
5,476
January 21, 2017
5,930
July 10, 2017
5,741
December 15, 2017
5,961
July 10, 2018
6,335
November 8, 2018
6,558
July 10, 2019
6,854
November 27, 2019
7,183
July 7, 2020
7,461
December 24, 2020
7,702
May 24, 2021
7,740
Sources: U.S. Smal Business Administration (SBA), Office of Congressional and Legislative Affairs,
“Correspondence with the author,” May 4, 2010, and May 5, 2011; and SBA, “Dynamic Smal Business Search
Database,” at http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm; accessed on the date provided.
To become certified, firms complete and submit specified SBA HUBZone application forms to
the SBA, either online or by mail. Firms must
 meet SBA size standards for the firm’s primary industry classification;
 be at least 51% owned and controlled by U.S. citizens, a community
development corporation, an agricultural cooperative, or an Indian tribe
(including Alaska Native Corporations and Native Hawai an Organizations);
 maintain a principal office located in a HUBZone;64
 ensure that at least 35% of its employees reside in a HUBZone;65

64 Effective December 26, 2019, if a small business owns a building in a HUBZone at the time of its certification an d
that location meets the definition of principal office, the small business will be deemed to meet the principal office
requirement for 10 years, starting from the date of recertification, as long as the firm continues to own the building and
that location remains the small business’s principal office, even if the area loses its HUBZone designation. See SBA,
“Small Business HUBZone Program and Government Contracting Programs,” 84 Federal Register 65228, 65242,
November 26, 2019.
65 Effective May 3, 2010, “employee means all individuals employed on a full-time, part-time, or other basis, so long as
that individual works a minimum of 40 hours per month. T his includes employees obtained from a temporary employee
agency, leasing concern, or through a union agreement or co-employed pursuant to a professional employer
organization agreement.” See SBA, “HUBZone and Government Contracting,” 74 Federal Register 56702, November
3, 2009. Prior to May 3, 2010, the definition of employee was based on full-time equivalency and only permanent
positions were counted.
Effective December 26, 2019, to count as residing in a HUBZone, employees must live in a location full-time and for at
Congressional Research Service

16

Small Business Administration HUBZone Program

 represent, as provided in the application, that it wil “attempt to maintain” having
at least 35% of its employees reside in a HUBZone during the performance of
any HUBZone contract it receives;66
 represent, as provided in the application, that it wil ensure that it wil comply
with certain contract performance requirements in connection with contracts
awarded to it as a qualified HUBZone smal business concern (such as spending
at least 50% of the cost of the contract incurred for personnel on its own
employees or employees of other qualified HUBZone smal business concerns
and meeting specified subcontracting limitations to nonqualified HUBZone smal
business concerns);
 provide an active, up-to-date Dun and Bradstreet profile and Data Universal
Numbering System (DUNS) number that represents the business; and
 provide an active Central Contractor Registration profile for the business.67
The SBA processes about 1,500 HUBZone applications each year.68 Prior to 2010, the SBA’s goal
was to make its determination within 30 calendar days after receipt of a complete application
package, subject to the need for additional information or clarification of information contained in
the application.69
In response to reports of applicant fraud, in FY2009 the SBA began a two-year effort to
reengineer its applicant review process (requiring applicants to submit documentation such as
lease or rental agreements, three years of tax returns, citizenship documentation, and payroll

least 180 days immediately prior to the date of application or date of recertification, as applicable. When determining
the percentage of employees that reside in a HUBZone, if the percentage results in a fraction, SBA rounds to the
nearest whole number (up or down). See SBA, “ Small Business HUBZone Program and Government Contracting
Programs,” 84 Federal Register 65228, November 26, 2019. Prior to December 26, 2019, to count as residing in a
HUBZone, employees must live in a primary residence at a place for at least 180 days, or as a currently registered
voter, and with intent to live there indefinitely. Also, when determining the percentage of employees that reside in a
HUBZone, if the percentage results in a fraction, the SBA would round up to the nearest whole number (never down).
Effective December 26, 2019, “An employee who resides in a HUBZone at the time of certification (or time of
recertification where the individual is being treated as a HUBZone resident for the first time) shall continue to count as
a HUBZone resident employee if the individual continues to live in the HUBZone for at le ast 180 days immediately
after certification (or recertification) and remains an employee of the concern, even if the employee subsequently
moves to a location that is not in a HUBZone or the area in which the employee’s residence is located no longer
qualifies as a HUBZone.” See SBA, “ Small Business HUBZone Program and Government Contracting Programs,” 84
Federal Register 65242, November 26, 2019. Prior to December 26, 2019, employees who had moved out of a
HUBZone were not counted toward meeting residency requirements.
66 T he attempt to maintain provision is designed to assist HUBZone-certified firms maintain eligibility if they need to
hire additional employees to perform a federal contract . Effective December 26, 2019, “attempt to maintain means
making substantive and documented efforts, such as written offers of employment, published advertisements seeking
employees, and attendance at job fairs and applies only to concerns during the performance of any HUBZone contract.
A certified HUBZone small business concern that has less than 20% of its total employees residing in a HUBZone
during the performance of a HUBZone contract has failed to attempt to maintain the HUBZone residency requirement.”
Firms have an affirmative duty to notify the SBA if they fall below the 20% attempt to maintain standard. See SBA,
“Small Business HUBZone Program and Government Contracting Programs,” 84 Federal Register 65240, November
26, 2019; and 13 C.F.R. §126.103. Prior to December 26, 2019, the SBA did not specify a minimum percentage of
employees needed to maintain eligibility under the attempt to maintain provision.
67 13 C.F.R. §126.200.
68 SBA, FY2020 Congressional Budget Justification and FY2018 Annual Performance Report, p. 65, at
https://www.sba.gov/sites/default/files/2019-04/
SBA%20FY%202020%20Congressional%20Justification_final%20508%20%204%2023%202019.pdf .
69 SBA, “HUBZone Empowerment Contracting Program,” 63 Federal Register 31911, June 11, 1998.
Congressional Research Service

17

Small Business Administration HUBZone Program

records to prove they meet program requirements). Initial y, depending on the complexity of the
application and the need for additional information, the SBA took from 5 months to 12 months to
make its determination. The SBA has since decreased the average time to process HUBZone
applications, with about 61% of applications processed in three months or less.70
In 2016, the SBA revised its regulations to indicate that the SBA’s goal was to make HUBZone
determinations within 90 calendar days after receipt of a complete application package, subject to
the need for additional information or clarification of information contained in the application.71
P.L. 115-91 requires the SBA, effective January 1, 2020, to process HUBZone certification
applications with sufficient and complete documentation within 60 days of receipt.
If the SBA approves an application, it sends a written notice to the business and adds the business
to its list of certified HUBZone businesses. A decision to deny eligibility must be in writing and
state the specific reasons for denial.72
In the past, the SBA’s staff conducted random program examinations “to verify the accuracy of
any certification made or information provided as part of the HUBZone application process, or in
connection with a HUBZone contract.”73 Examiners typical y verified that the business met the
program’s eligibility requirements and that it met such requirements at the time of its application
for certification, its most recent recertification, or its certification in connection with a HUBZone
contract.74 In response to reports of fraud, the SBA, in addition to reengineering its applicant
review process, now conducts program examinations of al firms that received a HUBZone
contract in the previous fiscal year.75 SBA district field offices also conduct site visits to validate
the geographic requirement for principal offices. In FY2019, SBA district field offices completed
507 on-site compliance reviews of HUBZone-certified firms, about 9% of the HUBZone-certified
firms in the SBA’s portfolio.76
Effective December 26, 2019, certified HUBZone smal businesses must annual y represent to the
SBA that they continue to meet al HUBZone eligibility criteria (without requiring supporting
information or documentation unless the SBA has reason to question the firm’s recertification)
and recertify with full documentation every three years that they meet the requirements for being
a HUBZone business.77 They must also immediately notify the SBA of any material change that

