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23–764 2017

ENSURING OPPORTUNITIES: OVERSIGHT OF THE 

HUBZONE PROGRAM 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

SEPTEMBER 7, 2016 

Small Business Committee Document Number 114–069 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

CHRIS GIBSON, New York 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

CRESENT HARDY, Nevada 

WARREN DAVIDSON, Ohio 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

KEVIN FITZPATRICK, Staff Director 

JAN OLIVER, Chief Counsel 

ADAM MINEHARDT, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Steve Chabot ................................................................................................... 1 

Hon. Nydia Vela ́zquez ............................................................................................. 1 

WITNESSES 

Mr. William B. Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office, Washington, DC ..... 4 

Mr. John Shoraka, Associate Administrator, Office of Government Contracts 

and Business Development, United States Small Business Administration, 

Washington, DC ................................................................................................... 6 

APPENDIX 

Prepared Statements: 

Mr. William B. Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office, Washington, DC ..................................................................................................... 27 

Mr. John Shoraka, Associate Administrator, Office of Government Contracts and Business Development, United States Small Business Administration, Washington, DC ..................................................................... 42 

Questions and Answers for the Record: 

Questions from Hon. Steve Chabot and Answers from Mr. William B. 

Shear .............................................................................................................. 47 

Questions from Hon. Steve Chabot and Answers from Mr. John Shoraka . 49 

Additional Material for the Record: 

Allied Research Technology, Inc. ..................................................................... 53 

Contemporary Graphic Solution (CGS) .......................................................... 55 

Custom Software Systems, Inc. (CSS) ............................................................ 56 

Fairfield Technologies Inc. (FTI) ..................................................................... 58 

Fearless Solutions ............................................................................................ 60 

Ferguson Safety Products, Inc. ........................................................................ 61 

GCS - GeoControl Systems, Inc. ...................................................................... 62 

HUBZone Contractors National Council ........................................................ 65 

ITC Defense Corp. ............................................................................................ 75 

MINPACK ......................................................................................................... 76 

Nyla Technology Solutions, Inc. (Nyla) ........................................................... 77 

Set-Aside Alert .................................................................................................. 79 

SBA .................................................................................................................... 82 

Storage Strategies, Inc. (SSI) .......................................................................... 88 

SupplyCore Inc. ................................................................................................ 90 

Summit Technologies & Solutions, Inc. (Summit) ......................................... 93 

Syntelligent Analytic Solutions, LLC (Syntelligent) ...................................... 96 

The Data Entry Company (TDEC) .................................................................. 97 

Triangle Electric Corporation .......................................................................... 98 

TEVET ............................................................................................................... 99 

Work Force Now (WfN) .................................................................................... 100 

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(1) 

ENSURING OPPORTUNITIES: OVERSIGHT OF 

THE HUBZONE PROGRAM 

WEDNESDAY, SEPTEMBER 7, 2016 

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. 

The Committee met, pursuant to call, at 11:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Steve Chabot [chairman of the Committee] presiding. 

Present: Representatives Chabot, Luetkemeyer, Hanna, Gibson, 

Brat, Knight, Curbelo, Hardy, Kelly, Vela ́zquez, Chu, Hahn, Payne, 

Meng, Lawrence, Clarke, Adams, and Davidson. 

Chairman CHABOT. Good morning. The Committee will come to 

order. 

Before we begin today’s hearing, I want to take a moment to remember one of our colleagues. On July 20th, our friend and fellow 

member of this Committee, Congressman Mark Takai passed away. 

Mark spent much of the past year undergoing treatment for cancer, 

but he still managed to serve his constituents with dedication and 

enthusiasm, and every time we saw him, he had a smile on his 

face. He was ranking member of the Subcommittee on Contracting 

and the Workforce where he did a lot of great work for the people 

and small businesses of Hawaii and for the whole country for that 

matter. His presence and aloha spirit will be greatly missed by all 

of us. 

And I would now like to yield to our ranking member, Ms. 

Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman, for yielding and 

affording me a few minutes to remember our friend and colleague, 

Mark Takai. 

Mark was a valued member of this committee. As a subcommittee ranking member, he made numerous, valuable policy 

contributions in the area of contracting. Because of his tireless efforts, Native Hawaiian organizations are now eligible to participate 

in the HUBZone program. He was a strong advocate for working 

families, and he represented Hawaii with distinction. Perhaps most 

of all he will be remembered as a devoted father and husband and 

dedicated family member. I, personally, will remember his warmth, 

kindness, and friendship. I know we are all praying for and thinking of his wife, Sami, and his two children, Matthew and Kaila. 

I will now ask for a moment of silence in remembrance of our 

friend and distinguished member. 

Thank you again, Mr. Chairman, for the opportunity to speak. I 

yield back. 

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Chairman CHABOT. Thank you very much, Ranking Member. 

And Mark Takai will be greatly missed and long remembered by, 

I think, all the members of this Committee and all of Congress. 

Today, our Committee will examine the historically underutilized 

business zones or HUBZone program. This program run by the 

SBA seeks to incentivize small business development in economically distressed areas by providing access to government contracting opportunities. 

We are pleased to welcome back to the Committee Mr. Bill Shear 

from the Government Accountability Office, GAO, and Mr. John 

Shoraka, from the Small Business Administration—the SBA. 

Since its inception nearly 20 years ago, the goal of the HUBZone 

program has been to boost economic growth and business development in the areas of this Nation that are most in need. If this goal 

is to be achieved, the program must operate in the most efficient 

and effective way possible. 

In the past few years, GAO has performed several reviews of the 

program to examine how it is working. Through these reviews, 

GAO had identified several areas where the program needs to improve. One of the chief concerns identified by GAO, a concern that 

this Committee shares, is making sure that the opportunities provided by the HUBZone program are being utilized by small businesses who actually qualify for the program. The sole-source contract awards and 10 percent evaluation preference provided to 

HUBZone firms are significant incentives to companies, encouraging them to locate and hire employees in areas of significant 

need. The HUBZone program cannot fulfill its mission if the opportunities provided by these incentives are being taken by companies 

that do not actually qualify for the program. 

In response to their concerns, GAO has put forward several recommendations. Among those recommendations are increased and 

improved communications between HUBZone firms and the SBA, 

as well as steps to make it easier to verify information from 

HUBZone firms. SBA has accepted some of these recommendations, 

but others have not been adopted. We are here to look at how the 

HUBZone program has adapted to those recommendations and to 

examine other ways the program could improve. 

It is crucial, however, that any efforts to alter or expand the program are made by working through Congress and with this Committee. Actions that could change how the program has been run 

or how effective the program will be must be done in the open with 

the public debate afforded by the people’s branch. 

This Committee sees on a daily basis the tremendous impact 

small businesses can have in providing jobs and lifting the economic outlook of an entire community. The HUBZone program is 

intended to help these small businesses, but can only succeed if the 

program is run in a way that actually helps the areas most in 

need. 

We want to thank our witnesses for being with us here today. We 

are looking forward to their testimony and also asking questions. 

And I would now like to yield to the ranking member for her opening statement. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman, for holding today’s 

hearing. 

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Each year, the federal government buys over $400 billion in 

goods and services from businesses all over the country. Recognizing the benefit these contracts have on local communities in 

terms of economic development and job creation, Congress created 

a small business program aimed directly at helping regions with 

low employment and incomes. The Historically Underutilized Business Zone program provides federal assistance to firms located in 

economically distressed areas by lowering barriers for entry into 

the federal marketplace for these firms. Ideally, this will not only 

provide an incentive for selling goods and services to the government, but also create jobs and bring revenue to these struggling 

areas. 

However, since its implementation, the program has faced countless issues, from ensuring that only 35 businesses enter the program to overseeing that businesses maintain their eligibility, to 

even being able to present evidence that the program is meeting its 

mission. The SBA has lagged behind from the beginning admitting 

these basic tasks. In fact, at one point in time, the certification 

process was so poorly overseen that the GAO was able to certify 

fake businesses with principal locations at the Alamo and at a 

Starbucks down the street from the White House. 

While GAO’s most recent report shows that there have been improvements in the upfront certification process, I am concerned 

SBA is not doing more to ensure that businesses are adhering to 

the program’s requirements. The recertification process has, for the 

most part, become a self-certification with later follow-up from 

SBA. I am eager to hear from today’s witnesses on how the program can be reformed to provide sufficient oversight for both initial 

certification and recertification. 

Unfortunately, the problems facing the HUBZone program do not 

end with certification. For many years, the program’s portfolio consisted of businesses that were eligible only because of a 

grandfathering clause. Once this expired and other areas lost their 

HUBZone designation, close to 6,000 businesses were decertified. 

SBA’s outreach efforts have been unsuccessful in getting new businesses to enter the program, and nearly 90 percent of HUBZone 

areas do not have a business participating in the program. This low 

participation rate has resulted in the failure to meet the 3 percent 

prime and 3 percent subcontracting goals. In fact, the dollars in actions awarded through this program have continually decreased 

since fiscal year 2008, with only 71,000 actions worth $6.4 billion 

or 1.82 percent of prime contracting dollars awarded to these firms 

in fiscal year 2015. Even then, the program was vastly underutilized as only 25 percent of these actions were awarded through a 

HUBZone set-aside or sole-source contract. It is clear that reforms 

are needed to get the HUBZone program on track, and today’s 

hearing will provide information needed to guide this Committee as 

we formulate legislation to address these issues. 

Lastly, I would like to add that one of the primary responsibilities of this committee is to oversee the various programs run by 

the Small Business Administration. While we have evaluated many 

of the individual lending programs, we have yet to hold individual 

hearings on the small business contracting programs, and I hope 

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4 

today is just the first of many hearings held to assess these important programs. 

I want to thank the witnesses for being here today, and I look 

forward to gaining more insight as to how we can make the 

HUBZone program more effective in meetings its mission. 

Thank you, Mr. Chairman, and I yield back. 

Chairman CHABOT. Thank you very much. The ranking member yields back. And if members have opening statements, we 

would ask that they be submitted for the record. 

We have got a couple of veterans before us here today, so I do 

not have to take a long time explaining our rules. We operate by 

the 5-minute rule, as you both know, and there is a lighting system 

to assist you. The green light stays on for 4 minutes; the yellow 

light, 1 minute; and then the red light will come on and we would 

ask you to wrap it up by then if at all possible. We will give you 

a little time if you need a little extra. Then we will stick to the 5 

minutes ourselves in asking questions, and we will alternate back 

and forth between Republicans and Democrats. 

So I would now like to formally introduce our two witnesses here 

today just briefly. Our first witness today is Mr. William Shear, 

who is the Director of Financial Markets and Community Investment Team at the Government Accountability Office, the GAO. In 

this role, Mr. Shear has appeared before the Committee on a number of occasions, and so we welcome him back today. 

And our second witness is another familiar face, Mr. John 

Shoraka, who serves as the SBA’s Associate Administrator for Government Contracts and Business Development Office. And included 

within this office is the office of the HUBZone program. So he is 

the person to talk with about this, and so we welcome you back 

again as well. 

And so without further ado, Mr. Shear, you are recognized for 5 

minutes. 

STATEMENTS OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, UNITED STATES 

GOVERNMENT ACCOUNTABILITY OFFICE; JOHN SHORAKA, 

ASSOCIATE ADMINISTRATOR, OFFICE OF GOVERNMENT 

CONTRACTS AND BUSINESS DEVELOPMENT, UNITED 

STATES SMALL BUSINESS ADMINISTRATION 

STATEMENT OF WILLIAM B. SHEAR 

Mr. SHEAR. Thank you. Chairman Chabot, Ranking Member 

Vela ́zquez, and members of the Committee, I am pleased to be here 

today to discuss our work on SBA’s HUBZone program. 

Congress established the HUBZone program to stimulate economic development in economically distressed communities. The 

program provides Federal contracting preferences to small businesses located in HUBZone-designated areas that also employ residents of the areas. 

My statement today is based on the key findings in our February 

2015 report and SBA’s oversight of the HUBZone program in our 

March 2016 follow-up report and SBA responses to our 2015 recommendations. 

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We met with SBA in July 2016 at SBA’s request to discuss SBA’s 

actions in response to our recommendations and again in August 

2016 at our request to further discuss the status of SBA efforts in 

preparation for this hearing. In addition, we met with SBA officials, including John Shoraka yesterday, and further information 

was provided to us on some of the agency’s recent actions. 

Specifically, this testimony discusses, first, how SBA communicates changes and HUBZone designations to firms; second, SBA’s 

certification and recertification processes for firms; and third, how 

potential changes to designation criteria could affect HUBZones. 

First, with respect to how SBA communicates changes and 

HUBZone designations to firms, in 2015, we found that communications to firms about programmatic changes generally were not 

specific to affected firms. In response, SBA revised its approval letters to newly certified firms to include information about the consequences of redesignation. But as of August 2016, SBA had not 

yet implemented changes to help assure all currently certified 

firms would be notified of changes that could affect their program 

eligibility. SBA officials recently told us that the agency intended 

to develop a technology solution by spring of 2017 to help address 

GAO’s recommendation. 

Second, with respect to SBA certification and recertification processes for firms, SBA requires all firms seeking certification to provide documentation to show they meet the eligibility requirements, 

and SBA also conducts site visits at selected firms. However, as we 

reported in 2015, SBA did not require firms seeking recertification 

to submit information to verify continued eligibility, and instead, 

generally relied on firms’ attestations of continued eligibility. The 

SBA has made changes to its recertification processes, but had not 

fully addressed our recommendation to implement additional controls for recertification, including criteria for requesting and 

verifying firm information and guidance on using a risk-based approach to requesting and verifying firm information that are subject to recertification. 

