The term HUB-Zone is thrown around a lot in government contracting. Many contracts include restrictions that limits bidding to businesses located within a these zones. If you are new to the game, it is easy not to know if the area your business is located in qualifies as a HUB-Zone or even if your business qualifies.
So… what is a HUB zone?
The Small Business Administration (SBA) created the Historically Underutilized Business Zone (frequently referred to as a HUB Zone) program in 1997 when Congress passed the Small Business Reauthorization Act, which included the HUB-Zone Empowerment Act. The SBA enforces the act by maintaining a list of qualified businesses for federal agencies to use. They certify businesses in these areas as Hub-Zone businesses based on the following requirements:
• The company must be a small business based on the size standards used by the North American Industry Classification System (NAICS).
• At least 51% of the company must be owned and controlled by US citizens.
• The main location of business, where most employees do work (excluding contract sites), must be located in an authorized HUB zone.
• At least 35% of the company’s employees must live in a HUB zone.
The main objective of the SBA’s HUB Zone program is to promote economic growth and create more employment opportunities by bringing them the opportunity to obtain Federal contracts. The SBA reports to Congress how much the Empowerment Act has increased employment opportunities in these areas. According to the SBA’s website, for an area to be classified as underutilized it must have at least one of the following:
• Qualified census tract criteria (areas are subject to change every 10 years due to census)
• A qualified non-metropolitan county that has an average household income of less than 80 percent of the State median household income, or with unemployment rates 140% or more above the state-wide average.
• Land within a federally-recognized Indian reserve.
There are many advantages designed to help businesses located within a HUB Zone and meeting all the requirements obtain these special federal contracts. For many contracts, there must be at least $100,000 set aside for small businesses that qualify as HUB-Zones. There can be sole-source contracts in the areas, but the value must be greater than $100,000 but less than $3 million (or $5 million for manufacturing contracts). While that may not seem like a decent advantage, HUB Zone small businesses receive what is known as a “10% price evaluation.” This means that a HUB Zone company bidding on a project (based on price) will have their bid evaluated at 10% lower than it actually is - so long as their price is no more than 10% higher than a non-HUB Zone small business, they will win.
Aside from the benefits listed above, there are plenty more opportunities for small businesses within these areas. Another example is that when larger companies that win bids need sub-contractors they are required to have at least one HUB Zone sub-contractor to help complete the project. In addition, these businesses can apply for higher surety bonds then others, tax credits, investment tax deductions, and tax-free facility bonds. For more information about where these HUB Zones are located visit the SBA HUB Zone homepage: http://www.sba.gov/hubzone.
Showing posts with label sole source contracts. Show all posts
Showing posts with label sole source contracts. Show all posts
Thursday, May 21, 2009
Tuesday, May 19, 2009
What Are No Bid Contracts?
There are several things business owners need to know when joining the contracting circle. As we mentioned last week, contract bundling is a big one that many don’t know about, and this week’s topic is no different. Lucky for us regular folk, the government doesn’t create wacky acronyms for every contracting term they use and in this case the name makes sense.
Sole-source contracts, also commonly known as no bid contracts, are contracts awarded when the government feels there is only one company or business that can successfully complete all requirements of the contractual agreement. Another reason Uncle Sam feels these contracts are necessary is because if regular bidding were to be held, only one company would be eligible to successfully complete the contract, making the process last longer than it should.
Typically, the government awards sole source contracts after negotiations with the company and the sole source contracts are considered justified only if a few criteria are met:
a. only one business has a product that will meet the projects needs or only one firm can do the work (for example due to patent restrictions)
b. the existence of an unusual and compelling urgency (emergency, disaster, etc)
c. for purposes of industrial mobilization or expert services (unique or exclusive experience)
d. a sole source award is authorized or required by law, (socio-economic programs, etc)
e. national security
f. the general interest of the public, or
g. the work involved is time sensitive.
