This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information 

and analysis that was reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not 

necessarily reflect the views of the Office of Advocacy.

Purpose

Public Law 108-447 directed the Office of Advocacy 

to conduct a study measuring the effectiveness of 

the definitions under Section 3(p)(4) of the Small 

Business Act (15 U.S.C. 632(p)(4) for the purposes 

of economic impact on small business development 

and job creation. This section of the law is commonly referred to as the HUBZone program. This study 

examines the impact of the definitional changes to 

the HUBZone program.

Overview 

In 1997, Congress passed the Small Business 

Administration Reauthorization Act (Public Law 

105-135), which included provisions designed 

to promote economic development and employment opportunities in metropolitan or rural areas 

with low income, high poverty rates, and/or high 

unemployment rates. Title VI of the Act established the Historically Underutilized Business Zone 

(HUBZone) program to target federal contracts to 

small businesses that are located in these areas. 

In 2004 and 2005, Congress designated two additional classes of HUBZones: Indian lands and military bases closed under the Base Realignment and 

Closure (BRAC) Act. As a result of these changes 

there are now five classes of HUBZones:

1. Qualified census tracts (QCTs),

2. Qualified counties,

3. Indian reservations,

4. Difficult development areas (DDAs), and

5. Military bases closed under BRAC.

The HUBZone program has three mechanisms 

for targeting contracts to HUBZone businesses: setasides, sole source awards and price preferences. In 

the eight-year period from FY2000 through FY2007, 

there have been about 21,350 contracts totaling 

$6.28 billion awarded through the three HUBZone 

mechanisms.

Overall Findings

• In general, the program has grown steadily in 

terms of total contract dollars, from $44 million 

in FY 2000 to $1.76 billion in FY 2007. FY 2004 

was the only year in which there was a decline in 

the total amount awarded to HUBZone businesses. 

HUBZone contract dollars in FY 2007 were 2.75 

times the FY 2003 level. Growth from FY 2006 to 

FY 2007 was 26 percent.

• The number of HUBZone businesses and 

HUBZone vendors increases with the population and 

area of the HUBZone.

• The 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.

• HUBZone set-asides are the most frequently 

used tool to award HUBZone contracts. HUBZone 

sole source and price preferences were least often 

used by contracting officers. 

Scope and Methodology

Data for this study were drawn from three databases. 

Two of these provide information on all HUBZone 

businesses, namely the database of applications 

for HUBZone certification and the the Central 

Contractor Registration (CCR) data on small busiThe HUBZone Program Report

Henry Beale and Nicola Deas, Microeconomic Applications, Inc. Washington, DC 20016 

2008. [253] pages. Under contract SBAHQ-06-M-0486

May 2008 No. 325
nesses. The third source, the Federal Procurement 

Data System (FPDS), provides information on 

HUBZone businesses that have won HUBZone contracts.

In analyzing HUBZones, it is useful to think of 

them in relation to counties. From this perspective, 

there are three general types of HUBZones:

• Sub-county areas. These include all qualified 

census tracts, small Indian reservations, and BRAC 

bases.

• Counties. These include qualified counties, large 

Indian reservations, and DDAs.

• Larger areas that are collections of 

HUBZones. These include metropolitan areas which 

have only QCTs, and states that are almost entirely 

HUBZones (principally DDAs and Oklahoma).

There are fundamental differences in the way indirect impacts on earnings and employment are treated 

in these different types of HUBZone areas. 

The report generally follows this structure. 

Chapter 2 provides a general overview of the population of HUBZone businesses and Federal HUBZone 

procurement. Chapters 3-9 assess the distribution of 

HUBZone businesses and revenues and the resulting 

impacts. Each chapter deals with an individual class 

of HUBZones. Chapters 10 and 11 deal with topics 

common to all HUBZones: the industry and size distribution of HUBZone businesses, and the timing of 

certification of new HUBZone businesses. Chapter 

12 summarizes conclusions of the study. The report 

also contains eight appendixes on data and methodology.

This report was peer-reviewed consistent with 

Advocacy’s data quality guidelines. More information on this process can be obtained by contacting 

the director of economic research at advocacy @sba.

gov or (202) 205-6533.

Ordering Information

The full text of this report and summaries of other 

studies performed under contract with the U.S. Small 

Business Administration’s Office of Advocacy are 

available on the Internet at www.sba.gov/advo/research. 

For email delivery of Advocacy’s newsletter, 

press, regulatory news, and research, visit http://web.

sba.gov/list. For RSS feeds, visit www.sba.gov/advo/

rsslibrary.html.