Finally, in our 2015 report, we presented statistics on economic 

conditions in HUBZone-qualified, redesignated, and non-HUBZone 

census tracks, and non-metropolitan areas. We also evaluated potential changes to HUBZone designation criteria that could be designed to provide additional economic benefits to some communities. However, changes that benefit some communities also could, 

through competitive market processes, reduce activity by HUBZone 

firms in existing HUBZones. 

In my written statement, we have included examples based on 

adjusting criteria for unemployment rates and the potential impact 

of removing the limit on the number of areas that could qualify as 

HUBZones pursuant to the definition of qualified census tracks 

that was in effect at the time we issued our February 2015 report. 

Chairman Chabot and Ranking Member Vela ́zquez, this concludes my prepared statement. I would be happy to answer any 

questions. 

Chairman CHABOT. Thank you very much. 

Mr. Shoraka, you are recognized for 5 minutes. 

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STATEMENT OF JOHN SHORAKA 

Mr. SHORAKA. Thank you. Chairman Chabot, Ranking Member 

Vela ́zquez, and members of the full Committee, I appreciate the opportunity to testify here today. 

Before I begin, I would also like to acknowledge your former colleague, Mark Takai, Congressman Mark Takai of Hawaii, who 

served as ranking member of the Subcommittee on Contracting and 

the Workforce. Congressman Takai was a great partner with the 

Small Business Administration and his presence will be truly 

missed. 

Over the past 7 years, the administration, Congress, SBA, and 

Federal agencies have been successful in expanding Federal small 

business contracting opportunities through increased advocacy efforts and improved policies and regulations. As a result, the level 

of accountability has been raised across the Federal Government, 

allowing small businesses to continue to become more agile, innovative, and affordable providers of goods and services. This increased focus has resulted in over $640 billion in Federal contracting dollars being awarded to small businesses from fiscal year 

2009 to 2015. Of that, $90.7 billion was awarded in fiscal year 

2015, which represents an incredible impact to the American economy and drives job creation and support for over 537,000 jobs. 

Through small business contracting, the Federal Government 

acts as a catalyst for small business growth, while supporting the 

economic security of the Nation. In 2015, for the third consecutive 

year, the Federal Government exceeded the 23 percent small business prime contracting procurement goal, awarding 25.75 percent 

of eligible contracts to small businesses. This is the highest percentage recorded in history. 

Additionally, the Federal Government achieved the womenowned small business goal of 5 percent for the first time in history 

and achieved the highest percentage ever of contracts awarded to 

small disadvantaged businesses, as well as service-disabled veteran-owned small businesses. 

Over the last few years, the SBA’s Office of Government Contracting and Business Development began a variety of streamlining 

efforts to enhance customer service and reduce the administrative 

burdens on small businesses. These ongoing efforts include significant improvements and reduced timelines in processing 8(a) and 

HUBZone applications, 8(a) mentor protege agreements, as well as 

overhauling the HUBZone, 8(a), and WSB programs’ standard operating procedures. 

GCBD also invested in IT solutions to improve efficiencies for our 

interactions with small businesses. To ensure compliance with 

small business contracting regulations, Administrator ContrerasSweet authorized the hiring of 10 additional procurement center 

representatives, who have subsequently been hired. SBA has implemented over 25 provisions from the Small Business Jobs Act of 

2010 and the National Defense Authorization Acts of 2013, 2014, 

2015, and 2016, and is making great progress towards implementing the remaining provisions. 

Of note, the SBA issued a final rule expanding HUBZone eligibility in areas surrounding Base Realignment and Closure, BRAC, 

areas, qualified disaster areas, as well as allowing Native HawaiSBREP-219A with DISTILLER

7 

ian organizations to own HUBZone firms. We are working closely 

with the FAR Council to incorporate new regulations into the FAR 

as quickly as possible. 

Lastly, SBA issued a final rule implementing the new Small 

Business Mentor-Prot ́eg ́e program, which was followed by Administrator Contreras-Sweet approving the new office structure and 

processes for the program. With these important steps, the new 

Small Business Mentor-Prot ́eg ́e program is on track to begin accepting applications on the 1st of October. 

As we continue to support and improve contracting opportunities 

for small business, there are always opportunities to build on our 

strength and improve in certain areas. We are aware of the two 

open GAO recommendations and two OIG recommendations associated with the HUBZone program that we are actively working to 

resolve. In particular, we have maintained open communications 

and engagement with the GAO and believe we are nearing closure 

of these recommendations. 

In general, the HUBZone contracting program serves as an economic development tool that encourages small businesses to locate, 

invest, and hire employees from economically disadvantaged areas 

of the United States. As an agency, we work tirelessly to educate 

the small business and procurement communities about the 

HUBZone program in order to encourage firms to seek certification, 

help agency buyers utilize the program, and show economic development entities how the program’s benefits can be used to attract 

small businesses to their areas. 

Despite limited resources, the program has been successful in its 

efforts to ensure its mission is achieved. For example, the 

HUBZone program has implemented a sustainable plan to process 

applications within a 90-day period. We have also successfully conducted site visits to 10 percent of the firms in the portfolio with 87 

percent of those site visits finding firms that are in compliance. In 

addition, the program has increased education and outreach 

through the second year of the designation HUB initiative by visiting 15 cities and encouraging small businesses to seek Federal 

contracting opportunities. 

Moreover, the SBA recently conducted an in-depth analysis of the 

legislative and regulatory history of the program to determine if it 

had the authority to remove the 20 percent population cap to positively impact additional areas. Our analysis confirmed that the 

SBA did have the authority to remove the cap, and subsequently 

did so, increasing the number of census tracks in the HUBZone 

program. Due to the removal of the cap, Puerto Rico saw the largest increase of 516 new designated HUBZone areas. 

We are committed to continuous improvement in the HUBZone 

program, along with the SBA’s other certification and contracting 

programs. Our goal is to remove unnecessary burdens placed on 

the small businesses that have no merit, as our mission is to ensure that responsible small businesses have the maximum practicable opportunity to compete for and win contracts with the Federal Government. 

In closing, I would like to recognize this Committee’s commitment to small business and for being a partner in advancing positive small business practices across the Federal marketplace. I 

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would also like to acknowledge the administration and Federal 

agencies for their dedication to providing meaningful contracting 

opportunities to the small business community. Led by Administrator Contreras-Sweet, we will continue to fight for small businesses and advocate on their behalf. 

Thank you for the opportunity to testify here today. I look forward to your questions. 

Chairman CHABOT. Thank you very much. 

I now recognize myself for 5 minutes to begin the questions. 

Before I ask my first question, I was just looking at our names 

and it just hit me: Shear, Shoraka, Chabot. It sounds like an impressive law firm or something, does it not? Or a new disease to 

be avoided or something. But in any event, I will get on to my 

questions. 

Mr. Shear, I will begin with you. Through your reviews, what 

have you seen as being the specific problems with the current 

HUBZone certification tracking system, and what would be some of 

the features of a new system that would correct these problems? 

Mr. SHEAR. We—and I will mention especially the 2015 report— 

have had extensive experience with using the HUBZone certification tracking system itself, and I am very thankful to John and 

his staff for helping us conduct that analysis. It is this relational 

dataset that is really inadequate, not just in terms of how hard it 

was for us to go through these hypothetical scenarios and to look 

at certain characteristics of firms, but in terms of two things that 

are part of what SBA is trying to achieve. It is very bad in terms 

of conducting queries. An analyst can look at one firm at a time. 

But conducting queries across firms is problematic. One would 

want to conduct such quaries to do things such as establishing a 

risk-based oversight system for recertification. So it is inadequate 

because it is so difficult to conduct queries. And in terms of trying 

to evaluate impacts, looking at characteristics of firms and how 

much they may be benefitting or not benefitting from participation 

in the program, it is very difficult because of this data system. So 

I think that SBA is at least pointed in the direction of developing 

a new system is something that is a good idea. 

Chairman CHABOT. Okay. Thank you very much. 

Mr. Shoraka, I will turn to you now. When did discussions begin 

on the idea of ignoring the 20 percent cap for qualified census 

tracks? 

Mr. SHORAKA. Thank you for that question. As I mentioned in 

my testimony, sir, we began analyzing the potential impact of removing the cap I would say probably 6 to 9 months ago, and the 

discussion centered around the fact that the caps are included in 

the analysis by Housing and Urban Development for the purposes 

of the IRS. We found no statutory reason why those caps were included for the HUBZone program. Based on our general counsel’s 

review of our statute and analysis that we had authority to move 

forward in removing the caps, we went ahead and did that because 

we would expand the program exponentially to deserving communities that could benefit from participating in the program. Specifically, I think the largest impact was in Puerto Rico, and obviously, 

this is an area that both the administration and the Hill is interested in helping. 

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Chairman CHABOT. Let me follow up on my question, and you 

talk about expanding, and I agree. It could potentially dramatically 

expand the program. But going, blowing past the 20 percent cap 

could result in potentially thousands of new HUBZones, and arguably perhaps weaken its effectiveness in perhaps some of the existing HUBZones themselves. And what makes you all think that the 

SBA is able to take this step without congressional action? How 

can you do that on your own? 

Mr. SHORAKA. I would have to defer to our Office of General 

Counsel, who provided an opinion to my office with that respect 

and we have shared it with the Hill. And in fact, I think we have 

shared it with GAO as well. But the analysis that, again, that I 

have seen with our recommendations from our general counsel is 

that the statute and the calculation performed by the HUD, when 

they put that 20 percent cap on it, is specifically for the purposes 

of the IRS and not for our purposes. 

Chairman CHABOT. Okay. Well, if you could get that to us, we 

would like to take a look at that. Thank you very much. 

Let me go back to you, Mr. Shear. Have there been other challenges within the HUBZone program that you have seen but have 

not had the time or opportunity yet to highlight today? Are there 

other things that you would want to point out? 

Mr. SHEAR. I think I would want to point out—I know this 

Committee is taking a leadership role in the legislation for Puerto 

Rico—I will paraphrase this, the Puerto Rico Economic Stabilization Act. The questions you are asking in the first mandate, which 

we plan to staff in the next month and proceed earnestly with, asks 

us to look at contracting activity in Puerto Rico. We will be looking 

at expansion in the HUBZone qualified areas and to try to bring 

analysis to try to look at what types of shifts are being brought 

about by expanding. We may also address, what are the impacts 

of contracting? Because we can look back to 2008 where after an 

error made in the HUBZone map for Puerto Rico was corrected, we 

identified it during our 2008 audit, much of Puerto Rico was classified as HUBZone in 2008 due to this error, and once it was corrected, a small part of Puerto Rico was in a HUBZone. So we would 

look at the opposite, so the opportunity to evaluate the reduction 

in HUBZone areas may be possible. 

And it is not just looking at number of HUBZone firms and 

HUBZone contracts; it is looking at HUBZones and small businesses and what dynamic is going on in that community in Puerto 

Rico to try to establish what the impact could be so that the Congress and SBA—I think we all want to make sure that informed 

choices are being made as far as bringing up the issue you had as 

far as could expanding cause some of the existing HUBZone areas 

to suffer. I think those are very important issues to look at. So I 

am glad that we can start that. 

Chairman CHABOT. Okay. Thank you very much. My time is expired. The ranking member is recognized for 5 minutes. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Mr. Shear, let us go back again to what provided the path to lift 

the cap in Puerto Rico. It was an action of Congress. It was by 

passing PROMESA. So my question to you is has GAO analyzed 

whether or not SBA exceeded its authority when they removed the 

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cap without congressional authorization? I think that is the question here. 

And then further, how a program that since the first GAO report 

in 2008, and then 2010, clearly demonstrated there were no oversight mechanisms in place at SBA to prevent the program from 

being abused. And we have seen the abuse mismanagement of the 

program and also the fact that there is an issue with the type of 

communication between SBA and the firms and the information 

that they provided. Have you analyzed that? I know you provided 

GAO with information regarding the opinion from your legal counsel. When did this happen? When did it happen? 

Mr. SHORAKA. When did we provide—— 

Ms. VELA ́ ZQUEZ. The legal—— 

Mr. SHORAKA. I think that was just recently, if I am not mistaken. 

Ms. VELA ́ ZQUEZ. Have you had any opportunity to analyze it? 

Mr. SHEAR. Yes. Can I go through starting with—— 

Ms. VELA ́ ZQUEZ. Sure. Yes. 

Mr. SHEAR.—you asked a multi-part question and please help 

me through this. The first one is the question of the decision to lift 

the cap. 

Ms. VELA ́ ZQUEZ. Yes. 

Mr. SHEAR. When we started preparing for this hearing, and 

also starting to gear up to start our work in response to the first 

mandate dealing with Puerto Rico, we started looking for information about HUBZone and Puerto Rico, and that was roughly two 

weeks ago. And we identified the press release that on June 15th, 

SBA had lifted the cap for Puerto Rico and that was kind of the 

headline. Then, when we read it, we saw that it was lifted nationwide. And our shock was that we had just had a meeting with SBA 

where we asked are there any other significant changes to the program? And this was never mentioned. 

Ms. VELA ́ ZQUEZ. Mr. Shoraka, do you consider that a big 

change when he asked you whether or not there had been any policy changes? 

Mr. SHORAKA. Ma’am, would consider the fact that we issued 

a press release, completely open discussion. This is nothing that we 

were—— 

Ms. VELA ́ ZQUEZ. But you had a meeting. SBA had—— 

Mr. SHORAKA. I do not know if I was in that particular meeting, but that is nothing that we have intended to hide from anybody, ma’am. We did a press release. We did events around the 

country. Our director of HUBZone, in fact, was in Puerto Rico, and 

discussed the impact to Puerto Rico with respect to the removal of 

the cap. This was all done in June, and quite frankly, it was done 

to make sure that our HUBZone program impacts the deserving 

communities that it should be impacting. 

Ms. VELA ́ ZQUEZ. I understand, and that is the intent of this 

committee, and this is why we are doing these type of hearings. 