While no bid contracts may seem like a negative aspect of government contracting, there is some good to them. For instance, in a pinch, if you’re offering services that the government needs immediately, then Uncle Sam will forego the normal bidding process and award the contract much more quickly. Or, if you have an exclusive product, patent, or licensing agreement or some sort of unique experience or expertise, you are going to be very well-positioned to do business on sole-source contracts. Of course, there are instances where this type of contract backfires and corruption ensues.
In March 2009, President Obama made a promise to help cut back on the number of no bid contracts in order to save money. As mentioned before, the original intent of awarding contacts without bidding is to cut costs and to speed the process up, but not everything always goes according to plan. The President claims that by decreasing the amount of sole source contracts the government can save as much as $40 billion each year. "The days of giving government contractors a blank check are over," President Obama stated.
President Obama asked his budget director, Peter Orszag, to have a reform plan ready by the end of September 2009. The reforms will involve making more contracts open to bidding and, in the process, hopefully saving the taxpayers money by awarding the contract to an independent contractor and their sub-contractors rather than a single company that could potentially inflate the price.
Obviously, there are still circumstances in which sole-source contracts will occur. For example, if you hold the patent on a particular item that the government determines that it needs, a sole-source contract will still be awarded.
The reforms requested are important because in the past eight years the amount of money spent on contracts has increased from $200 billion in 2000 to $500 billion in 2008. Many believe that a large percentage of the increase went to no bid contracts and by eliminating the number of them in 2010, Uncle Sam hopes to create more competition to cut back costs and to help the independent contractors and small business owners gain more work.
Sole-source contracts, also commonly known as no bid contracts, are contracts awarded when the government feels there is only one company or business that can successfully complete all requirements of the contractual agreement. Another reason Uncle Sam feels these contracts are necessary is because if regular bidding were to be held, only one company would be eligible to successfully complete the contract, making the process last longer than it should.
Typically, the government awards sole source contracts after negotiations with the company and the sole source contracts are considered justified only if a few criteria are met:
a. only one business has a product that will meet the projects needs or only one firm can do the work (for example due to patent restrictions)
b. the existence of an unusual and compelling urgency (emergency, disaster, etc)
c. for purposes of industrial mobilization or expert services (unique or exclusive experience)
d. a sole source award is authorized or required by law, (socio-economic programs, etc)
e. national security
f. the general interest of the public, or
g. the work involved is time sensitive.
While no bid contracts may seem like a negative aspect of government contracting, there is some good to them. For instance, in a pinch, if you’re offering services that the government needs immediately, then Uncle Sam will forego the normal bidding process and award the contract much more quickly. Or, if you have an exclusive product, patent, or licensing agreement or some sort of unique experience or expertise, you are going to be very well-positioned to do business on sole-source contracts. Of course, there are instances where this type of contract backfires and corruption ensues.
In March 2009, President Obama made a promise to help cut back on the number of no bid contracts in order to save money. As mentioned before, the original intent of awarding contacts without bidding is to cut costs and to speed the process up, but not everything always goes according to plan. The President claims that by decreasing the amount of sole source contracts the government can save as much as $40 billion each year. "The days of giving government contractors a blank check are over," President Obama stated.
President Obama asked his budget director, Peter Orszag, to have a reform plan ready by the end of September 2009. The reforms will involve making more contracts open to bidding and, in the process, hopefully saving the taxpayers money by awarding the contract to an independent contractor and their sub-contractors rather than a single company that could potentially inflate the price.
Obviously, there are still circumstances in which sole-source contracts will occur. For example, if you hold the patent on a particular item that the government determines that it needs, a sole-source contract will still be awarded.
The reforms requested are important because in the past eight years the amount of money spent on contracts has increased from $200 billion in 2000 to $500 billion in 2008. Many believe that a large percentage of the increase went to no bid contracts and by eliminating the number of them in 2010, Uncle Sam hopes to create more competition to cut back costs and to help the independent contractors and small business owners gain more work.
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