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Top 5 Ways HUBzone Companies Grow out of their Set-Asides (And How to Slow This Down)

Author: TeamingPro Staff

The government is always trying to even the playing field. Nowhere is this truer than when it comes to small businesses, which the SBA (Small Business Administration) works to ensure have a fighting chance when it comes to competing for contracts. This is primarily achieved through Set-Asides, where certain contracts are specifically designated to be awarded to small businesses. These Set-Asides are further divided based on the socio-economic categories of businesses, including HUBZones, which can occasionally grow out of their Set-Asides.

We’re going to detail some of the ways HUBZone companies grow to lose that Set-Aside safety net the government provides, and how you can slow that down until you’re ready to dominate the market on your own.

1. Pricing

The SBA and the Federal Acquisition Regulation (FAR) both require contracts worth $150,000 to be considered for socio-economic programs first (HUBZone, 8(a), Women-Owned, Service-Disabled Veteran-Owned), though they don’t require any preference among these programs. The contracting officer is then required to explain the rationale they used to make their decision in the contract file.

So how might a HUBZone company lose out on such a contract?

One way is if the HUBZone company has messed up at a basic level – pricing. If your HUBZone has grown to a size and maintained a reputation where you’re raising prices in order to cover the increased costs of operation (or to increase your profit margin), you might end up out of the range a contracting officer would consider a fair market price. Then, they can say they considered you, found you too expensive, and decided to award the contract to someone else.

To mitigate this, you’d have to decide if staying within the Set-Aside eligibility range would be worth the tight profit margins, or even operating at a loss. And it’s possible the answer might be yes, if it would allow you set up connections for further business down the line when you’re more ready to lose those benefits.

2. Contract Selection

When it comes to contracts themselves, you could increase your odds for winning by choosing smaller contracts. When a contract is worth $150,000 or less, it’s automatically set aside for small businesses. It’s only when it’s worth more than this amount that it gets set-aside only if there are two or more small businesses that could complete the work.

A HUBZone company focusing on growth might set their sights on bigger contracts as a natural evolution in their operations, but doing so would take them out of the range to benefit from the automatic Set-Asides. Instead, a savvy HUBZone company might choose to cast a wider net, taking on more of the smaller contracts intended for them.

One way to aide in this goal is to get in contact with more contractors offering work in the $3500 to $150,000 range by using tools such as FedBizOpps or TeamingPro.

3. Location

One surefire way to lose out on the benefits of being a HUBZone Company is to, naturally, relocate your business outside of qualified HUBZones. The decision to make this change is going to come down to what’s ultimately better for your business – is a change in location going to improve your operations in some regards, and therefore worth the trade-off? Or is there some other factor influencing your decision (commute, schools, family, etc.).

It’s also possible that your goal for relocation might be to transfer your business to a different HUBZone – A Washington Post report found that 70 percent of HUBZone dollars in a DC District went specifically to firms in wealthier areas of the city.

4. Expansion

The problem of expanding your growing business could also indirectly cause you to lose out on your HUBZone qualification entirely. In order to maintain your HUBZone status, at least 35% of your employees must reside in a HUBZone. If your operations have grown to such an extent that it would be prudent to use a second location and hire a new team, you might end up losing out on all the benefits of HUBZone qualification.

If you find that this second location is absolutely mandatory, you might need to look into not only hiring a new team, but replacing members of your old team with workers that live in HUBZones and are willing to make commutes.

5. Size

And as part of expansion, the last way to lose out on your HUBZone qualification would be to grow to such a size that the SBA no longer considers you a small business at all. The Size Standards Tool and Size Standards Table can help you prep for this down the line, but the best way to fight this natural growth of your business would be to cultivate efficiency and teamwork in your employees, enabling you to accomplish more with a smaller team.

The HUBZone Qualification is a strategic tool, but like all tools – it’s not a one size fits all solution. Some businesses will want to make use of it throughout their lifetime, while others will want to employ them to a certain point, and then move to the next level as they continue to expand. Hopefully, this guide will prove useful in your company’s ability to choose which methods will work for you.

Good luck out there!
- Your friends at TeamingPro.