But since 2008, you know that different investigations have been 

conducted, and ineligible firms have been participating within the 

program. And still, the oversight mechanisms and the metrics that 

are so needed for us to be able to fix the program have not been 

provided. 

SBREP-219A with DISTILLER

11 

Mr. SHORAKA. May I respond to that? 

Ms. VELA ́ ZQUEZ. Yes. 

Mr. SHORAKA. So as you are aware, a full front-end certification was put in place in 2009 and 2010, and because of that full 

front-end certification, I mean, we get sort of the discussion on both 

sides. Right? We get the question with respect to firms who oftentimes complain because of the time it takes to have them certified, 

and, quite frankly, it has to be a balancing act. So we have implemented a full front-end certification process that sometimes is considered overly onerous. And quite frankly, over the last several 

years, over the last 2 years, we have looked at how do we remove 

some of those burdens. Because in my opinion, our programs are 

targeted towards some of the most underserved communities, 

which a lot of times do not have the resources to be able to put 

applications together that are 2 pounds of paper. So we are looking 

for opportunities to reduce the burden on those firms, and it has 

to be a balancing act. Sometimes we increase risk, but we reduce 

the burden on our firms. 

Ms. VELA ́ ZQUEZ. As I mentioned in my opening statement, we 

are going to be looking at ways to improve the program that might 

need congressional action. So I just want to be on record asking 

that you provide the committee with the type of reforms you consider needed to make this program effective so that those deserving 

communities get the benefit of the HUBZone program. 

Thank you, Mr. Chairman. I yield back. 

Chairman CHABOT. Thank you. The gentlelady’s time is expired. 

The gentleman from Missouri, Mr. Luetkemeyer, who is vice 

chairman of this Committee, is recognized for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

I want to follow up on the ranking member’s comments about the 

20 percent situation here. 

Mr. Shoraka, whenever you did this, are you continuing to fall 

under the same guidelines that HUD had with regards to percent 

of household incomes and that sort of stuff? You are just taking a 

community that normally would be restricted to 20 percent but still 

falls under the guidelines of expanding it to 30 percent or 40 percent. What is the largest that you have expanded to at this point? 

Mr. SHORAKA. So just to explain. Housing and Urban Development actually performs this analysis, and for the reasons of other 

programs, puts a 20 percent population concentration cap. What we 

have determined is that that cap is not relevant or goes to the intent of this program because it reduces the communities that can 

participate in this program, so we have actually removed that cap 

in our calculations. So we are not changing any of the calculations 

that Housing and Urban Development does and has done and continues to do for us. They put an additional cap for other program 

purposes, a 20 percent population cap. We take that away because 

we feel that it does not go to the intent of the HUBZone program. 

Mr. LUETKEMEYER. So what percentage of the community 

then are you allowing to participate in this program? 

Mr. SHORAKA. So it has—— 

Mr. LUETKEMEYER. Originally, the program standard is 20 

percent of the community, right? 

SBREP-219A with DISTILLER

12 

Mr. SHORAKA. It is a population concentration cap. In other 

words, if more than 20 percent of the population is below the poverty line, then the cap is in place. And I can certainly get you specifics with response to how this has impacted the communities. 

What I mentioned in my testimony is that in Puerto Rico, we increased the HUBZone areas from 27 percent of the census tracks 

to close to 87 percent of the census tracks. 

Mr. LUETKEMEYER. Okay. 

Mr. SHORAKA. And we have the calculations by State, and I am 

happy to share that with you. 

Mr. LUETKEMEYER. Okay. So instead of taking 20 percent of 

the community, now you are taking 87 percent of the community 

in? It is a census track, right? 

Mr. SHORAKA. Correct. 

Mr. LUETKEMEYER. Okay. So what is your anticipated amount 

of extra workload that you are looking at here? Have you thought 

about that? 

Mr. SHORAKA. We, you know, one of the things—that is an excellent question. 

Mr. LUETKEMEYER. I am not against the competition here that 

this would encourage. 

Mr. SHORAKA. Right. 

Mr. LUETKEMEYER. What I am looking at is your ability to 

maintain control. Because Mr. Shear is going to come in here 2 

years from now and say, hey, these guys expanded the program; 

have no idea what is going on. They cannot go back and do visits 

because you are in here, you are limited to 10 percent or whatever, 

which is way too low in my mind. And then you are not able to control these things and suddenly we have ineligible businesses in this 

program which defeats the whole purpose of what is going on. 

Mr. SHORAKA. Yes. That is an excellent question, sir. Thank 

you. 

We actually have lost over a third of our portfolio because of the 

census track redesignations of the 2010 census. So we lost over 

two-thirds and we are down year about 5,000 firms in the portfolio 

where we were historically up around 8,000 or 9,000. Since then, 

we have sort of leveled out at right under 4,000 firms in the portfolio. What we have been attempting to do over the last 2 to 3 

years is actually through our Destination Hub Initiative, trying to 

increase the number of firms. We have the capacity, and as Mr. 

Shear mentioned, we are developing the technology to be able to 

make sure that the deserving firms to participate in our program. 

Mr. LUETKEMEYER. My time is running out. I want Mr. Shear 

to comment on this. 

Mr. Shear, do you believe that this expansion is going to undermine the program from the standpoint of expanding it beyond what 

the intent of it was? Does it help businesses in this area to be able 

to compete? Question number one. 

Number two, have they got the controls in place yet or are they 

putting controls in place that you believe are going to be adequate 

to monitor this program, this expansion? 

Mr. SHEAR. Let me just try to do it real briefly. 

Mr. LUETKEMEYER. I have got 10 seconds left. 

SBREP-219A with DISTILLER

13 

Mr. SHEAR. Okay. Well, I will take more than 10 seconds if it 

is okay. 

But the first one, in terms of the expansion of the program, I 

cannot sit here and say that the new communities, whether they 

be counties or census tracks that comprise a community, in Puerto 

Rico are not deserving. But what we are looking for is some evaluation, even putting the legal issues aside, as far as what would the 

impact be here? Because of the things that I can point out from our 

analysis in our 2015 report and in this testimony, that you do observe that HUBZones have worse economic conditions than in the 

redesignated areas, and as you expand, you are tending to move up 

the ladder to areas that might not be as economically depressed. 

Mr. LUETKEMEYER. That is the heart of my question. Are we 

undermining the purpose of HUBZone? I am not against it. I am 

just saying are we going too far? 

Mr. SHEAR. What we are looking for and what we are going to 

try to address in a mandate from this Committee with Puerto Rico, 

and we will probably look more broadly than Puerto Rico, but certainly for Puerto Rico as we have been mandated, is to look at the 

question as what happens on the ground when you expand the program in this fashion? There should be some type of informed analysis that goes behind an informed decision regardless of what the 

statutory authority is. And to us, an opposite question that we will 

be looking at in terms of our before and after analysis is what happened in 2008 when there was a sharp contraction in Puerto Rico. 

We will be looking, what were the impacts of that action? So we 

think that you really need informed consent here. 

As far as the oversight of the program, it expands the pieces but 

we are not in a position to say what happens as far as SBA’s ability to oversee the program. It is clear that if you keep the number 

of site visits about the same, they will be a smaller percentage of 

your overall universe. But in addition to that kind of simple point, 

I do not think I have much to really offer on that point. 

Chairman CHABOT. The gentleman’s time is expired. 

Mr. LUETKEMEYER. I appreciate the chairman’s indulgence. 

Thank you. 

Chairman CHABOT. Thank you. 

The gentlelady from California, Ms. Chu, who is the ranking 

member of the Economic Growth, Tax, and Capital Access Subcommittee, is recognized for 5 minutes. 

Ms. CHU. Thank you, Mr. Chair. 

You know, on one hand, there are instances of these ineligible 

firms that have been certified for the HUBZone. On the other 

hand, there are these vast areas that do not have HUBZone certified firms operated within them. In fact, when researching this, 

I found that while my district has pockets of census tracks that 

would qualify for HUBZone status, there are only two HUBZone 

certified firms in the entire area. I understand that across the 

country there are only 5,600 participants in the HUBZone program 

and nearly 90 percent of HUBZones do not have a single certified 

firm. So can you tell me, for the panel, can you tell us why you believe that the program is not being utilized in certain areas? 

Yes, please. 

SBREP-219A with DISTILLER

14 

Mr. SHORAKA. I think the HUBZone program is unique in 

many instances, right? So there are certain requirements that 

sometimes can be complicated for small businesses to maintain. 

One is their primary office has to be in a HUBZone. That means 

that most of their employees, the largest percentage of their employees, actually work out of that office. Another is that 35 percent 

of their staff have to reside in the HUBZone. Maybe not that same 

HUBZone, but in a HUBZone. So oftentimes, when we have talked 

to firms, they have talked about the difficulty of being able to 

maintain those requirements, especially as they get contracts and 

they begin to grow. So the challenge is, quite frankly, it is a unique 

and different program. A lot of times firms will fall in and out of 

compliance with the program. And quite frankly, contracting officers have a hesitancy to use the program sometimes because of 

these unique differences. 

We have in the last several rules that we have promulgated, if 

that is the right word, I apologize, we have implemented measures 

to put the HUBZone program at the same level with our other programs. When it comes to—and this is kind of in the weeds—when 

it comes to nonmanufacturing rule waivers or when it comes to limitations on subcontracting, these were differences in the program 

that were not the same as the WOSB program or the service-disabled program. 

So I think it is twofold. One is, quite frankly, it is a unique and 

challenging program. So firms are sometimes reluctant to take advantage of it. I think we need more training with contracting officers to encourage them to take the program seriously. And lastly, 

I think this is a great opportunity to look at the statute to see 

where we can add some level of continuity or comfort or consistency 

with firms falling in and out of program requirements. 

Ms. CHU. Mr. Shear? 

Mr. SHEAR. I think you are asking an excellent question. I think 

John Shoraka gave a very good answer of the challenges HUBZone 

firms face and, therefore, what can affect their participation in the 

program. 

One of the things I would like to emphasize, which goes to our 

first recommendation, is the ability to communicate with firms and 

to provide firms information that makes it easier for them to navigate how changes in the program can affect their status. I think, 

we heard and we reached out to the HUBZone community as such, 

and we just found that it is kind of expecting too much of the firms 

with the current state there. So that is one thing that I would want 

to emphasize. 

The other thing I would want to emphasize is to be very mindful 

of a tradeoff when the solution that is offered is to allow firms to 

stay in the program that may no longer be eligible. We are very 

sympathetic with the idea that firms can be very challenged if 

based on short-term swings and economic conditions they are in 

and they are out and they are in, it is a concern of the program 

and it might be something that this Committee might want to look 

at more closely or, have SBA and GAO look at more closely. There 

is a challenge created. But what I would emphasize from our analysis of characteristics of HUBZone areas compared with those that 

have lost designation and those that are not HUBZones is that if 

SBREP-219A with DISTILLER

15 

you make the window too wide, you are undermining the purpose 

of the program, which is to serve the most economically depressed 

areas in our country. 

Chairman CHABOT. The gentlelady’s time is expired. 

The gentleman from California, Mr. Knight, is recognized for 5 

minutes. 

Mr. KNIGHT. Thank you, Mr. Chair. 

Some of the challenges with the HUBZone program were first 

identified by the GAO years ago and have persisted. From your 

knowledge of what SBA is now doing to address these challenges, 

do you believe they will be resolved soon? And can you tell us some 

of the methods that are being used to resolve these? Mr. Shear? 

Mr. SHEAR. Thank you. 

As I stated, certainly with the certification process, SBA has improved. When we started our audit in 2008, we concluded at the 

end that there was just a complete lack of internal control. But we 

had concluded that very early on, and we were the ones that 

reached out to our fraud investigators. So the program has definitely improved since that situation that we evaluated in 2008. 

What remains now I think is challenging. One is how to deal with 

firms that are dealing with the complexities of a program. It is trying to do something geographically where you are talking about a 

very dynamic environment. Businesses change over time and the 

economic conditions of census tracks and counties change over 

time. So I think that this idea of looking to a technology solution 

cannot solve these problems by themselves. But the idea is implementing better technology to address concerns about how to notify 

firms, how to conduct the recertification process, how to have riskbased approach to oversight. These things are very important. 

So, I mean, at GAO, we are very good at asking questions. We 

have observed that SBA has had trouble implementing technology. 

A number of years ago, we were all talking about One Track, which 

was going to be the solution for the 8(a) program and the HUBZone 

program, and it was not a successful investment. So our concerns 

are coming up with a real specific plan for how to use the technology, then what resources have to be used, have to be available 

from SBA for a more manual process even after the technology is 

in place. And I think those are the challenges that are out there. 

Mr. KNIGHT. And I understand that. I come from one of the 

fastest-growing areas in the country. And, in fact, we lead the 

country when our economy is expanding and we are growing at a 

good rate. Always reaching out and making sure of the new programs and making sure that we are giving the most information 

is one of the hardest things for either one of us who represents 

these areas or one of you who is trying to reach out to the firms 

or to the businesses. It is always the biggest challenge in making 

sure they are getting the right information. 

Can you tell me, over the last maybe 5 or 10 years, as the advent 

of new type of innovative ways to reach out, have you found one 

that has done more than others? Or have you found that just the 

same kind of walking, doing the site visits, doing all those types 

of things are still the most important thing? 

Mr. SHEAR. Part of it is that certainly using technology and 

electronic transmission can help, whether it be webinars from a 

SBREP-219A with DISTILLER

16 

training standpoint or whether it be sending notifications to firms 

that are meaningful about what they have to know to make sure 

they are compliant with a program and can manage it. So there 

has to be a mix there. But part of this I would say is really a manual process and requires some interaction. And this is where SBA’s 

district offices, I think, would want to be involved in reaching out 

to the various parts of the country where HUBZones are present. 

Mr. KNIGHT. Thank you very much. I yield—— 

Mr. SHORAKA. If I just may real quick on that—— 

Mr. KNIGHT. Sure. 