70 SBA, FY2013 Congressional Budget Justification and FY2011 Annual Performance Report, p. 72, at
https://www.sba.gov/sites/default/files/files/1-
508%20Compliant%20FY%202013%20CBJ%20FY%202011%20APR%281%29.pdf ; and Michael A. Chodos, SBA,
“T estimony before the U.S. House of Representatives Committee on Oversight and Government Reform,” June 26,
2013, at http://docs.house.gov/meetings/GO/GO00/20130626/101044/HHRG-113-GO00-Wstate-ChodosM-
20130626.pdf.
71 SBA, “Small Business Mentor Protégé Programs: Part 126, HUBZone Program,” 81 Federal Register 48591, July
25, 2016.
72 13 C.F.R. §126.306.
73 13 C.F.R. §126.401.
74 13 C.F.R. §126.401.
75 SBA, FY2011 Congressional Budget Justification and FY2009 Annual Performance Report, pp. 72, 73, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/Congressional_Budget_Justification.pdf.
76 SBA, FY2021 Congressional Budget Justification and FY2019 Annual Performance Report, p. 77, at
https://www.sba.gov/document/report —congressional-budget-justification-annual-performance-report.
77 Prior to December 26, 2019, certified HUBZone small businesses had to recertify with full documentation every
three years and to certify to federal contracting officers offering a contract that it was HUBZone eligible at both the
time of the firm’s initial offer and at the time of award. As of December 26, 2019, HUBZone small businesses
represent to the contracting officer that it is a certified HUBZone small business at the time of each offer, but its
eligibility would relate back to the date of its certification or recertification, not to the date of the offer. See SBA,
Congressional Research Service

18

Small Business Administration HUBZone Program

could affect their eligibility, such as a change in the ownership, business structure, or principal
office of the concern or a failure to meet the 35% HUBZone residency requirement.78
HUBZone Federal Contracting Goals
Since 1978, federal agency heads have been required to establish federal procurement contracting
goals, in consultation with the SBA, “that realistical y reflect the potential of smal business
concerns and smal businesses concerns owned and controlled by social y and economical y
disadvantaged individuals” to participate in federal procurement.79 Each agency is required, at the
conclusion of each fiscal year, to report its progress in meeting the goals to the SBA.
In 1988, Congress authorized the President to annual y establish government-wide minimum
participation goals for procurement contracts awarded to smal businesses and smal businesses
owned and controlled by social y and economical y disadvantaged individuals. Congress required
the government-wide minimum participation goal for smal businesses to be “not less than 20%
of the total value of al prime contract awards for each fiscal year” and “not less than 5% of the
total value of al prime contract and subcontract awards for each fiscal year” for smal businesses
owned and controlled by social y and economical y disadvantaged individuals.80
Each federal agency was also directed to “have an annual goal that presents, for that agency, the
maximum practicable opportunity for smal business concerns and smal business concerns
owned and controlled by social y and economical y disadvantaged individuals to participate in the
performance of contracts let by such agency.”81 The SBA was also required to report to the
President annual y on the attainment of the goals and to include the information in an annual
report to Congress.82 The SBA negotiates the goals with each federal agency and establishes a
small business eligible baseline for evaluating the agency’s performance.83 The agency head is
required to “make consistent efforts to annual y expand participation by smal business concerns
from each industry category.”84 If the SBA and the agency cannot agree on the goals, the agency
may submit the case to the Office of Management and Budget (OMB) Office of Federal
Procurement Policy (OFPP) for resolution.85

“Small Business HUBZone Program and Government Contracting Programs,” 84 Federal Register 65222, November
26, 2019; 13 C.F.R. §126.500; and 13 C.F.R. §126.601(d).
78 13 C.F.R. §126.501.
79 See 15 U.S.C. §644(g)(2) and P.L. 95-507, a bill to amend the Small Business Act and the Small Business
Investment Act of 1958.
80 See 15 U.S.C. §644(g)(1) and P.L. 100-656, the Business Opportunity Development Reform Act of 1988.
81 15 U.S.C. §644(g)(1) and P.L. 100-656, the Business Opportunity Development Reform Act of 1988 .
82 15 U.S.C. §644(g)(1) and P.L. 100-656, the Business Opportunity Development Reform Act of 1988 .
83 According to a 2001 GAO report, the SBA began to specify what types of contracts the Federal Procurement Data
System would exclude when determining agency compliance with federal contracting goals in FY1998. Prior to
FY1998, agencies reported their small business contracting information directly to th e SBA and excluded from their
calculations certain types of contracts, such as those for which the agency felt that small businesses had a limited or no
chance to compete. GAO reported that “SBA officials said that in some cases they were not aware of all exclusions the
agencies made when reporting their numbers.” See GAO, Sm all Business: More Transparency Needed in Prim e
Contract Goal Program , GAO-01-551, August 1, 2001, pp. 9-10, at http://www.gao.gov/assets/240/231854.pdf.
84 15 U.S.C. §644(g)(2).
85 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” August 30, 2017, p. 4, at https://www.sba.gov/sites/default/files/2018-06/
FY18_Small_Business_Goaling_Guidelines.pdf.
Congressional Research Service

19

Small Business Administration HUBZone Program

The smal business eligible baseline excludes certain contracts that the SBA has determined do
not realistical y reflect the potential for smal business participation in federal procurement (such
as those awarded to mandatory and directed sources), contracts funded predominately from
agency-generated sources (i.e., nonappropriated funds), contracts not covered by Federal
Acquisition Regulations, acquisitions on behalf of foreign governments, and contracts not
reported in the General Services Administration’s (GSA’s) Federal Procurement Data System—
Next Generation, or FPDS-NG (such as contracts or government procurement card purchases
valued less than $10,000).86 These exclusions typical y account for 18% to 20% of al federal
prime contracts each year.
The SBA then evaluates the agencies’ performance against their negotiated goals and presents the
results in the SBA’s annual Smal Business Procurement Scorecards. The SBA uses FPDS-NG
data, which are published in GSA’s annual Smal Business Goaling Report. Each agency that
fails to achieve any proposed prime or subcontract goal is required to submit a justification to the
SBA on why it failed to achieve a proposed or negotiated goal with a proposed plan of corrective
action.87
Agencies can take credit in every category that is applicable to the recipient of the contract. For
example, “when counting goaling achievements, a contract awarded to a Service-Disabled
Veteran-Owned Woman-Owned Smal Business would be counted toward the Smal Business
(SB) goal, the Service-Disabled Veteran-Owned Smal Business (SDVOSB) goal and the Women-
Owned Smal Business (WOSB) goal. However, these category counts are not summed to triple
the total count. The Sum of Parts Does Not Equal the Whole (italics in original).”88
Over the years, federal government-wide procurement contracting goals have been established for
smal businesses general y (P.L. 100-656, the Business Opportunity Development Reform Act of
1988, and P.L. 105-135, the HUBZone Act of 1997—Title VI of the Smal Business
Reauthorization Act of 1997), smal businesses owned and controlled by social y and
economical y disadvantaged individuals (P.L. 100-656), women (P.L. 103-355, the Federal
Acquisition Streamlining Act of 1994), smal businesses located within a HUBZone (P.L. 105-
135), and smal businesses owned and controlled by a service-disabled veteran (P.L. 106-50, the
Veterans Entrepreneurship and Smal Business Development Act of 1999).
The current federal smal business contracting goals are
 at least 23% of the total value of al smal business eligible prime contract awards
to smal businesses for each fiscal year,
 5% of the total value of al smal business eligible prime contract awards and
subcontract awards to smal disadvantaged businesses for each fiscal year,