Mr. SHORAKA. I think one of the things that we have done, in 

addition to sort of looking at SBA One and making sure that the 

new system that should be launched by March of 2017 accounts for 

this communication, is to ensure that all new HUBZones, 

HUBZone firms, subscribe to the newsletter, which is put out regularly to inform them of changes in the designation. And it is a requirement, and I think this is absolutely correct. Not only do you 

have to monitor the HUBZones with respect to your principal office, but you have to monitor HUBZones with respect to your employees and where they reside. And so having an automated system 

to be able to do that for you and your staff, it would alleviate a 

lot of the burdens that are now manual. 

Chairman CHABOT. The gentleman’s time is expired. 

The gentlelady from California, Ms. Hahn, is recognized for 5 

minutes. 

Ms. HAHN. Thank you, Mr. Chairman. 

And let me just start by saying thank you to you and the ranking 

member for taking a moment before we started today to remember 

our colleague, Mark Takai. I would consider him a friend of mine. 

He actually lived in my building here in D.C., and actually was on 

the same floor that I was, so I ran into him and his wife and his 

kids many times. 

One of my fondest members was during the cherry blossom season. I had been here for 5 years. I never had made it down to the 

Tidal Basin to actually see the cherry blossoms. He and his wife 

invited me to join them, so that was just like April, and I spent 

about an hour and a half with them down at the Tidal Basin. He 

took these great photos of me and I took great photos of him, and 

I am really going to miss Mark. In a short period of time here in 

Congress, he really made his mark and made a lot of friends. And 

it seemed like he got more done in like 18 months than I think a 

lot of people have in much longer careers. So we will miss him. But 

thanks for taking the time to honor him this morning. 

So I am going to talk about technology as well, Mr. Shoraka. Apparently, the map of the eligible HUBZones, it seems to have continuous problems. And even back in the Bush administration, GAO 

noted serious issues with the map and recommended that it be updated regularly to ensure its accuracy. So when my staff, my 

millennials accessed the map, they noticed it was really extremely 

difficult to use and not very high tech. When the map is zoomed 

out, it does not appear to show any eligible zones for Los Angeles 

County, where my district is located. You have to zoom in a considerable amount to see the zones in my district, and when the map 

is accessed using a smartphone, it is apparently even more difSBREP-219A with DISTILLER

17 

ficult. So what can you tell me that SBA is doing to make this map 

more user-friendly, and do we have any plans on making it more 

of a mobile-friendly app, particularly for smartphone users? 

Mr. SHORAKA. Absolutely. Thank you, ma’am. 

You are absolutely correct. This is a technology that is outdated 

and has lived its life. We recently engaged a vendor not only to address the certification module, the HUBZone certification module, 

but also the mapping module. And they will begin work on it in 

earnest this month. And as I mentioned earlier, by March of 2017, 

we should have at least an initial module out on the program. 

What we try to do is with respect to changes in the program and 

changes in the maps, the data that is out there that changes either 

economic information or unemployment information sometimes is 

updated monthly, right? We collect that data and issue changes either to the qualified census track or the nonmetropolitan areas on 

an annual basis, and we do have a vendor that uploads this data 

and adjusts the maps. But as you have mentioned, it is an outdated map and it is not as user-friendly as one would hope. And 

we are trying to address that in the next 6 to 9 months. 

Ms. HAHN. What is the timeline on that? 

Mr. SHORAKA. We hope to have, as I said, a revised mapping 

system and HUBZone certification system by March of 2017. 

Ms. HAHN. So it is one thing for it to be, you know, not userfriendly. It is another thing to actually cost someone their job, 

which is what happened to a business in my district. They had to 

let an employee go because the map showed the employee did not 

reside within the HUBZone and, therefore, the business was not 

going to meet their 35 percent residential requirement. Later, the 

business found this to be an error on the map. However, this was 

after the employee lost their job. So again, it is one thing for it to 

not be user-friendly; it is another thing for it to contain errors that 

actually would cost somebody their job. That was very disturbing 

when I found that out. 

Mr. SHORAKA. Thank you for bringing that to my attention, 

first off. But one is, you know, we always encourage the firms, as 

Mr. Shear has mentioned, to work with our local district offices in 

situations like that so they are absolutely sure what that data is. 

And the second is, as we update the maps, anytime there are 

changes, we also upload a much more manual process of spreadsheets that have census tracks and zip codes. So we direct businesses, small businesses to those as well to double-check the accuracy of the map. But I think this is something that we need to 

work with our district offices to make sure that we are available 

to the firms when there are questions. 

Ms. HAHN. Yeah, let us pay attention to this. 

Chairman CHABOT. The gentlelady’s time has expired. Thank 

you. 

The gentleman from Mississippi, Mr. Kelly, is recognized for 5 

minutes. 

Mr. KELLY. Thank you, Mr. Chairman. And thank both of you 

witnesses for being here. 

The whole purpose of the HUBZone is to spread this type of help 

to small businesses across the entirety. And although I am happy 

that Puerto Rico is getting a great share of this, I am more conSBREP-219A with DISTILLER

18 

cerned with the counties in my Mississippi area that need it the 

most. But by expanding, you are taking away from the folks who 

I have that need it. So what it sounds to me like is the whole purpose is to spread the wealth so that not one area gets all the help. 

But it sounds to me like when you do away with the 20 percent 

rule, what you have effectively done is decide you get to say who 

gets help and who does not get help. And that is not the purpose. 

I am really concerned when Congress passes a law and they 

write in what they mean, that people interpret it that they do not 

think that is what Congress meant. And so you said that you have 

the numbers for other States and other areas that are affected, so 

Mr. Shoraka, I ask you, what is the effect in Mississippi in all four 

of my congressional districts, my first district and the other three 

districts in my State that need it the most? 

Mr. SHORAKA. Thank you, sir. 

Two points. One is I do not have the numbers for your district 

in front of me, but I certainly will share that with you after the 

hearing. There are an additional 2,015 census tracks that were 

qualified as HUBZones across the country. Every State saw an impact. It was not a pick or choose decision. The QCTs, which are by 

statute what we have to use, is what we continue to use. We are 

not stopping using the QCTs as put out by HUD. What we did was 

not include the additional step that they take to put the 20 percent 

cap on. There were significant impacts on all of the States, the 

most significant being Puerto Rico, but certainly, I know off the top 

of my head that there was an impact in Mississippi, but I do not 

know the exact numbers and we would be happy to share those 

with you, sir. 

Mr. KELLY. I wanted to say that Mark Takai, when I first got 

here—Mr. Chairman, thank you for having that moment of silence—when I first got here, he was a guy on the other side of the 

aisle from me, but we both have a common bond of serving in the 

National Guard; he in Hawaii and I in Mississippi. And one of the 

first things when I first got here as a new guy, he walked up to 

me and said aloha, and set up an office visit to take care of me, 

to make sure as a fellow battle buddy and guardsman and soldier 

that he took care of me. And what a gentleman. And I thank you 

for having that moment of silence, Mr. Chairman. 

The statutory definition of qualified census track is no more than 

20 percent of a single metro area can be designated as a HUBZone. 

My concern is, like I said earlier, is that it is going to take away 

from the areas with the most need. There is only X-amount of resources that are allocated. So if you allow more than 20 percent, 

if you expand that area and you put more resources into one area 

and there is only X-amount of resources, that, by definition, means 

that you have to take it away. 

And one of the other things that I heard you say is that you did 

not think it was a big thing when Mr. Shear said you asked were 

there any other big things. And obviously, it is a big thing if you 

have a press conference. As a former DA, I did not hold a press 

conference when it was something that was small. I held press conferences for something that I deemed to be big. So the fact that you 

have a press conference, to me, by definition, says that it was big. 

And right after he asked you were there any other big changes, it 

SBREP-219A with DISTILLER

19 

was not responded to. I think we have to be very careful that we 

allow the Congress to pass things and not usurp Article 1 authority 

or any other article authority. And I think we are doing that right 

now to delegate. 

Mr. Shoraka, do you not think that that is what you are doing, 

is designating these assets and resources that are limited to the 

areas that you think are most important? 

Mr. SHORAKA. Sir, again, we would be happy to share with you 

the legal analysis that we received from our Office of General 

Counsel. Their opinion was that we did have the authority to not 

use the additional steps performed by HUB for other program purposes. It was not a picking or choosing of where the impact would 

be made. It had an impact on every State. 

And the other thing that I will point out is that we have had a 

situation where we have been trying to recruit additional firms into 

the program. Where we were at a portfolio of 8,000 or 9,000, we 

are—— 

Mr. KELLY. I am sorry, I have got 15 seconds and I want to get 

this thing in. Just the one thing I will caution you on, it is easier 

to serve urban areas because they are closer together, but the 

whole purpose of this is to serve rural areas, and it is harder and 

more expensive. So when you focus on one large urban area with 

a larger population, you leave out the people who need it the most, 

which are the rural areas. 

Thank you, Mr. Chairman. I yield back. 

Chairman CHABOT. Thank you. The gentleman’s time is expired. 

The gentlelady from New York, Ms. Clarke, is recognized for 5 

minutes. 

I have been misinformed by my crack staff, so let me get the 

right one here. 

We will go to the gentlelady from North Carolina, Ms. Adams. 

Ms.ADAMS. Thank you, Mr. Chair. Thank you, Ranking Member 

Vela ́zquez. I thank my colleague, Ms. Clarke, for making that notation. 

Gentlemen, thank you for being here, and I certainly want to add 

my words of commendation to the late Mark Takai. I lived in the 

same building as well and met him regularly in the mornings 

downstairs in the lobby as he was waiting to be picked up, and we 

had many conversations along the way. We are certainly going to 

miss him and his bright smile. But certainly, a tribute to all of the 

work that he did for the people that he served, and I just wanted 

to add my words of thanks and appreciation to him. 

The HUBZone program is critically important in encouraging 

small businesses to build and operate in economically disadvantaged communities across our country. I do have a few questions, 

and I want to start with Administrator Shoraka. 

If you could just walk us through the certification process for 

small businesses looking to become part of the HUBZone program, 

I would appreciate that. 

Mr. SHORAKA. As I mentioned before, there are a number of requirements to become HUBZone certified. And as a result, quite 

frankly, of the findings in 2008 and 2009 of GAO, the program did 

become a full front-end certification program. So the primary office 

SBREP-219A with DISTILLER

20 

for the HUBZone firm needs to be in a HUBZone area. And by 

that, that means that the largest percentage of staff work in that 

office. And then 35 percent of your employees need to also reside 

in a HUBZone area. Again, not the same HUBZone area, but in a 

designated HUBZone area. 

Ms.ADAMS. Okay. So what about the recertification process? If 

you could identify some of the inefficiencies that exist within the 

process. 

Mr. SHORAKA. Thank you. Thank you for that question. 

One of the things that we have identified, both in the 8(a) program and the HUBZone program, quite frankly, in making sure 

that we are customer-friendly, is the overly burdensome requirements in some of our recertification or annual review processes. So 

we did put a team together to look at how we are recertifying both 

8(a) and HUBZone companies, and how can we reduce the burden 

on some of the smallest firms, some of the most deserving firms in 

the country. 

So one of the things that we did, and this is a discussion we have 

had with GAO, is to streamline the recertification process for the 

HUBZone and, quite frankly, for both, but for the HUBZone companies, so that they do not drop out of the program just because it 

is an overly burdensome process. 

Now, they recertify that they continue to meet the requirements 

of the program with the risk or at risk of perjuring themselves. So 

when they recertify, they sign at risk of perjuring themselves. 

When we find a bad actor, and we have done this a number of 

times, we have had more suspensions, debarments, and proposed 

suspensions and debarments in the last 4 years than in the previous decade, when we find a bad actor, we move quickly to get 

them out of Federal contracting. But our intent is to make our programs as user-friendly as possible. When we talk about risk-based 

analysis, when we do our site visits, the 10 percent, we look at not 

just any firm in the HUBZone program; we look at who is receiving 

contracts. That is where the risks exist, right? They are receiving 

benefits. Benefits are flowing to a recipient. And as I am sure you 

would agree, we would want the benefits to flow to the intended 

recipients. Our site visits oftentimes are determined on where contracts are going. And again, those site visits have documented 87 

percent of the firms meeting the requirements of the program. 

And lastly, I do not want to take too long, but lastly, we have 

the entire protest function. So if either a contracting officer or the 

SBA or an interested party, like the second runner-up in a contract, feels that that winner did not meet the requirements of being 

a HUBZone, they can file a protest, and that is when we will review all of the documentation to make sure that indeed they meet 

the requirements of the program. 

Ms.ADAMS. Thank you. And maybe, Mr. Shear, can someone 

speak to how the program services businesses in rural versus the 

urban areas and the challenges that exist there? 

Mr. SHEAR. It is a great question. And so for us, part of the concern, I agree with John Shoraka that the biggest element of risk 

in a program in certification/recertification are those that are getting contracts. But nonetheless, when you start talking about the 

inability to really provide specific information about designations 

SBREP-219A with DISTILLER

21 

that affect firms, it is not like we focused in on rural areas, but 

it was one place where we would just presume that in rural areas 

it is more difficult to deal with that situation. 

In terms of our work, looking at hypothetical changes, and part 

of this was concern from rural areas where unemployment areas 

are used to determine whether the area is eligible or not in these 

large counties is that we went through a scenario that said, well, 

what would happen if instead of using a 1-year unemployment rate 

for the 1 year, if we said let us look at the average unemployment 

rate over longer periods of time, that very much has a rural focus 

to it. So it is something that in rural areas it can be more problematic when you cannot give specific advice about whether your county is in is going to remain in the program. 

Ms.ADAMS. All right. Thank you, sir. I am out of time. I apologize, Mr. Chair. 

Chairman CHABOT. Thank you. Thank you, the gentlelady’s 

time is expired. 