86 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” p. 3; and U.S. General Services Administration (GSA), Federal Procurement Data System—Next
Generation, “ What’s In FPDS-NG,” at https://www.fpds.gov/wiki/index.php/FPDS-NG_FAQ.
87 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” August 30, 2017, p. 6, at https://www.sba.gov/sites/default/files/2018-06/
FY18_Small_Business_Goaling_Guidelines.pdf.
88 SBA, Office of Policy, Planning & Liaison, Office of Government Contracting & Business Development, “FY 2018
Goaling Guidelines,” p. 5. “… T he exception to this non-additive rule is for total Small Disadvantaged Business (SDB)
which is the sum of 8(a) and non-8(a) SDBs. Each special type of small business is first of all a small business. T hat
also means Federal procurements awarded to SDVOSB will also have been awarded to Veteran -Owned Small Business
(VOSB).”
Congressional Research Service

20

link to page 24 link to page 24 Small Business Administration HUBZone Program

 5% of the total value of al smal business eligible prime contract awards and
subcontract awards to women-owned smal businesses,
 3% of the total value of al smal business eligible prime contract awards and
subcontract awards to HUBZone smal businesses, and
 3% of the total value of al smal business eligible prime contract awards and
subcontract awards to service-disabled veteran-owned smal businesses.89
There are no punitive consequences for not meeting these goals. However, the SBA’s Smal
Business Procurement Scorecards and GSA’s Smal Business Goaling Report are distributed
widely, receive media attention, and heighten public awareness of the issue of smal business
contracting. For example, agency performance as reported in the SBA’s Smal Business
Procurement Scorecards is often cited by Members during their questioning of federal agency
witnesses during congressional hearings.
As shown in Table 2, the FY2019 Small Business Goaling Report indicates that federal agencies
met the federal contracting goal for smal businesses general y, smal disadvantaged businesses,
women-owned smal businesses, and service-disabled veteran-owned smal businesses in
FY2019. Table 2 also provides, for comparative purposes, the percentage of total reported federal
contracts (without exclusions) awarded to those smal businesses in FY2019.
Table 2. Federal Contracting Goals and Percentage of FY2019 Federal Contract
Dollars Awarded to Small Businesses, by Type
Percentage of FY2019 Federal
Contracts
Small Business
All Reported
Business Type
Federal Goal
Eligible
Contracts
Smal Businesses
23.0%
25.82%
22.21%
Smal Disadvantaged Businesses
5.0%
10.13%
8.69%
Women-Owned Smal Businesses
5.0%
5.04%
4.32%
HUBZone Smal Businesses
3.0%
2.23%
1.95%
Service-Disabled Veteran-Owned Smal Businesses
3.0%
4.34%
4.00%
Sources: U.S. Smal Business Administration, “Statutory Guidelines,” at https://www.sba.gov/content/statutory-
guidelines-0 (federal goals); U.S. General Services Administration, Federal Procurement Data System—Next
Generation, “Smal Business Goaling Report: Fiscal Year 2019,” at https://www.fpds.gov/downloads/
top_requests/FPDSNG_SB_Goaling_FY_2019.pdf; and U.S. General Services Administration, Federal
Procurement Data System—Next Generation, at https://www.fpds.gov/fpdsng/ (contract dol ars).
Notes: The Smal Business Goaling Report for FY2019 was made available on-line on August 12, 2020. The
report does not indicate when the data were generated. The report indicates that smal business eligible
contracts totaled $501.58 bil ion and that $129.5 bil ion was awarded to smal businesses, $50.8 bil ion to smal
disadvantaged businesses, $25.3 bil ion to women-owned smal businesses, $11.2 bil ion to SBA-certified
HUBZone smal businesses, and $21.8 bil ion to service-disabled veteran-owned smal businesses. The
percentages provided in the column for al reported contracts in FY2019 were calculated using FPDS-NG data as
reported on August 12, 2020: $589.5 bil ion in total contracts; $131.0 bil ion to smal businesses, $51.3 bil ion to
smal disadvantaged businesses, $25.5 bil ion to women-owned smal businesses, $11.5 bil ion to SBA-certified
HUBZone smal businesses, and $23.6 bil ion to service-disabled veteran-owned smal businesses.

89 15 U.S.C. §644(g)(1)-(2).
Congressional Research Service

21

Small Business Administration HUBZone Program

Congressional Issues
Congressional interest in the HUBZone program has increased in recent years, primarily due to
the program’s difficulty in meeting its 3% contracting goal.90
Program Administration
GAO and the SBA’s Office of Inspector General (OIG) have audited the SBA’s administration of
the HUBZone program on many occasions over the years and have made a number of
recommendations to improve the SBA’s internal control and oversight practices in an effort to
deter fraud in the program. In most instances, the SBA has endeavored to implement these
recommendations, but both GAO and the OIG have argued that despite these efforts
administrative chal enges remain.
SBA OIG and GAO Audits, 2006-2010
 In 2006, the OIG reported that there was a two-year backlog in HUBZone
program examinations. It noted that it was concerned “that workload resources
had not been adequately devoted to eliminating this two-year backlog” and that
firms that should be decertified from the program remained on the list of certified
HUBZone businesses and potential y were “inappropriately receiving HUBZone
contracts between the time they are initial y certified and subsequently
examined/recertified.”91
 In 2008, GAO reported that the map used by the SBA to publicize qualified
HUBZone areas was inaccurate, resulting in ineligible smal businesses
participating in the program and excluding eligible businesses; the mechanisms
used by the SBA to certify and monitor HUBZone firms provided limited
assurance that only eligible firms participated in the program; the SBA had not
complied with its own policy of recertifying HUBZone firms every three years
(about 40% of those firms had not been recertified); and the SBA lacked formal
guidance that would specify a time frame for processing HUBZone firm