The gentleman from Ohio, Mr. Davidson, is recognized for 5 minutes. 

Mr. DAVIDSON. Thank you, Mr. Chairman. Thank you all for 

being here. I have a couple basic questions on metrics. 

So how, Mr. Shoraka, how do you measure the success of the program? 

Mr. SHORAKA. I think for us right now, one of the—obviously, 

the base metric is the percentage that we are held accountable to 

as the Federal Government, the 3 percent goal, which is the statutory goal on prime and subcontracts. And when you look at that, 

quite frankly, because of the firms that we lost, because of the redesignation of the census change in 2010, we lost a third of the 

portfolio. And so when we came close to meeting that number in 

2009, it has, quite frankly, been a challenge. We hit 1.82 percent 

last year, so that is an area that the Federal Government can improve on, and that is an area where we have done—— 

Mr. DAVIDSON. So participation, I mean, simply participating 

in the program’s success, what are the economic benefits of the program? I mean, clearly there are benefits to the firm that get the 

contracts, but are there costs to the firm? I mean, they are basically getting a 10 percent cost preference in contracting, so does 

that really result in the government paying 10 percent more for the 

things they buy from that 3 percent of firms? Or is there a cost or 

savings? Have you measured that? 

Mr. SHORAKA. That is an area that we, as an agency, have not 

looked at, quite frankly. And when Congresswoman Vela ́zquez also 

talked about the impact to the communities, that is an area where 

we have had difficulty in being able to analyze are there a good 

number of firms, HUBZone firms, in this community? And what is 

the impact or the economic impact? 

Now, obviously, if an area was a HUBZone and then because of 

economic data no longer is a HUBZone, one would assume that 

good economic things have occurred, unemployment went down. 

But can we really correlate that to the HUBZone firms or the fact 

that that area was a HUBZone? That has been a difficult challenge 

for us to be able to determine. 

SBREP-219A with DISTILLER

22 

Mr. DAVIDSON. Thanks for that. And then how much does the 

HUBZone program cost to administer? Do you allocate cost in your 

budget in terms of what it costs? Mr. SHORAKA. If I am not mistaken, there is a $3 million or 

$2.8 million line item for the HUBZone program annually. 

Mr. DAVIDSON. And how many people are employed doing that? 

Mr. SHORAKA. Eighteen. Now, that is 18 that do the certification and the recertification. We obviously have district offices. We 

have 68 district offices around the country that help support and 

educate and, you know, do our outreach and recruiting, et cetera. 

So a portion of their time is dedicated to the HUBZone program. 

And that does not include, you know, our sister agencies and all 

their small business specialists, et cetera, that help to promote the 

HUBZone program. 

Mr. DAVIDSON. Mr. Shear, would you agree with those conclusions on metrics? 

Mr. SHEAR. It is a challenge to look at it. And so from our 

standpoint, how do you create benchmarks for what would happen 

with the absence of HUBZone activity? But nonetheless, after our 

2008 report, somebody was hired at SBA. We provided a lot of our 

time just giving technical support as far as how you could evaluate 

the program. So it is trying to look at what are the characteristics 

of different communities that are both HUBZones and not 

HUBZones and trying to make some comparisons to try to benchmark and to see what is the economic impact of the HUBZone program and how might that be affected by how many HUBZones? 

Again, this basic question. 

Every community would like to be a HUBZone, but every time 

you add communities the question is what happens to the existing 

communities? So there are ways that we think that could be used 

to try to benchmark, and that is what we are going to be attempting to do with our Puerto Rico mandate. But it is a real challenge. 

Mr. DAVIDSON. Setting aside Puerto Rico, do you have a mandate to do this anywhere, Mr. Shoraka, to actually create—because 

here is the concern, right? I disagree. Not every community would 

want to be a HUBZone. They want a good economy. They want 

good jobs and they want the opportunities that, by definition, make 

you not qualified as a HUBZone. So it is success to not be a 

HUBZone, frankly. But we are spending money because we want 

fewer HUBZones. You have found a way to increase more 

HUBZones or more places which flies in the eyes. So if we are 

spending the money, what are we getting in return? That is the 

thing that I think the American people want to know. And certainly, in our district where we do not have HUBZones, we want 

to know, hey, what are we getting? We are donating this for a good 

cause, right? 

Mr. SHORAKA. I think for our part this is a question, quite 

frankly, that we have around the 8(a) program as well. What is the 

impact of being in the program and how do we track your success 

or failure, quite frankly, through that program? The 8(a) program 

is a 9-year business development program where we have requirements and, quite frankly, statutory requirements to be able to 

track certain metrics with respect to income and employment, et 

cetera. 

SBREP-219A with DISTILLER

23 

With the HUBZone program, as we move into SBA One, one of 

the things that we could be discussing on the Hill, quite frankly, 

is statutory authority to collect some of the metrics around number 

of employees, revenues, growth, et cetera, that then we can track 

a firm through their years in the program and be able to report 

back, much like we do or should do. 

Mr. DAVIDSON. Thank you. My time is expired. Thank you. 

Chairman CHABOT. Thank you. The gentleman’s time has expired. 

The gentlelady from New York is recognized, Ms. Clarke. 

Ms. CLARKE. Thank you very much, Mr. Chairman. And I 

thank our ranking member. 

Before I begin, I would like to also thank you for the memoriam 

to our departed colleague, Mark Takai, and I would like to offer my 

condolences to his family, friends, and staff of Mr. Takai. He was 

a great man who I enjoyed working with. As Congresswoman Tulsi 

Gabbard stated in her remarks on the House floor yesterday, Mark 

Takai embodied the spirit of aloha, and I think we all were beneficiaries of that. And he will certainly be missed. 

But turning to the matter at hand, HUBZones are an important 

tool for revitalizing struggling communities. They incentivize investment in economically disadvantaged communities and provide 

residents of these communities with the means to support their 

families. In my district alone, more than 50 census tracks qualify 

as HUBZones in places like Flatbush and Marcus Garvey Village 

in Brownsville, Brooklyn. However, the program only works and is 

effective if firms are aware of their eligibility to participate and are 

recertified in a timely manner. 

So my question, Mr. Shoraka, is this. SBA has indicated that a 

lack of resources is a main obstacle for getting rid of the backlogs 

and allowing the agency to conduct a more in-depth recertification 

process. Can you give us an idea of how many new hires your department would need to run the HUBZone program efficiently and 

effectively and at the proper level for internal controls? 

Mr. SHORAKA. Thank you, ma’am. I appreciate the question. 

I think when we talk about obviously the number of resources or 

how many resources the HUBZone or, quite frankly, the SBA or my 

office, Government Contracting and Business Development, has, I 

think we always have—any Federal manager would argue that I 

may need more people to be able to get my job done. I think one 

of the things we have attempted to do is do our job smarter with 

systems and with technology. And so that is the direction we have 

moved forward in with respect to SBA One. 

And with respect to making sure firms are aware of the program 

and take advantage of the program, I think that is where, or at 

least in my opinion, that is where we need to double down on our 

outreach and education. So we have the Destination HUB then, 

that we have done over 15 events across the country. And one of 

the unique pieces of Destination HUB—and if we have not done 

one in New York, we need to do one—is that we actually sit down 

with local economic development folks and encourage them to use 

the HUBZone program as an economic development tool, another 

tool in their toolkit or tool belt. And so I think it is the question 

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24 

ronment to find ways to tighten their belt, but it is how do we leverage our resource partners, our Small Business Development 

Centers, our Women’s Business Centers? How do we leverage our 

stakeholders, like the HUBZone Council and other partners, in 

making sure that the word gets out and training is done efficiently 

and effectively? With respect to number of employees that may or 

may not require, I think there would have to be a much more significant analysis with respect to what that number would be. 

Ms. CLARKE. I want to encourage you to make that analysis, 

simply because the program is a program that holds great promise. 

And to the extent that we can be targeted and effective in terms 

of identifying potential businesses that should be accessing it and 

making sure that there is no abuse on the other side because someone who is far more sophisticated knows how to work the system, 

that makes all the difference in the world. And if you do not have 

the wherewithal to do sort of that balancing act, then we miss the 

point of the HUBZone program completely. So I want to encourage 

you to do that analysis. 

Mr. Shear, there have been concerns raised regarding data used 

to determine HUBZone eligibility, and some have called for using 

different criteria to designate HUBZones. Has GAO looked at how 

changing the unemployment rate and median household income required to determine HUBZones may affect the success of the program? 

Mr. SHEAR. Yes. And thank you for the question. 

In our 2015 report, this was very much, brought forward by requesters for that work really wanting a focus on what types of 

changes could be made and what would be the effect on a number 

of HUBZones. So this is one where I referred earlier. I really appreciate John and his staff really helping us work with their data system, but we went through a number of scenarios. So the 2015 report that provides part of the basis for my statement and it can 

certainly provide the report for the record, it is GAO-15-234. In appendix 3, we go through a number of scenarios. What would happen, based on at that time if you had changed some of these provisions? So it is meant to—not to say there is a right way of doing 

it, but it gets into some of the concerns, like I just stated with respect to rural areas. What would happen if you went to a longer 

term unemployment rate to determine eligibility? Things like what 

would happen? 

One of the scenarios we went to at the time was lifting this 20 

percent cap that is so much the focus, of this hearing and just 

other scenarios. What would be the impact of doing that on the 

number of HUBZones and just some of the consequences of that? 

And we are very mindful that when you shift around which areas 

get HUBZone status, that when you bring in new areas, it has implications for the existing areas, even those that remain in the program. 

Chairman CHABOT. The gentlelady’s time is expired. Thank 

you. 

The gentleman from New Jersey, Mr. Payne, is recognized for 5 

minutes. 

Mr. PAYNE. Thank you, Mr. Chairman, and to our ranking 

member. I apologize for being delayed and I was not here for the 

SBREP-219A with DISTILLER

25 

commemoration of our colleague, and I would just like to add my 

sentiments as well. 

Mark Takai was a true gentleman and epitomized what a member of Congress should be and he will be sorely missed. And I just 

knew that he was ill and was going through treatment, but just 

still been shocked by the rapid demise of our colleague and still 

shocked by it. But he was a good man and I think that is one of 

the best things you could say about a person. 

Mr. Shoraka, we know the HUBZone programs have had issues 

around fraud. As we have seen, part of the issue may be the certification process. And, you know, since the certification process depends on documentation submitted by the participant businesses, 

what does the SBA use to verify the information and documentation they are receiving is indeed authentic? And how can the system be improved to curtail the fraud? 

Mr. SHORAKA. So we use various obviously third-party sources 

of data to ensure ownership, residency, et cetera. And there is various documentation that can be used to document principal office 

residence, like leases or ownership documents, et cetera, as well as 

corporate structures, ownership, and control. I think, again, one of 

the challenges that we want to make sure we balance is if we 

wanted to eliminate all risk in the program, we could turn off the 

spigot and accept no applications and we would not have any risk 

at all, but that is not what we want. We want to make sure that 

the program serves the intended recipients. And quite frankly, 99.9 

percent of the program applicants are good actors. Unfortunately, 

we have .01 percent of people who are bad actors and will always 

continue to be bad actors. But one of the things that I think is critical is that we manage towards the good actors with risk-based 

analysis, as Mr. Shear has pointed to, to make sure that we do 

have backup to analyze the risk to the Federal Government with 

respect, again, to where the risks exist. The risk exists when the 

Federal Government is giving contracts to these small businesses. 

One last thing that I will point to is that with respect to the program and casting a broader net, we have done analysis that documents using the current formulas. That net is significantly smaller 

than the net was when the program was established. So I think 

that is another discussion that we have to have jointly with respect 

to what the intent of the program is. If we look at the analysis of 

when the program was put in place, the net that was cast is significantly broader than those formulas cast today. 

Mr. PAYNE. Okay. So you feel that the issue is .01? 

Mr. SHORAKA. With bad actors. I think there are always going 

to be bad actors. 

Mr. PAYNE. Oh, sure. I agree. I thought the issue was a little 

more, a little higher. 

Mr. SHORAKA. I think when you talk about, right, but when 

you talk about $96 billion into the hands of small businesses every 

year, and I am not sure what the GAO report, the exact numbers, 

but I know the numbers sound big, and obviously we want to address fraud when it is waste and abuse, but when you talk about 

$10 million as opposed to $96 billion into the hands of small businesses, that is a very small fraction. 

Mr. PAYNE. Okay, thank you. 

SBREP-219A with DISTILLER

26 

Mr. Shear, very quickly, you have been looking at this program 

for a number of years now. Why has the program remained to be 

susceptible to fraud? 

Mr. SHEAR. It is a very good question. I will first start out by 

something in my statement as far as, when we do our program 

audit and we are looking at what we call internal controls, that 

there has been improvement, particularly in the certification process. So the idea that when we looked in 2008, from the start we 

said this looks like a self-certification program. You know, from 

soup to nuts, it looks that way. So there has been improvement. 

Our concern, we have not found evidence of fraud, and we have 

not seen the susceptibility to fraud that we have reached out like 

we did in 2008 and said, you know, we have to have a fraud investigation here, but we do have concerns about the recertification 

process because there is a lot of moving parts: the characteristics 

of the businesses and the characteristics of the counties and census 

tracks that are defined as HUBZones. And so that is where our 

concern is. 

And when you have a lack of internal control, that is where our 

antennae tends to go up in terms of saying we are concerned about 

fraud. And it is hard to forget about fraud when we think of the 

experience we had, even though it was 8 years ago, the experience 

we had evaluating and conducting fraud investigations of this program. So we are always mindful of that. 

Mr. PAYNE. Okay, thank you. My time is expired. But the reason I asked the question is because the Committee has nothing but 

goodwill towards small businesses. It is our mission. But there are 

other members that always look for an issue around fraud to curtail the type of work that we are trying to do for small businesses. 

And with that I yield back. 

Chairman CHABOT. Thank you. The gentleman yields back. The 

gentleman’s time is expired. 

We would like to thank both of our witnesses for being here with 

us today. I think the importance of the HUBZone program and the 

concerns that some members had are reflected by the heavy attendance that we saw really on both sides of the aisle here today with, 

I thought, a lot of good questions. 

The SBA’s HUBZone program began with a goal of promoting 

economic growth by incentivizing small businesses to locate in 

areas most in need. This cannot be achieved, however, unless the 

program is properly managed and the benefits are not being taken 

up by nonqualified firms. The work GAO has done to identify specific ways in which the program should be improved has been invaluable. I thank this Committee and I would urge the SBA to take 

immediate steps to fully adopt all of the recommendations of the 

GAO. And we owe it to America’s small businesses and America’s 

taxpayers to ensure that the opportunities provided by the 

HUBZone program are utilized in the most efficient way possible. 

I would ask unanimous consent that members have 5 legislative 

days to submit statements and supporting materials for the record. 

Without objection, so ordered. 

And if there is no further business to come before the Committee, 

we are adjourned. Thank you very much. 

[Whereupon, at 12:33 p.m., the Committee was adjourned.] 

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27 

A P P E N D I X 

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Insert offset folio 28 here 23764.001

For Release on Delivery 

Expected at 11:00 a.m. ET, 

Wednesday, September 7, 2016 

GA0-16-866T 

United States Government Accountability Office 

Testimony 

Before the Committee on Small 

Business, House of Representatives 

HUBZONE 

PROGRAM 

Opportunities Exist to 

Further Improve 

Oversight 

Statement of William B. Shear, 

Director, Financial Markets and Community 

Investment 
28 

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Insert offset folio 29 here 23764.002

GAO 

Highlights 

Highlights of GA0-16-866T, a testimony 

before the Committee on Small Business, 

House of Representatives 

Why GAO Did This Study 

The purpose of the HUBZone program 

is to stimulate economic development 

in economically distressed areas, SBA 

certified HUBZone firms are eligible for 

federal contracting benefits, including 

limited competition awards such as 

sole-source and set-aside contracts. 

Small firms in SBA's HUBZone 

program had almost $6.6 billion in 

obligations on active federal contracts 

for calendar year 2015. 

This testimony includes a discussion of 

(1) how SBA communicates changes 

in HUBZone designations to firms, 

including how SBA addressed GAO's 

2015 recommendation to improve this 

process, and (2) SBA's certification 

and recertification processes for firms, 

including how SBA addressed GAO's 

2015 recommendation to improve 

recertification. 

GAO relied on the work supporting its 

February 2015 report on SBA's 

oversight of the program (GA0-15-

234) and its March 2016 report on 

actions taken in response to GAO 

recommendations (GA0-16-4232R), 

as well as July and August 2016 

interviews with SBA officials on efforts 

the agency had undertaken to 

implement GAO's recommendations. 

View GA0-16-866T. For more information, 

contact William B. Shear at (202} 512-8678 or 

shearw@gao.gov. 

HUBZONE PROGRAM 

Opportunities Exist to Further Improve 

Oversight 

What GAO Found 

As of August 2016, the Small Business Administration (SBA) had taken steps to 

better inform firms about changes in the designations of Historically Underutilized 

Business Zones (HUBZones) but had not yet fully implemented GAO's February 

2015 recommendation to improve this process. 

SBA primarily designates economically distressed areas as HUBZones, 

based on demographic data such as unemployment and poverty rates. The 

designations include certain census tracts and counties and are subject to 

periodic changes as economic conditions change. HUBZones that lose 

qualifying status due to changes in economic conditions become 

"redesignated" and undergo a 3-year transition period. After the 3-year 

period, HUBZone certified firms in these areas can no longer apply to and 

participate in the program and receive contracting preferences. 

GAO found in February 2015 that SBA's communications to firms about 

programmatic changes (including redesignation) generally were not specific 

to affected firms and thus some firms might not have been informed they 

would lose eligibility. GAO recommended SBA better ensure firms were 

notified of changes that might affect program participation. 

In response, SBA revised its approval letters to newly certified firms to include 

information about the consequences of redesignation (if applicable). But as of 

August 2016, SBA had not yet implemented changes to help ensure all currently 

certified firms would be notified of changes that could affect their program 

eligibility. SBA officials recently told GAO the agency intended to develop a 

technology solution by spring 2017 to help address GAO's recommendations. 

While SBA made changes to its certification and recertification processes, SBA 

had not fully addressed GAO's recommendation on recertification of firms. To 

receive initial certification, SBA requires a!! firms to provide documentation to 

show they meet the eligibility requirements. SBA also conducts site visits at 

selected firms (for example, based on the amount of federal contracts received). 

According to HUBZone regulations, firms wishing to remain in the program 

without any interruption must recertify their continued eligibility to SBA within 30 

days after the third anniversary of their certification date and each subsequent 3-

year period. But in 2015, GAO found SBA did not require firms seeking 

recertification to submit any information to verify continued eligibility and instead 

relied on firms' attestations of continued eligibility. GAO also found SBA had a 

backlog for recertifying firms. GAO recommended in February 2015 that SBA 

implement additional controls for recertification, including criteria for requesting 

and verifying firm information, and ensuring sufficient staffing for the process so 

that significant backlogs would not recur. As of August 2016, SBA had plans to 

eliminate the backlog, but had not issued guidance on requesting supporting 

documents. SBA officials stated that any potential risk of fraud during 

recertification would be mitigated by SBA's site visits of firms. But as GAO stated 

in 2015 and reiterated in 2016, SBA only conducts site visits to about 10 percent 

of certified firms on an annual basis and characteristics of firms often can 

change, therefore relying on site visits is not adequate to mitigate this risk. 

------------- United States Government Accountability Office 
29 

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Chairman Chabot, Ranking Member Velazquez, and Members of the 

Committee: 

Thank you for the opportunity to discuss our work on the Historically 

Underutilized Business Zone (HUBZone) program of the Small Business 

Administration (SBA). As of December 31, 2015, there were about 16,500 

designated HUBZones and 4,600 certified firms in the program. For 

calendar year 2015, firms in the program had almost $6.6 billion in 

obligations on active federal contracts directly awarded to bidders. 

Congress established the HUBZone program to stimulate economic 

development in economically distressed communities. The program 

provides federal contracting preferences to small businesses located in 

HUBZone-designated areas that also employ residents of the areas.' The 

contracting preferences that a certified HUBZone firm (one that meets 

program eligibility requirements) can receive include limited-competition 

contracting awards such as sole-source and set-aside contracts. A 

HUBZone-certified firm also can receive an award through full and open 

competition if its price does not exceed the otherwise lowest responsive 

and responsible offeror's price by more than 10 percent. 2 Federal 

agencies are responsible for trying to meet an annual statutory goal for 

awarding contracts to HUBZone firms (3 percent of all prime contracts 

and subcontracts that are subject to the goaling process). During fiscal 

year 2015, federal agencies collectively obligated 1.8 percent of eligible 

contracts to HUBZone-certified firms. 

My statement today is based on the key findings in our February 2015 

report on SBA's oversight of the HUBZone program and our March 2016 

follow-up report on SBA responses to our 2015 recommendations.' 

Specifically, this testimony discusses (1) how SBA communicates 

changes in HUBZone designations to firms, including how SBA 

Pub. L. No. 105-135, Title VI, 111 Stat 2592, 2627-36 (1997). 

21n this case, if the other offerer is a small business concern, the 10 percent price 

preference does not apply. 

3

GAO, Small Business Contracting: Opportunities Exist to Further Improve HUBZone 

Oversight, GA0-15-234 (Washington, D.C.: Feb. 12, 2015); and HUBZone Program. 

Actions Taken on February 2015 GAO Recommendations, GA0-16-423R (Washington. 

D.C.: Mar. 24, 2016). 

Page 1 GA0~16~866T HUBZone Program 
30 

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Background 

addressed our recommendation to improve this process; (2) SBA's 

certification and recertification processes for firms, including how SBA 

addressed our recommendations to improve these processes; and ( 3) 

how potential changes to designation criteria could affect HUBZones. In 

preparing this statement, we relied on the work supporting our February 

2015 and March 2016 reports, as well as July and August 2016 interviews 

with SBA officials on efforts they had undertaken to implement our 

recommendations. More detailed information on our scope and 

methodology can be found in our February 2015 and March 2016 

reports' 

The work on which this testimony is based was performed in accordance 

with generally accepted government auditing standards. Those standards 

require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on 

our audit objectives. 

The HUBZone Act of 1997 (which established the HUBZone program) 

identified HUBZones as (1) qualified census tracts, which are determined 

by area poverty rate or household income; (2) qualified nonmetropolitan 

counties, which are determined by area unemployment rate or median 

household income; and (3) lands meeting certain criteria within the 

boundaries of an Indian reservation. 5 Congress subsequently expanded 

4

GA0-15-234 and GA0-16-423R 

5

Small Business Reauthorization Act of 1997, tit. VI, Pub. L. No. 105-135). 111 Stat 2592, 

2627-2636 (codified in several sections, as amended, in tit!e 15, United States Code) 

Qualified census tracts are generally those the Secretary of the Department of Housing 

and Urban Development designates for the Low-Income Housing Tax Credit (UHTC) 

program, 

Page 2 GA0-16-866T HUBZone Program 
31 

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the criteria for HUBZones to add former military bases and counties in 

difficult development areas outside the continental United States. • 

To be certified to participate in the HUBZone program, a firm must meet 

the following criteria: 7 

when combined with its affiliates, be small by SBA size standards;' 

be at least 51 percent owned and controlled by U.S. citizens; 9 

have its principal office-the location where the greatest number of 

employees perform their work-in a HUBZone; 10 and 

have at least 35 percent of its employees reside in a HUBZone. 11 

SBA recertifies firms (that is, determines that firms continue to meet 

HUBZone eligibility requirements to participate in the program) every 3 

years. 

6Difficu!t development areas have high construction, land, and utility costs relative to area 

median income, and are designated annually. Consolidated Appropriations Act, 2005 Pub. 

L No. 108-447, Div. K, § 152, 118 Stat 3456-58 (2004), and Safe, Accountable, Flexible, 

Efficient Transportation Equity Act A Legacy for Users, Pub. L. No. 109M59, § 10203, 119 

Stat 1933-34 (2005). In addition, Section 866 of the National Defense Authorization Act 

for Fiscal Year 2016 authorized Native Hawaiian Organizations to own HUBZone smaB 

business concerns; expanded the definition of "base closure area"; and authorized the 

inclusion of "qualified disaster areas" under the program. In August 2016, SBA issued a 

final rule to implement these changes. 

7Different rules apply for Indian Tribal governments, Alaska Native Corporations, 

Community Development Corporations, and small agricultural cooperatives. See 13 CFR 

Part 126 

8The finn, with its affiliates, must meet the size standard corresponding to its primary 

industry classification as defined in 13 CFR Part 121. SBA's size standards vary by 

industry and are almost always stated as the average number of employees or average 

annual receipts of a business 

9

Qua!ified HUBZone firms also can be owned and controlled by Alaska Native 

Corporations, Indian Tribal governments, community development corporations, and 

agricultural cooperatives 

1

0Whlle a certified HUBZone business must have its principal office in a HUBZone area, 

HUBZone contracts are not limited to performance in HUBZone areas. 

11SBA defines an employee as an individual employed on a full-time, part-time, or other 

basis, and working a minimum of 40 hours per month. This includes employees obtained 

from a temporary employee agency, !easing concern, or through a union agreement or coemployed pursuant to a professional employer organization agreement. 

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SBA Improved 

Communications to 

Firms about Changes 

to HUBZone 

Designations but Had 

Not Fully 

Implemented GAO's 

Recommendation 

As of August 2016, SBA had taken some actions to address but had not 

yet fully implemented our recommendation on better informing firms about 

programmatic changes that could affect their eligibility. In our February 

2015 report, we described how HUBZone designations can change with 

some frequency. 12 SBA generally updates HUBZone designations at least 

twice a year based on whether they meet statutory criteria (such as 

having certain income levels or poverty or unemployment rates). SBA 

generally uses data from other federal agencies to determine if areas still 

qualify for the HUBZone program. As a result of the updates, additional 

areas are designated for inclusion while other areas lose their 

designation. Areas that lose their designation begin a 3-year 

"redesignation" period during which firms in those areas can continue to 

apply to and participate in the program and receive contracting 

preferences. After the 3 years, firms in these areas lose their HUBZone 

certified firm status and the associated federal contracting award 

preferences. In 2015, we reported that 17 percent (871) of firms certified 

at the time were located in a redesignated area. 

However, we found that SBA's communications to firms about 

programmatic changes (including redesignation) generally had not been 

targeted or specific to firms that would be affected by the changes. In 

2015, we found that SBA used a broadcast e-mail (which simultaneously 

sends the same message to multiple recipients) to distribute program 

information. According to SBA officials, the e-mail list initially included all 

certified firms, but firms certified since the list was created in 2013 and up 

to the time period covered by our 2015 report had not been automatically 

added to the list. Firms had to sign up through SBA's website to receive 

the e-mails. As a result, not all certified firms may have done so. 

Consequently, we recommended that SBA establish a mechanism to 

better ensure that firms are notified of changes to HUBZone designations 

that may affect their participation in the program. This recommendation 

was intended to address communications to all certified firms, whether 

newly certified or in the program for years. 

In response to the recommendation, SBA has improved notifications to 

newly certified firms. As we reported in March 2016, SBA revised its 

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certification letters to firms. If SBA identifies during an application review 

that a firm's principal office is in a redesignated area, it indicates in the 

certification letter that the firm is in a redesignated area, explains the 

implications of the designation, and notes when the redesignated status 

will expire. However, we found in March 2016 that SBA had not yet 

implemented changes to ensure that all currently certified firms are 

notified of changes that could affect their program eligibility. 13 It is 

important that all certified firms potentially affected by such changes 

receive information about the changes or are made aware in a timely 

fashion of any effects on their program eligibility. 