90 In addition, Congress addressed the potential consequence of two Court of Federal Claims decisions that directed
federal agencies to provide HUBZone set -asides preference when two or more set -aside programs could potentially be
used. Providing the HUBZone program preference over other small business contracting programs could have resulted
in an increase in the percentage of federal contract dollars awarded to HUBZone small businesses and a decrease in the
percentage of federal contract dollars awarded to other small businesses. P.L. 111-240, the Small Business Jobs Act of
2010, amended the Small Business Act (15 U.S.C. 657a(b)(2)(B)) to remove the language that the court relied upon in
finding that HUBZone set -asides have “ precedence.” Specifically, the act struck the phrase “ a contract opportunity
shall” and replaced it with “a contract opportunity may.” T he court had ruled that the use of the word shall made the
HUBZone program mandatory, whereas the use of the word m ay in the Section 8(a) contracting program for small
businesses owned and controlled by the socially and economically disadvantaged made it a discretionary program, and
mandatory programs took precedence over discretionary ones. See DGR Assocs., Inc. v. United States, 2010 U.S.
Claims LEXIS 588 (August 13, 2010); and Mission Critical Solutions v. United States, 2010 U.S. Claims LEXIS 36
(March 2, 2010); GAO, Mission Critical Solutions, B-401057, May 4, 2009, at http://www.gao.gov/decisions/bidpro/
401057.pdf; and Office of Legal Counsel, Department of Justice, Permissibility of Small Business Administration
Regulations Implementing the Historically Underutilized Business Zone, 8(a) Business Development, and Service -
Disabled Veteran-Owned Small Business Concern Programs, August 21, 2009, at http://www.justice.gov/sites/default/
files/olc/opinions/2009/08/31/sba-hubzone-opinion082109.pdf.
91 SBA, Office of the Inspector General, HUBZone Program Examination and Recertification Processes, May 23,
2006, pp. 3, 6.
Congressional Research Service

22

Small Business Administration HUBZone Program

decertifications (1,400 of 3,600 firms proposed for decertification had not been
processed within the SBA’s self-imposed goal of 60 days).92
 In 2008, GAO released another report that “identified substantial vulnerabilities
in SBA’s application and monitoring process, clearly demonstrating that the
HUBZone program is vulnerable to fraud and abuse.”93 Using fictitious employee
information and fabricated documentation, GAO obtained HUBZone certification
for four bogus firms. In one of its applications, GAO claimed that its principal
office was the same address as a coffee store that happened to be located in a
HUBZone. GAO argued that if the SBA “had performed a simple Internet search
on the address, it would have been alerted to this fact.”94 Two of GAO’s
applications used leased mailboxes from retail postal services centers. GAO
argued that “a post office box clearly does not meet SBA’s principal office
requirement.”95 In addition, it identified “10 firms from the Washington, D.C.
metro area that were participating in the HUBZone program even though they
clearly did not meet eligibility requirements.”96
 GAO subsequently selected four geographical areas for analysis to determine
whether cases of fraud and abuse exist for HUBZone businesses located outside
of the Washington, DC, metropolitan area: Dal as, TX; Huntsvil e, AL; San
Antonio, TX; and San Diego, CA. GAO reported in March 2009 that it found
“fraud and abuse” in al four metropolitan areas, including 19 firms that “clearly
are not eligible,” and highlighted 10 firms that it “found to be egregiously out of
compliance with HUBZone program requirements.”97
 In 2010, GAO submitted applications for HUBZone certification for “four new
bogus firms … using false information and fabricated documents .. fictitious
employee information and bogus principal office addresses” including “the
addresses of the Alamo in Texas, a public storage facility in Florida, and a city
hal in Texas as principal office locations.”98 The SBA certified three of the four
bogus firms and lost GAO’s documentation for its fourth application “on
multiple occasions,” forcing GAO to abandon that application.99 GAO reported
that “the SBA continues to struggle with reducing fraud risks in its HUBZone
certification process despite reportedly taking steps to bolster its controls.”100
The SBA responded to these audits and congressional criticism of its administration of the
HUBZone program by “reengineering business processes to reduce fraud and abuse within the

92 SBA, Office of the Inspector General, HUBZone Program Examination and Recertification Processes, pp. 1-5.
93 GAO, HUBZone Program: SBA’s Control Weaknesses Exposed the Government to Fraud and Abuse, GAO-08-
964T , July 17, 2008, pp. i, 4, 5, 7-9, at http://www.gao.gov/new.items/d08964t.pdf.
94 GAO, HUBZone Program: SBA’s Control Weaknesses Exposed the Government to Fraud and Abuse, pp. i, 4, 5, 7-9.
95 GAO, HUBZone Program: SBA’s Control Weaknesses Exposed the Government to Fraud and Abuse , pp. i, 4, 5, 7-9.
96 GAO, HUBZone Program: SBA’s Control Weaknesses Exposed the Government to Fraud and Abuse, pp. 5, 10-20.
97 GAO, Small Business Administration: Status of Efforts to Address Previous Recommendations on the HUBZone
Program , GAO-09-532T , March 25, 2009, pp. 5-8, at http://www.gao.gov/new.items/d09532t.pdf.
98 GAO, Small Business Administration: Undercover Tests Show HUBZone Program Remains Vulnerable to Fraud
and Abuse, GAO-10-759, June 25, 2010, Highlights section and p. 2, at http://www.gao.gov/new.items/d10759.pdf.
99 GAO, Small Business Administration: Undercover Tests Show HUBZone Program Remains Vulnerable to Fraud
and Abuse, p. 4.
100 GAO, Small Business Administration: Undercover Tests Show HUBZone Progra m Remains Vulnerable to Fraud
and Abuse, p. 4.
Congressional Research Service

23

Small Business Administration HUBZone Program

program.”101 In 2006, the SBA committed to reviewing 5% of al certifications “through a full-
scale program of examinations.”102 In 2009, it “moved from verifying a sample of HUBZone
firms to verifications of 100% of HUBZone firms receiving contrac ts in the previous fiscal
year.”103 In 2010, the SBA reported that its standard HUBZone business process
now requires all firms to submit supporting documentation verifying the information and
statements made in their application. Previous practice required firms only to submit an
electronic application.
In addition, the Program Office implemented a new business process for recertifying
HUBZone firms which requires all firms that are due for recertification to certify via wet
signature that they still conform to the eligibility requirements. Previous practice required
firms to submit an electronic verification.104
On April 21, 2010, Karen Mil s, the SBA’s Administrator at that time, testified before the House
Committee on Smal Business that the SBA is “working to ensure that only legitimate and eligible
firms are benefiting from HUBZone” and has “made dramatic increases in the number of site
visits to HUBZone firms.”105
The SBA conducted 680 HUBZone site visits in FY2008, 911 in FY2009, 1,070 in FY2010, 988
in FY2011, 788 in FY2012, 511 in FY2013, 569 in FY2014, 518 in FY2015, 515 in FY2016, 505
in FY2017, 529 in FY2018, and 507 in FY2019.106
The SBA’s new, more labor-intensive certification process, coupled with an increase in
applications for HUBZone certifications, resulted in what the SBA described as “significant
delays in the processing of new applications for certification.”107 Noting that individual
applications “can vary greatly depending on the complexity of the case and the applicant’s
responsiveness to any requests for supporting information,” the SBA reported in 2010 that the
final HUBZone determination time frames “vary from 5 months to 12 months, with an average of
8 to 10 months.”108 The SBA has since decreased the average time to process HUBZone
applications, with about 61% of applications processed in three months or less.109