As of August 2016, SBA had plans to improve its notifications to all firms. 

SBA recently hired an employee whose responsibilities include helping 

SBA update its e-mail distribution list As part of this effort, according to 

SBA officials, SBA plans to collect all the e-mail addresses for certified 

firms from its Dynamic Small Business Search database to create a new 

distribution list 14 SBA plans to begin adding newly certified firms to the 

list quarterly. Additionally, SBA officials told us that the agency intends to 

develop a technology solution similar to SBA One-a database now used 

to process loan applications-to include the HUBZone program to help 

collect information and documents from existing firms and address this 

recommendation. SBA expects to implement this solution by spring 2017. 

14The Dynamic Small Business Search database offers a search engine for contracting 

officers and serves as a marketing tool for sma!! businesses that register with the system. 

It contains the profiles of thousands of small firms_ 

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SBA Has Taken Some 

Steps to Address 

GAO's 

Recommendation to 

Strengthen the 

Recertification 

Process 

We found in February 2015 that SBA had addressed weaknesses in its 

certification process that we previously identified. However, as of August 

2016, SBA had not yet taken steps to fully address our recommendation 

related to the HUBZone firm recertification process. In February 2015, we 

reported that SBA had changed its certification process to require all 

applicant firms to provide documentation supporting their eligibility and to 

require agency staff to perform a full document review to determine firms' 

eligibility for the program." Additionally, SBA had conducted site visits on 

1 0 percent of its portfolio of certified firms every year in response to a 

prior GAO June 2008 recommendation. 16 However, we also found 

deficiencies relating to the recertification process. 

First, in 2008 and again in 2015, we found that the recertification 

process had become backlogged-that is, firms were not being 

recertified within the 3-year time frame. 17 As of September 2014, SBA 

was recertifying firms that had been first certified 4 years previously. 

While SBA initially eliminated the backlog following our 2008 report, 

according to SBA officials the backlog recurred due to limitations with 

the program's computer system and resource constraints. 

Second, in 2015 we found that SBA relied on firms' attestations of 

continued eligibility and generally did not request supporting 

documentation." SBA only required firms to submit a notarized 

June 2008, we found that SBA relied on data that firms entered in the online 

application system and performed limited verification of the self-reported information. As a 

result, the mechanisms that SBA used to certify and monitor firms provided limited 

assurance that only eligible finns participated in the program. We recommended that SBA 

develop and implement guidance to more routinely and consistently obtain supporting 

documentation upon application and conduct more frequent site visits, as appropnate, to 

ensure that firms applying for certification were eligible. See GAO, Small Business 

Administration: Additional Actions Are Needed to Certify and Monitor HUBZone 

Businesses and Assess Program Results, GA0-08~643 (Washington, D.C.: June 17, 

2008). 

16!n June 2008, we reported that SBA rarely conducted site visits during program 

examinations to verify a firm's information and recommended that the agency conduct 

more frequent site visits. GA0-08-643. 

17 According to HUBZone regulations, firms wishing to remain in the program without 

interruption must recertify their continued eligibility to SBA within 30 calendar days after 

the third anniversary of their date of certification and for each subsequent 3-year period. 

13 CFR §126.500. GA0-08-643 and GA0-15-234. 

18GA0-15-234. 

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recertification form stating that their eligibility information was 

accurate. SBA officials did not believe they needed to request 

supporting documentation from recertifying firms because all firms in 

the program had undergone a full document review, either at initial 

application or during SBA's review of its legacy portfolio in fiscal years 

2010-2012. 19 

As a result, we concluded in 2015 that SBA lacked reasonable assurance 

that only qualified firms were allowed to continue in the HUBZone 

program and receive preferential contracting treatment. 

Consequently, we recommended that SBA reassess the recertification 

process and implement additional controls, such as developing criteria 

and guidance on using a risk-based approach to requesting and verifying 

firm information, allowing firms to initiate the recertification process, and 

ensuring that sufficient staff would be dedicated to the effort so that 

significant backlogs would not recur. 

In response to the recommendation, SBA made some changes to its 

recertification process. For example, instead of manually identifying firms 

for recertification twice a year, SBA automated the notification process, 

enabling notices to be sent daily for firms to respond to and attest that 

they continued to meet the eligibility requirements for the program. 

According to SBA officials, this change should ultimately help eliminate 

the backlog by September 30, 2016. 

However, as we discussed in our March 2016 report, SBA had not 

implemented additional controls (such as guidance for when to request 

supporting documents) for the recertification process because SBA 

officials believe that any potential risk of fraud would be mitigated by site 

visits to firms. 20 The officials also cited resource limitations. Based on 

data that SBA provided, the agency visited about 10 percent of certified 

firms each year during fiscal years 2013-2015. 21 SBA's reliance on site 

agency officials, SBA conducted the portfolio review to verify that firms 

certified SBA implemented the full document review compiled with the program's 

eligibility requirements. 

20GA0-16-423R. 

21 According to SBA officials, SBA anticipates conducting site visits to 12 percent of its 

portfolio in fiscal year 2016. 

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Potential Changes to 

HUBZone 

Designation Criteria 

Could Affect Program 

Benefits Realized by 

Specific Communities 

visits alone would not mitigate the recertification weaknesses that were 

the basis for our recommendation. In recognition of SBA's resource 

constraints, we said in our 2015 report and reiterated in 2016 that SBA 

could apply a risk-based approach to its recertification process to review 

and verify information from firms that appear to pose the most risk to the 

program. A lack of risk-based criteria and guidance for staff to request 

and verify firm information during the recertification process increases the 

risk that ineligible firms obtain HUBZone contracts. And as we stated in 

2015 and reiterated in 2016, the characteristics of firms and the status of 

HUBZone areas-the bases for program eligibility-often can change, 

and need to be monitored. 

SBA officials told us that the agency intends to implement a technologybased solution similar to SBA One to address some of the ongoing 

challenges with the recertification process by spring 2017. The officials 

expect that the new solution will help them better assess firms and 

implement risk-based controls. 

As we reported in February 2015, potential changes to HUBZone 

designation criteria could be designed to provide additional economic 

benefits to some communities. 22 However, changes that benefit some 

communities also could, through competitive market processes, reduce 

activity by HUBZone firms in existing HUBZones. Likewise, if the potential 

changes significantly increased the number of HUBZones, new areas 

could realize economic benefits. However, such changes also could result 

in diffusion-decreased targeting of areas of greatest economic 

distress-by lessening the competitive advantage on which small 

businesses may rely to thrive in economically distressed communities. 

An analysis we performed for our February 2015 report offers examples 

of the scope of the differences in economic conditions among HUBZone 

areas (qualified areas), redesignated areas, and non-HUBZone areas 

(nonqualified tracts or areas) . We analyzed the economic conditions of 

such areas as of 2012 and found that indicators for redesignated areas 

on average fell between those of qualified and non-qualified areas. For 

example, as shown in figure 1, qualified census tracts had poverty and 

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unemployment rates of 32 percent and 14 percent, respectively; 

redesignated tracts had rates of 24 percent and 12 percent, respectively; 

and nonqualified tracts had rates of 11 and 8 percent, respectively. A 

similar pattern existed for nonmetropolitan counties. Therefore, while 

allowing redesignated areas with certified firms to remain eligible can 

generate economic benefits for such areas, such inclusion could limit the 

benefits realized by qualified areas with more depressed economic 

conditions. 

Figure 1: Comparison of Unemployment and Poverty Rates by Census Tract and 

Nonmetropolitan County HUBZone Eligibility Status, as of 2012 

Census tracts 

Percentage 

35 

30 

25 

20 

15 

10 

Poverty Unemployment 

rate rate 

CJ Ncn-HUBZone 

CJ Rectes1gnated 

- HUBZone qualified 

Nonmetropolitan counties 

Perc&ntage 

35 

30 

25 

20 

15 

10 

Poverty Unemployment 

rate rate 

Soorce GAO analysis of Bureau of labor Stahshcs and Amenca'"< Comrmm1ty Survey data i GAO·l6-866T 

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In our 2015 report, we explored the potential impact of altering some of 

the criteria used to designate HUBZones. 23 We examined changes to 

thresholds for unemployment rate and for the number of census tracts 

that could qualify for the program in a given metropolitan area. For 

example, one way a nonmetropolitan county can qualify as a HUBZone is 

based on its unemployment rate. More specifically, the unemployment 

rate must be 140 percent or more of the average unemployment rate for 

the United States or for the state in which the county is located, 

whichever is less. Under the current definition, two counties in different 

states with the same unemployment rate would not necessarily both 

qualify as HUBZones, depending on the unemployment rate of the state 

in which they are located. In general, every county in a state with an 

unemployment rate less than the U.S. average would qualify as a 

HUBZone if its unemployment rate was at least 140 percent of the state's 

(even if it was less than the U.S. average). In contrast, counties in states 

with unemployment rates higher than the U.S. average must have an 

unemployment rate at least equal to 140 percent of the U.S. average to 

qualify as a HUBZone. 

Our application of hypothetical changes to the unemployment rate 

generally resulted in approximately the same number of areas qualifying 

compared to the current definition with two exceptions -applying the 

lowest unemployment rate to all states resulted in approximately four 

times as many counties qualifying, while applying the highest 

unemployment rate resulted in approximately eight times fewer counties 

qualifying (see table 1). 

Table 1: Total Number of Nonmetropofitan Counties by State That Would Qualify If Different Unemployment Rates Were Used, 

as of 2013 

Current Lowest state Highest state 

definition (1~ rate applied to rate applied to u.s. Average 5-year 10-year 

year rate) all states all states average state rate average average 

Total number of qualifying 

counties 424 1,692 54 301 451 345 377 

Source GAO analySIS ol Bureau of Labor Stat•st<cs data 1 GA0-16·866T 

23GA0-15-234. 

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GAO Contact and 

Staff 

Acknowledgments 

(101058) 

Similarly, we analyzed the potential impact of removing the limit on the 

number of areas that could qualify as HUBZones pursuant to the 

definition of "qualified census tract" that was in effect at the time we 

issued our February 2015 report 24 We found that about 2,400 more 

census tracts would qualify as HUBZones if the 20 percent cap were not 

in place, an increase of 15 percent from the number of qualified tracts as 

of June 2014, 

Chairman Chabot and Ranking Member Velazquez, this concludes my 

statement I would be pleased to respond to any questions you or other 

Members of the Committee may have. 

If you or your staff have any questions about this testimony, please 

contact William B. Shear, Director, Financial Markets and Community 

Investment, at (202) 512-8678 or shearw@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this statement GAO staff who made key contributions 

to this testimony are Harry Medina (Assistant Director), Daniel Newman 

(Analyst-in-Charge), Pamela Davidson, John McGrail, and Barbara 

Roesmann. 

issued our report, the term "qualified census tract" for the HUBZone 

program same meaning as that term was used in the LIHTC program. See 15 

US C.§ 632(p)(4)(A)(i). The Department of Housing and Urban Development designates 

qualified census tracts for the UHTC program. Statutory provisions for UHTC limit the 

amount of qualified tracts in any metropolitan statistical area or pnmary metropolitan 

statistical area to no more than 20 percent of the total population of the statistical area. 

For purposes of the rule, all non metropolitan areas in a state are treated as if they 

constituted a single metropolitan area. See 26 U.S.C §42{d}(5)(8)(il)(lll). Consequently, 

some tracts that qualified as HUBZones based on the area's median household income or 

poverty rate were not designated as qualified census tracts because of the population cap, 

and were therefore not included in the HUBZone program. Since the issuance of our 

report, the term "qualified census traer for the HUBZone program was amended to 

provide that the 20 percent population cap does not apply, for a limited time, to census 

tracts in any metropolitan statistical area in Puerto Rico that otherw1se meet the 

definition's criteria for household income or poverty rate. Pub. L No. 114-187, § 412(a)(1), 

Stat. (2016), codified at 15 U.S.C.§ 632(p)(4)(A)(ii) 

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U.S. Small Business Administration 

Washington D.C. 20416 

Wednesday, September 7, 2016 

Written Testimony of 

A. John Shoraka, Associate Administrator 

Office of Government Contracting and Business Development 

Before The 

United States House of Representatives 

Small Business Committee 

Hearing Entitled 

"Ensuring Opportunities: Oversight of the HUBZone Program" 

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To Chairman Chabot, Ranking Member Velazquez, and members of the full committee, I 

appreciate the opportunity to testify. Before I begin, I would like to take a moment to 

acknowledge your former colleague, Congressman Mark Takai of Hawaii, who served as 

Ranking Member of the Subcommittee on Contracting and Workforce. Congressman Takai was 

a true advocate and leader for small businesses in Hawaii and across the nation. His presence 

will truly be missed. 

Over the past seven years, the Administration, Congress, SBA, and federal agencies have been 

successful in expanding federal small business contracting opportunities. As a result of 

increased advocacy efforts, and improved policies and regulations, the level of accountability 

has been raised across the federal government and its executive leadership teams, allowing 

small businesses to continue to become more agile, innovative, and affordable providers of 

goods and services. This increased focus has resulted in over $640 billion in federal contracting 

dollars being awarded to small businesses from Fiscal Years (FY) 2009 to 2015. Of that, $90.7 

billion was awarded in FY 2015, which represents an incredible impact to the American 

economy and drove job creation and support for over 537,000 jobs. Through small business 

contracting, the federal government acts as a catalyst for small business growth, while 

supporting the economic security of the nation. 