101 SBA, FY2011 Congressional Budget Justification and FY2009 Annual Performance Report, pp. 72, 73, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/Congressional_Budget_Justification.pdf.
102 U.S. Congress, House Committee on Small Business, Full Committee Hearing to Consider Legislation Updating
and Improving the SBA’s Contracting Program s, 110th Cong., 1st sess., October 4, 2007, Serial Number 110-50
(Washington: GPO, 2007), p. 6.
103 U.S. Congress, House Committee on Small Business, Full Committee Hearing to Consider Legislation Updating
and Improving the SBA’s Contracting Programs, p. 76.
104 U.S. Congress, House Committee on Small Business, Full Committee Hearing to Consider Legislation Updating
and Improving the SBA’s Contracting Programs, pp. 72, 73.
105 T estimony of Karen G. Mills, then-SBA administrator, before the U.S. House of Representatives Committee on
Small Business, “Accountability Update,” April 21, 2010, at http://www.house.gov/smbiz/democrats/hearings/hearing-
04-21-10-oversight/Mills.pdf.
106 SBA, FY2015 Congressional Budget Justification and FY2013 Annual Performance Report, p. 113, at
https://www.sba.gov/sites/default/files/files/FY15_CBJ_FY%202013_APR.pdf; and SBA, FY2021 Congressional
Budget Justification and FY2019 Annual Perform ance Report, p. 77, at https://www.sba.gov/document/report —
congressional-budget -justification-annual-performance-report.
107 SBA, “HUBZones: Frequently Asked Questions,” at https://www.sba.gov/contracting/government-contracting-
programs/hubzone-program/frequently-asked-questions.
108 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” May 4, 2010.
109 SBA, FY2013 Congressional Budget Justification and FY2011 Annual Performance Report, p. 72, at
https://www.sba.gov/sites/default/files/files/1-
508%20Compliant%20FY%202013%20CBJ%20FY%202011%20APR%281%29.pdf ; and Michael A. Chodos, SBA,
Congressional Research Service

24

Small Business Administration HUBZone Program

As mentioned previously, P.L. 115-91 requires the SBA, effective January 1, 2020, to process
HUBZone certification applications with sufficient and complete documentation within 60 days
of receipt.
SBA’s OIG Audit, 2013
On November 19, 2013, the OIG released the results of an audit of 12 of the 357 firms that
received HUBZone certification between July 2012 and December 2012. The 12 firms accounted
for 94% of the federal contract dollars awarded to those 357 firms during that time period.
The OIG found that 3 of the 12 firms “received certification without meeting the requirements of
the program.”110 Specifical y, the OIG found “one firm [that] did not meet the principal office
requirement, one firm [that] did not meet the 35% residency requirement, and one instance where
a possibly fraudulent application was missed.”111 The OIG also noted that
 the HUBZone program’s standard operating procedures (SOP) manual was last
updated in November 2007, when firms self-certified their HUBZone eligibility,
and does not account for the SBA’s new certification process;
 the SBA did not make its eligibility determination within 30 calendar days of the
receipt of a complete application for al 12 of the nonfraudulent applications
reviewed as required under the SBA’s existing regulations;112 and
 the SBA did not make its eligibility determination within its proposed 90
calendars days of the receipt of a complete application, a change to the existing
regulations that the SBA is seeking due to the shift from self-certification to full
document review, for 5 of the 12 firms.113
The SBA responded to the OIG’s audit on November 12, 2013, indicating that it planned to
update and publish a new HUBZone program SOP by the end of 2014, issue decertification
notices for the three firms cited in the OIG’s audit, and amend the certification process “so that
actions are completed within an average of 90 days from the date the application is electronical y
verified.”114
The new HUBZone SOP has not been published. The delay may be related to the SBA’s years-
long comprehensive review of the program’s regulations, which resulted in numerous changes “to

“T estimony before the U.S. House of Representatives Committee on Oversight and Government Reform,” June 26,
2013, at http://docs.house.gov/meetings/GO/GO00/20130626/101044/HHRG-113-GO00-Wstate-ChodosM-
20130626.pdf.
110 SBA, Office of the Inspector General, Opportunities Exist to Further Improve Quality and Timeliness of HUBZone
Certifications, November 19, 2013, p. 6, at https://www.sba.gov/sites/default/files/Audit%20Report%2014-
03%20Opportunities%20Exist%20to%20Further%20Improve%20Quality%20and%20Timeliness%20of%20HUBZone
%20Certifications.pdf.
111 SBA, Office of the Inspector General, Opportunities Exist to Further Improve Quality and Timeliness of HUBZone
Certifications, p. 6.
112 See 13 C.F.R. §126.306. “ SBA will make its determination within 30 calendar days after receipt of a complete
package whenever practicable.”
113 SBA, Office of the Inspector General, Opportunities Exist to Further Improve Quality and Timeliness of HUBZone
Certifications, November 19, 2013, p. 10, at https://www.sba.gov/sites/default/files/Audit%20Report%2014-
03%20Opportunities%20Exist%20to%20Further%20Improve%20Quality%20and%20Timeliness%20of%20HUBZone
%20Certifications.pdf.
114 SBA, Office of the Inspector General, Opportunities Exist to Further Improve Quality and Timeliness of HUBZone
Certifications, p. 14.
Congressional Research Service

25

Small Business Administration HUBZone Program

reduce the regulatory burden imposed on HUBZone smal business concerns” that were published
in the Federal Register on November 26, 2019 (effective December 26, 2019).115 Now that the
review has been completed and the final regulation issued, the SBA is widely expected to work
on a new SOP for the HUBZone program that incorporates these changes.
SBA’s OIG Audit, 2019
On March 28, 2019, the OIG released the results of an audit of 15 of 39 firms that received
HUBZone certification and a HUBZone contract between April 1, 2017, and March 31, 2018. The
15 firms obtained approximately $29.4 mil ion in HUBZone contract dollars during that time
period. Of these selected firms, five received more than $1 mil ion in HUBZone contracts, five
received HUBZone contacts amounting to $100,000 to $999,999, and five received HUBZone
contacts amounting to less than $100,000.116
The OIG found that the SBA “did not detect indicators of fraud and certified 2 of the 15 firms …
that did not meet principal office location requirements” and “certified a third firm … based on
incomplete analysis of supporting documentation” related to the 35% residency requirement.117
The OIG questioned $598,000 in contract obligations for these firms and concluded that “these
deficiencies occurred because the Program Office did not have a standardized review process of
the analysis of oversight of HUBZone certifications” and “did not update its written policies
despite a prior OIG audit recommendation to update its HUBZone guidance.”118
The OIG also found that the SBA did not make its eligibility determinations for 4 of the 15 firms
with the 90-day regulatory requirement and “did not timely assign applications to analysts for
certified and pending firms.”119 The OIG concluded that these delays were due to “a lack of
formalized guidance, IT issues, and staff turnover.”120
The OIG issued five recommendations for the SBA’s consideration, including reexamine the
three cited firm’s eligibility, update and implement HUBZone written guidance, and implement a
plan to mitigate information technology issues affecting the HUBZone certification process. The
SBA responded to a draft of the OIG’s audit on March 14, 2019, indicating that it agreed with al
five recommendations and had already reexamined the eligibility of one of the three firms cited in
the audit.121
Legislation
During the 112th Congress, S. 633, the Smal Business Contracting Fraud Prevention Act of 2011,
which was introduced on March 17, 2011, and agreed to by the Senate, with amendment, by

115 SBA, “Small Business HUBZone Program and Government Contracting Programs,” 84 Federal Register 65222-
65251, November 26, 2019. Also, see SBA, “ Semiannual Regulatory Agenda: Small Business HUBZone Program,” 79
Federal Register 76791, December 22, 2014; SBA, “ Semiannual Regulatory Agenda: Small Business HUBZone
Program,” 80 Federal Register 78042, December 15, 2015; and SBA, “Small Business HUBZone Program;
Government Contracting Programs,” 83 Federal Register 54812-54835, October 31, 2018.
116 SBA, Office of the Inspector General, SBA’s HUBZone Certification Process, p. 15, at https://www.sba.gov/sites/
default/files/oig/SBA-OIG-Report -19-08.pdf.
117 SBA, Office of the Inspector General, SBA’s HUBZone Certification Process, p. 4.
118 SBA, Office of the Inspector General, SBA’s HUBZone Certification Process, p. 4.
119 SBA, Office of the Inspector General, SBA’s HUBZone Certification Process, p. 10.
120 SBA, Office of the Inspector General, SBA’s HUBZone Certification Process, p. 11.
121 SBA, Office of the Inspector General, SBA’s HUBZone Certification Process, pp. i, 18-20.
Congressional Research Service

26

Small Business Administration HUBZone Program

unanimous consent on September 21, 2011, would have required the SBA to implement GAO’s
recommendations to
 maintain a correct, accurate, and updated map to identify HUBZone areas;
 implement policies that ensure only eligible firms participate in the program;
 employ appropriate technology to control costs and maximize efficiency;
 notify the Smal Business Committees of any backlogs in applications or
recertifications with plans and timetables for eliminating the backlog;
 ensure smal businesses meet the 35% HUBZone residency requirement at the
time of bid as wel as at the time of the contract award; and
 extend the redesignated status of HUBZone areas that lose that status due to the
release of economic data from the 2010 decennial census for three years after the
first date on which the SBA publishes a HUBZone map that is based on the
results from that census.122
In addition, S. 3572, the Restoring Tax and Regulatory Certainty to Smal Businesses Act of
2012, was introduced on September 19, 2012, and referred to the Senate Committee on Finance.
It included, among other provisions, the HUBZone provisions contained in S. 633.
The SBA did not formal y respond to the legislation. It has argued at congressional hearings and
in its congressional budget justification documents that it has taken steps to implement GAO’s
recommendations.123
During the 114th Congress, P.L. 114-187, the Puerto Rico Oversight, Management, and Economic
Stability Act (PROMESA), includes a provision requiring the SBA to implement, within 270 days
following PROMESA’s enactment (which took place on June 30, 2016), a risk-based approach to
requesting and verifying information from firms applying to be designated or recertified as a
qualified HUBZone smal business. GAO is required to begin an assessment of the SBA’s risk-
based approach within a year of the approach’s implementation and complete the assessment,
along with any recommendations for improvement, within the following six months.
During the 115th Congress, P.L. 115-91, the National Defense Authorization Act for Fiscal Year
2018, among other provisions, requires the SBA, starting on January 1, 2020, to “conduct
program examinations of qualified HUBZone smal business concerns, using a risk-based
analysis to select which concerns are examined, to ensure that any concern examined meets the
[program’s] requirements.” The act also specifies that any smal business that misrepresented its
status as a qualified HUBZone smal business concern shal be subject to liability for fraud.

122 T he bill’s sponsor, then-Senator Olympia Snowe, introduced similar legislation in 2010, S. 3020, the HUBZone
Improvement Act of 2010. See Senator Olympia Snowe, “ Statements on Introduced Bills and Joint Resolutions,”
remarks in the Senate, Congressional Record, daily edition, vol. 156 (February 23, 2010), p. S702.
123 U.S. Congress, House Committee on Small Business, Full Committee Hearing on Oversight of the Small Business
Adm inistration and its Program s, 111th Cong., 1st sess., March 25, 2009, Small Business Committee Document
Number 111-012 (Washington: GPO, 2009), pp. 4-27, 32-38; T estimony of Karen G. Mills, then-SBA administrator,
before the U.S. House of Representatives Committee on Small Business, “ Accountability Update,” April 21, 2010, at
http://www.house.gov/smbiz/democrats/hearings/hearing-04-21-10-oversight/Mills.pdf; SBA, FY2011 Congressional
Budget Justification and FY2009 Annual Perform ance Report, pp. 72, 73, at https://www.sba.gov/sites/default/files/
aboutsbaarticle/Congressional_Budget_Justification.pdf; and SBA, FY2012 Congressional Budget Justification and
FY2010 Annual Perform ance Report, pp. 77-79, at https://www.sba.gov/sites/default/files/aboutsbaarticle/
FINAL%20FY%202012%20CBJ%20FY%202010%20APR_0.pdf .
Congressional Research Service

27

Small Business Administration HUBZone Program

Performance Measures
As part of its 2008 audit of the HUBZone program, GAO reported that the SBA had taken
“limited steps” to assess the effectiveness of the HUBZone program.124 It noted that the SBA’s
performance measures—the number of applications approved and recertifications processed, the
annual value of federal contracts awarded to HUBZone firms, and the number of program
examinations completed—provide data on program activity but “do not directly measure the
program’s effect on firms (such as growth in employment or changes in capital investment) or
directly measure the program’s effect on the communities in which the firms are located (for
instance, changes in median household income or poverty levels).”125 GAO recommended that
the SBA “further develop measures and implement plans to assess the effectiveness of the
HUBZone program that take into account factors such as the economic characteristics of the
HUBZone area.”126
The SBA responded to GAO’s findings by announcing that it “would develop an assessment tool
to measure the economic benefits that accrue to areas in the HUBZone program” and that it
“would then issue periodic reports accompanied by the underlying data.”127
On March 25, 2009, GAO reported that, as of that date, the SBA had not developed measures or
implemented plans to assess the program’s effectiveness.128 GAO noted that the SBA did
commission an independent review of the HUBZone program’s economic impact. That study was
released in May 2008. It concluded that the HUBZone program
has not generated enough HUBZone contract dollars to have an impact on a national scale.
When spread over an eight-year period across 2,450 metropolitan areas and counties with
qualified census tracts, qualified counties, and Indian reservations, $6 billion has a limited
impact….
About two-thirds of HUBZone areas have HUBZone businesses; just under one-third have
HUBZone vendors that have won HUBZone contracts; and about 4 percent of HUBZone
areas have received annual-equivalent HUBZone contract revenues greater than $100 per
capita, based on HUBZone population….
The program has a substantial impact in only a very small percentage of HUBZones. Where
the impact is largest, there generally is at least one very successful vender in the HUBZone.
Thus, the program can be effective. At present, however, the impact in two-thirds of al
HUBZones is nil.129
GAO also noted that the SBA had issued a notice in the Federal Register on August 11, 2008,
seeking public comment on a proposed methodology for measuring the economic impact of the

124 GAO, Small Business Administration: Additional Actions are Needed to Certify and Monitor HUBZone Businesses
and Assess Program Results, GAO-08-643, June 17, 2008, p. 5, at http://www.gao.gov/new.items/d08643.pdf.
125 GAO, Small Business Administration: Additional Actions are Needed to Certify and Monitor HUBZone Businesses
and Assess Program Results, p. 34.
126 GAO, Small Business Administration: Additional Actions are Needed to Certify and Monitor HUBZone Businesses
and Assess Program Results, p. 45.
127 GAO, Small Business Administration: Additional Actions are Needed to Certify and Monitor HUBZone Businesses
and Assess Program Results, p. 46.
128 GAO, Small Business Administration: Status of Efforts to Address Previous Recommendations on the HUBZone
Program , GAO-09-532T , March 25, 2009, p. 8, at http://www.gao.gov/new.items/d09532t.pdf.
129 Henry Beale and Nicola Deas, “T he HUBZone Program Report,” Wash ington, DC: Microeconomic Applications,
Inc., prepared for the SBA, Office of Advocacy, May 2008, pp. i–iii, at https://www.sba.gov/content/hubzone-program-
report .
Congressional Research Service

28

Small Business Administration HUBZone Program

HUBZone program.130 The notice presented a two-step economic model that the SBA had
developed to estimate the impact on HUBZone areas directly attributable to the HUBZone
program, the SBA’s non-HUBZone programs, and other related federal procurement programs.
The notice indicated that economic impact “wil be measured by the estimated growth in median
household income and employment (or a reduction in unemployment) in a specific HUBZone
area.”131
GAO criticized the SBA for relying on public comments to refine the proposed methodology
“rather than conducting a comprehensive effort” that considered relevant literature and input from
experts in economics and performance measurement.132 GAO concluded that “based on our
review, we do not believe this effort was a sound process for developing measures to assess the
effectiveness of the program” and reported that the SBA had abandoned that proposal and “had
initiated a new effort to address this issue.”133
The SBA indicated in its FY2011 budget justification report to Congress that it had developed “a
methodology for measuring the economic impact of the HUBZone program” to “provide for the
continuous study and monitoring of the program’s effectiveness in terms of its economic
goals.”134 However, it did not provide any details concerning the methodology and has continued
to use its previous performance measures—the number of smal businesses assisted (applications
approved and recertifications processed), the annual value of federal contracts awarded to
HUBZone firms, and the number of program examinations completed—to assess the program’s
performance.135
Legislation
During the 112th Congress, S. 633 would have required the SBA to implement GAO’s
recommendation to “develop measures and implement plans to assess the effectiveness of the
HUBZone program.”136 It also would have required the SBA to identify “a baseline point in time
to al ow the assessment of economic development under the HUBZone program, including
creating additional jobs” and take into account “the economic characteristics of the HUBZone
and contracts being counted under multiple socioeconomic subcategories.”137
The SBA did not formal y respond to the legislation. It has argued at congressional hearings and
in its congressional budget justification documents that it is taking steps to implement GAO’s
recommendation.138

130 SBA, “Notice of methodology for measuring the economic impact of the HUBZone Program,” 73 Federal Register
46698-46703, August 11, 2008.
131 SBA, “Notice of methodology for measuring the economic impact of the HUBZone Program,” p. 46701.
132 GAO, Small Business Administration: Status of Efforts to Address Previous Recommendations on the HUBZone
Program , GAO-09-532T , March 25, 2009, p. 9, at http://www.gao.gov/new.items/d09532t.pdf.
133 GAO, Small Business Administration: Status of Efforts to Address Previous Recommendations on the HUBZone
Program , p. 9.
134 SBA, FY2011 Congressional Budget Justification and FY2009 Annual Performance Report, p. 73, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/Congressional_Budget_Justification.pdf.
135 SBA, FY2011 Congressional Budget Justification and FY2009 Annual Performance Report, p. 73.
136 S. 633, the Small Business Contracting Fraud Prevention Act of 2011, §6. HUBZone Improvements.
137 S. 633, the Small Business Contracting Fraud Prevention Act of 2011, §6. HUBZone Improvements.
138 U.S. Congress, House Committee on Small Business, Full Committee Hearing on Oversight of the Small Business
Adm inistration and its Program s, 111th Cong., 1st sess., March 25, 2009, Small Business Committee Document
Number 111-012 (Washington: GPO, 2009), pp. 4-27, 32-38; SBA, FY2011 Congressional Budget Justification and
Congressional Research Service

29

Small Business Administration HUBZone Program

During the 115th Congress, P.L. 115-91 requires the SBA, starting on January 1, 2020, to publish
performance metrics measuring the HUBZone program’s success in meeting the program’s
objective of promoting economic development in economical y distressed areas and to submit,
not later than 90 days after the last date of each fiscal year, a report to the House Committee on
Smal Business and the Senate Committee on Smal Business and Entrepreneurship “analyzing
the data from the performance metrics.” Similar provisions were included in H.R. 2592, the
Expanding the Impact of the HUBZone Program Act of 2017, and H.R. 3294, the HUBZone
Unification and Business Stability Act of 2017.
Small Business Contracting Goals
As mentioned previously, the federal government has established procurement contracting goals
for smal businesses general y (at least 23% of the total value of al smal business eligible prime
contract awards for each fiscal year), smal disadvantaged businesses (5% of the total value of al
smal business eligible prime contract awards and subcontract awards for each fiscal year),
women-owned smal businesses (5% of the total value of al smal business eligible prime
contract awards and subcontract awards for each fiscal year), HUBZone smal businesses (3% of
the total value of al smal business eligible prime contract awards and subcontract awards for
each fiscal year), and service-disabled veteran-owned smal businesses (3% of the total value of
al smal business eligible prime contract awards and subcontract awards for each fiscal year).139
A number of bil s have been introduced over the past several Congresses to increase the smal
business procurement contracting goals. General y speaking, the executive branch, during both
Democratic and Republican Administrations, has not advocated increasing these goals. Although
no official reason has been provided for not advocating an increase in these goals, it is general y
recognized that the sitting Administration is often blamed when smal business contracting goals
are not achieved. From FY2005 through FY2019 (15 fiscal years)
 the 23% contracting goal for smal businesses general y was achieved 8 times (in
FY2005 and FY2013-FY2019),
 the 5% contracting goal for smal disadvantaged businesses was achieved in al
15 fiscal years,
 the 5% contracting goal for women-owned smal businesses was achieved twice
(in FY2015 and FY2019),
 the 3% contracting goal for service-disabled veteran-owned smal businesses was
achieved 7 times (in FY2013-FY2019), and
 the 3% contracting goal for HUBZone smal businesses was not met in any of
these fiscal years.140
Because the federal government has frequently not been able to meet most of its smal business
contracting goals, sitting Administrations have general y been reluctant to advocate an increase in
these goals. From the executive branch’s perspective, increasing the goals could subject the
sitting Administration to a greater risk of being labeled as antibusiness or anti-small business

FY2009 Annual Perform ance Report, pp. 72, 73, at https://www.sba.gov/sites/default/files/aboutsbaarticle/
Congressional_Budget_Justification.pdf; and SBA, FY2012 Congressional Budget Justification and FY2010 Annual
Perform ance Report, pp. 77-79, at https://www.sba.gov/sites/default/files/aboutsbaarticle/
FINAL%20FY%202012%20CBJ%20FY%202010%20APR_0.pdf .
139 15 U.S.C. §644(g)(1)-(2).
140 U.S. General Services Administration, Federal Procurement Data System—Next Generation, “Small Business
Goaling Reports, FY2005-FY2019,” at https://www.fpds.gov/fpdsng_cms/index.php/reports.
Congressional Research Service

30

Small Business Administration HUBZone Program

even if the executive branch increases its contracting with smal businesses from the previous
fiscal year. As a result, proposals to increase the smal business contracting goals have originated
in the legislative, as opposed to the executive, branch.
Legislation
Several bil s were introduced during the 112th Congress to increase the federal government’s
smal business contracting goals, including H.R. 2424, the Expanding Opportunities for Main
Street Act of 2011, and its companion bil in the Senate (S. 1334); H.R. 2921, the Expanding
Opportunities for Smal Businesses Act of 2011; H.R. 2949, the Smal Business Opportunity
Expansion Act of 2011; H.R. 3850, the Government Efficiency through Smal Business
Contracting Act of 2012; H.R. 6078, the Smal Business Contracting Opportunities Expansion
Act of 2012; and S. 3213, the Smal Business Goaling Act of 2012. In addition, as passed by the
House on May 18, 2012, H.R. 4310, the National Defense Authorization Act for Fiscal Year 2013,
included a provision that would have increased the 23% contracting goal for smal businesses
general y to 25%. The bil would have also established a 40% goal for smal businesses general y
of the total value of al subcontract awards for each fiscal year. These provisions were
subsequently dropped from the bil .
During the 113th Congress, S. 259, the Assuring Contracting Equity Act of 2013, would have
increased the federal government’s 23% contracting goal for smal businesses general y to 25%,
raised the 5% contracting goals for smal disadvantaged businesses and women-owned smal
businesses to 10%, and increased the 3% contracting goals for HUBZone smal businesses and
service-disabled veteran-owned smal businesses to 6%.141 The bil ’s provisions were
reintroduced in both the House and Senate during the 114th Congress (H.R. 3175 and S. 1859) and
the 115th Congress (H.R. 2362 and S. 1061).
In addition, H.R. 4093, the Greater Opportunities for Smal Business Act of 2014, which was
reported by the House Committee on Smal Business on April 9, 2014, would have increased the
federal government’s 23% contracting goal for smal businesses general y to 25% and established
a 40% subcontracting goal for smal businesses general y. H.R. 4435, the Howard P. “Buck”
McKeon National Defense Authorization Act for Fiscal Year 2015, which was passed by the
House on May 22, 2014, also contained these two provisions. The Senate’s national defense
reauthorization bil (S. 2410) did not include this language. Also, H.R. 273, the Minority Smal
Business Enhancement Act of 2015, would have increased the federal government’s 23%
contracting goal for smal businesses general y to 25% and the 5% contracting goals for smal
disadvantaged businesses and women-owned smal businesses to 10%.
Advocates of increasing the federal government’s smal business contracting goals argue that
higher goals are necessary to ensure that smal businesses receive “a fair proportion of the total
purchases and contracts for property and services for the government in each industry
category.”142 They also contend that higher goals wil “increase prime contracting and

141 H.R. 4093, the Greater Opportunities for Small Business Act of 2014, was introduced on February 26, 2014, and
reported by the House Committee on Small Business on March 5, 2014. It would have increased the federal
government’s 23% contracting goal for small businesses generally to 25%. It did not address the contracting goal for
HUBZone small businesses.
142 U.S. Congress, House Committee on Small Business, Greater Opportunities for Small Business Act of 2014, report
to accompany H.R. 4093, 113th Cong., 2nd sess., April 9, 2014, H.Rept. 113-409 (Washington: GPO, 2014), p. 3.
Congressional Research Service

31

Small Business Administration HUBZone Program

subcontracting opportunities for smal businesses” and that “each time the goal has previously
been increased, smal business contracting, with its inherent benefits, has increased.”143
During consideration of H.R. 4310, the National Defense Authorization Act for Fiscal Year 2013,
the Obama Administration opposed the House’s provisions that would have increased the 23%
contracting goal for smal businesses generally and established a 40% subcontracting goal for
smal businesses general y:
The Administration strongly supports efforts to increase Federal contracting with smal
businesses, but opposes section 1631, which would establish a laudable but overly
ambitious government-wide small business procurement goal and unrealistic individual
agency goals that could undermine the goals process and take away the Government’s
ability to focus its efforts where opportunities for small business contractors are greatest.144
Concluding Observations
Congressional interest in the SBA’s HUBZone program has increased in recent years, primarily
because the program has had difficulty in meeting its 3% contracting goal. The recent addition of
governor’s designated covered areas and qualified disaster areas is expected to increase the
number of HUBZone smal businesses that are available to bid on federal contracts, and,
ultimately, to more contracts being awarded to HUBZone smal businesses. It remains to be
determined if these changes wil result in the program meeting its 3% contracting goal.
Concerns about the SBA’s ability to prevent HUBZone fraud continue. As mentioned, in response
to audits conducted by GAO and the SBA’s OIG, the SBA has overhauled the program. One of
the immediate by-products of the SBA’s new business processes was an increase in the
processing time for new HUBZone certifications. In the past, the SBA had a self-imposed goal of
making those certifications within 30 calendar days after receipt of a complete applic ation
package, subject to the need for additional information or clarification of information contained in
the application. Now, depending on the complexity of the application and the need for additional
information, the SBA reports that it takes, on average, about three months to make those
certifications. Concerns about the processing times were reflected in P.L. 115-91’s provision
requiring the SBA, effective January 1, 2020, to process HUBZone certification applications with
sufficient and complete documentation within 60 days of receipt. It remains to be determined if
the SBA’s new processes wil reduce the incidence of fraud within the program. The resolution of
that question could determine the HUBZone program’s future.

143 U.S. Congress, House Committee on Small Business, Government Efficiency Through Small Business Contracting
Act of 2012, report to accompany H.R. 3850, 112th Cong., 2nd sess., December 21, 2012, H.Rept. 112-70 (Washington:
GPO, 2012), pp. 5-6.
144 U.S. Office of Management and Budget, “Statement of Administration Policy: H.R. 4310 – National Defense
Authorization Act for FY2013,” May 15, 2012, p. 8, at http://www.presidency.ucsb.edu/ws/index.php?pid=100875.
Congressional Research Service

32

Small Business Administration HUBZone Program

Author Information

Robert Jay Dilger

Senior Specialist in American National Government

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

Congressional Research Service
R41268 · VERSION 134 · UPDATED
33