For the third consecutive year, the federal government exceeded the 23 percent small business 

prime contracting procurement goal, awarding 25.75 percent of eligible contracts to small 

businesses in FY 2015. This is the highest percentage recorded in history. Additionally, the 

federal government achieved the Women-Owned Small Business (WOSB) goal of five percent 

for the first time in history, doubled the Small Disadvantaged Business (SDB) goal, and achieved 

the highest percentage ever of contracts awarded to Service-Disabled Veteran Owned Small 

Businesses (SDVOSBs) at 3.93 percent. 

We have been able to achieve these goals through a commitment to small businesses 

participation and growth by federal agencies. During FY 2015, the federal government as a 

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whole received an "A" on its Small Business Scorecard, with three the 24 agencies receiving an 

"A+," and 18 agencies receiving an "A." These achievements are the result of the dedicated 

and focused efforts by the SBA and federal agencies to support small businesses, as they play a 

critical role in building and sustaining the nation's industrial base and strengthening the 

economy. 

Over the last few years, the SBA Office of Government Contracting and Business Development 

(GCBD) began a variety of programmatic streamlining and process improvements efforts to 

enhance customer service and reduce the administrative burdens on small business firms. 

These ongoing efforts include, but are not limited to, significant improvements and reduced 

timelines in processing 8(a) and HUBZone Program applications, including 8(a) Mentor Protegee 

agreements, while overhauling the HUBZone, 8{a), and WOSB programs' Standard Operating 

Procedures, which are nearing final agency approval. GCBD also initiated efforts to invest in 

technological solutions to provide efficiencies for our interactions with small businesses. To 

ensure compliance with small business contracting regulations, Administrator Contreras-Sweet 

authorized the hiring of 10 additional Procurement Center Representatives {PCRs), who were 

subsequently hired. They are currently supporting oversight of federal buying center activities 

and have fulfilled a long-term need of providing additional oversight and support. 

SBA has also implemented over 2S provisions from the Small Business Jobs Act of 2010 and the 

National Defense Authorization Acts (NDAAs) of 2013, 2014, 2015, and 2016, and is making 

great progress towards implementing the remaining provisions. Provisions implemented to 

date include completion of the WOSB Industry study, finalization of the WOSB sole source rule, 

accountability of senior executives, total and partial set-asides and reserves under multiple 

award contracts, revisions to the reporting structure of Office of Small Disadvantaged Business 

Utilization {OSDBU), inclusion of overseas contracting in the FY16 goaling base, and increased 

training and certification for staff. Additionally, the SBA issued a final rule expanding HUBZone 

eligibility in areas surrounding Based Realignment and Closure (BRAe) areas, qualified disaster 

areas, and allowing Native Hawaiian Organizations to own HUBZone firms. SBA also issued a 

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final rule on teaming allowing small business concerns to utilize similarly situated entities to 

perform set-aside contracts. We are working closely with the FAR Council to incorporate new 

regulations into the FAR as expeditiously as possible. Lastly, SBA issued a final rule 

implementing the new "All Small" Mentor Protegee Program (MPP), which was followed by 

Administrator Contreras-Sweet approving the new office structure and processes for the 

program last month. With these important steps, the new "All Small" MPP is on track to begin 

accepting applications on October 1, 2016. 

As we continue to support and improve contracting opportunities for small businesses, there 

are always opportunities to build upon our strengths and improve in certain areas. We are 

aware of recommendations from the Government Accountability Office {GAO} and the 

Inspector General (IG) that remain open and need to be closed with urgency. Closure of these 

open recommendations is a high priority and we are actively working with the IG and GAO to 

come to meaningful resolutions that will benefit small businesses through improved SBA 

policies and practices. In particular, the HUBZone program has two open GAO 

recommendations and two open IG recommendations that we are actively working to resolve. 

Through continued engagement and open communication, we believe we are nearing closure 

of these recommendations. 

In general, the HUBZone Contracting Program serves as an economic development tool that 

encourages small businesses to locate, invest, and hire employees from economically 

disadvantaged areas of the United States. As an agency, we work tirelessly to educate the small 

business and procurement communities about the HUBZone Program, in order to encourage 

firms to seek certification, help agency buyers utilize the program, and show economic 

development entities how the program's benefits can be used as a tool to attract small 

businesses to certain areas. Despite limited resources, the program has seen success in its 

efforts to ensure its mission is achieved. For example, the HUBZone Program has implemented 

a sustainable plan to process applications within a 90 day period and successfully conducted 

site visits to 10 percent of firms in its portfolio with 87 percent of those site visits finding firms 

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in compliance. The program office has also increased education and outreach efforts through 

the second year of the DestinationHUB initiative, visiting 15 cities and encouraging small 

businesses to seek federal contracting opportunities. Moreover, the SBA recently conducted an 

in-depth analysis of the legislative and regulatory history of the program to determine if it had 

authority to remove the 20 percent population cap to positively impact additional areas. Our 

analysis confirmed that SBA did have the authority to remove the cap and subsequently did so 

increasing the number of census tracts becoming HUBZones. Due to the removal of the cap, 

Puerto Rico saw the largest increase of 516 new designated HUBZones. 

We are highly committed to continuous improvements in the HUBZone program, along with 

SBA's other certification and contracting programs. Our goal is to remove unnecessary burdens 

placed on small businesses that have no merit. We are working intently to incorporate the 

remaining, yet unimplemented provisions from recent Defense authorization bills into official 

agency policies and regulations intended to allow an even playing field for small businesses. 

Furthermore, we remain committed to updating our Standard Operating Procedures as well as 

resolving open recommendations from the GAO and I G. 

Our mission at the SBA is always to ensure that responsible small businesses have the 

maximum practicable opportunity to compete for and do business with the federal 

government. Every day, we work diligently to fulfill that mission. I would like to recognize this 

committee's commitment to small businesses and for being a partner in advancing positive 

small business practices across the federal marketplace. I would also like to acknowledge the 

Administration and federal agencies for their dedication to providing meaningful contracting 

opportunities to the small business community. Led by Administrator Contreras-Sweet, we will 

continue to fight for small businesses, improve participation, and support firms as they 

compete and successfully win federal contracting opportunities. 

Thank you for the opportunity to testify here today. I look forward to your questions. 

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Questions for the Record 

Committee on Small Business 

Hearing: "Ensuring Opportunities: Oversight of the HUBZone Program" 

September 7, 2016 

GAO Responses 

1. Has GAO examined whether SBA exceeded its authority in removing the 20% cap for 

qualified census tracts in the HUBZone program without Congressional authorization? 

GAO has not examined this legal issue to date. As detailed in our September 7 statement, however, we 

have recently examined and reported on several other significant HUB Zone matters: (I) how SBA 

communicates changes in HUBZone designations to firms, including how SBA addressed GAO's prior 

recommendation to improve this process; (2) SBA's certification and recertification processes for firms, 

including how SBA addressed GAO's prior recommendations to improve these processes; and (3) how 

potential changes to designation criteria could affect HUBZones. 

2. Has GAO examined what the effect of removing the 20% cap for qualified census tracts 

would have on the HUBZone program? 

As discussed in my statement, in our 2015 report we analyzed the potential impact of removing the 20 

percent cap for qualified census tracts on the number ofHUBZones. 1 Our analysis found that about 2,400 

additional census tracts would qualify, an increase of 15 percent from the number of qualified tracts as of 

June 2014. 

3. Has GAO commenced planning for the report mandated by the PRO MESA legislation, and 

does it anticipate that the results of that report will tell us anything about the potential 

effects of expanding the program nationwide? 

GAO has begun planning for the work mandated by the PRO MESA legislation and we expect to formally 

begin working on it in October 2016. As with all engagements, we will begin our work by designing an 

appropriate scope and methodological approach for addressing the mandate. While our primary focus 

would be the impact of expanding the program on Puerto Rico, we anticipate that our analysis would also 

provide information on the effect a nationwide expansion could have on the program in general. 

4. In addition to the information technology challenges facing the HUBZone program, what 

are some of the other concerns that need to be addressed to ensure the program runs 

effectively? 

In addition to its information technology improvements, SBA also would need to review and possibly 

update its Standard Operating Procedures. For example, if the improved technology allows SBA to collect 

documentation related to a firm's ongoing eligibility, SBA would have to require firms submit additional 

information as part of its recertification process. Additionally, SBA would need to develop a risk-based 

approach for selecting firms for review by SBA staff to determine whether the firm remains in 

compliance with the eligibility requirements. We also previously recommended that SBA ensure that 

firms are notified of changes that may affect their participation in the program. While the new system 

should allow SBA to maintain more current contact information for certified fmns, SBA would have to 

establish a process to ensure that certified firms are regularly added to its email distribution list upon 

which it relies to keep firms informed about programmatic changes, such as updates to the HUBZone 

maps. Similarly, SBA would be able to use these additional capacities to inform currently certified firms 

'GAO, Small Business Contracting: Opportunities Exist to Further Improve HUBZone Oversight, GA0-15-234, 

(Washington, D.C.: Feb. 12, 2015). 
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that they are located in a redesignated area (SBA's recent efforts have been targeted towards newly 

certified firms). 

5. Could you explain in more detail how site visits alone don't mitigate the recertification 

weaknesses you have identified? 

While site visits can be an important tool to monitor a program, as we noted in our February 2015 and 

March 2016 reports, they are insufficient to mitigate all of the weaknesses we found in the HUB Zone 

program because they occur so infrequently. 2 According to data supplied by SBA, the agency conducted 

site visits to about 10 percent of certified firms during fiscal years 2013-2015. Therefore, a certified firm 

may go several years after its initial certification without any checks on its eligibility status beyond its 

own attestations, despite regular changes to the HUB Zone map that could make the firm ineligible for the 

program (either because the firm's principal office was no longer located in a HUBZone or it no longer 

met the requirement that 35 percent of the firm's employees reside in a HUBZone). As an illustration, 

SBA's site visits have resulted in more than 10 percent of those firms that received a site visit failing and 

receiving a notice of proposed decertification. As we recommended in our 2015 report, because of the 

infrequent nature of the site visits and the lack of supporting documentation firms provide, SBA needs to 

supplement its use of site visits, such as by reviewing documents using a risk-based approach as part of its 

recertification process. This would enable SBA to better ensure that only qualified firms are allowed to 

continue in the HUBZone program and receive preferential contracting treatment. 

2See GA0-15-234 and GAO. HUBZone Program: Actions Taken on February 2015 GAO Recommendations, 

GA0-16-423R (Washington, D.C.: Mar. 24, 2016). 
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Questions for the Record 

. Committee on Small Business 

Hearing: "Ensuring Opportunities: Oversight of the HUBZone Program" 

September 7, 2016 

1. In SBA 's response to GAO'sfindings, the agency mentions that it is developing a "technologybased solution" to the HUB Zone recertification process. Please provide specific elements of this 

solution, as well as a time line for when it will be implemented. 

SBA has undertaken an ambitious project to modernize, consolidate, and replace the digital 

systems that support the Office of Government Contracting and Business Development. The 

new online platform features step-by-step logic guidance for small business owners to complete 

SBA forms directly online. Users will also be able to upload and manage documents across 

multiple programs and receive email notifications such as expirations and renewal notices. 

Currently, this website is available for the Women-Owned Small Business (WOSB) Program 

only and new programs will be incorporated onto the online platform following Agile project 

management methods. The new HUBZone solution will encompass a new geospatial 

information tool (the maps), an application program interface from the maps to communicate 

with the certification application, and a new certification application. The new application will 

be built in a modem, cloud based infrastructure using a modem technology stack (e.g. Jenkins, 

Ruby on Rails, and Chef) and adhering to open technology standards (e.g. US Web Design 

Standards as developed by the U.S. Digital Service). Features to support the HUBZone program 

are expected to be delivered starting in mid-2017, with additional features released throughout 

development of the project. 

2. Previously SBA had indicated that it was limiting site visits to businesses within 50 miles of a 

district office. Is this practice currently in place? If not, how does SBA determine which 

businesses to visit? 

SBA does not definitively limit HUB Zone site visits to business within 50 miles of a district 

office. For Fiscal Year (FY) 2017, SBA is integrating its aunual site visit and recertification 

models to mitigate risk in its recertification process. 

Regarding annual site visits, we will now run a report for firms by servicing district office 

(SDO) and highest contract revenue over the most recent two years (07/01/2014-06/30/2016). 

We will select firms for site visits which are in the top 10% of revenue within each SDO. 

Regarding re-certification, because our reliance on site visits does not fully mitigate the risk that 

ineligible firms are being re-certified into the program - for the firms that are scheduled for 

annual re-certification that are in the top 1 0% of revenues; we will do both a site visit and ask 

for corroborating information supporting recertification (occupancy, residency, payroll, and 

documents, etc.) to be maintained. 

Selection of HUB Zone firms for site visits will be based on the level of risk that they represent 

to the government. Therefore, site visits of HUBZone firms will be given priority (i.e. 

conducted first) according to the following criteria in descending order of precedence: 
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Questions for the Record 

Committee on Small Business 

Hearing: "Ensuring Opportunities: Oversight of the HUBZone Program" 

September 7, 2016 

1. Firms that are recertifying in the current FY and have received a recent contract 

award(s) over the past two years. regardless of whether such award(s) were made under 

HUBZone program. 

2. Firms for which HUBZone status protests were dismissed during the previous FY for 

untimeliness or lack of specificity. 

3. Firms, other than those included in items 1. and 2. above, that have received a recent 

contract award(s), regardless of whether such awards were made under HUBZone 

program. 

4. Other firms, as necessary. 

As documented in current procedural notices, currently in clearance, SBA travel to site visits for 

firms located more than 50 miles from the servicing District Office will be based on the 

following: 

1. Site visits will be scheduled by District Offices to coincide with other work-related 

activities in close proximity to firms' locations. 

2. If a District Office lacks sufficient travel resources to conduct a particular site visit, it 

must justify in writing the rationale for not conducting a site visit and discuss how it 

proposes to mitigate risk to the goverrunent. 

3. If the District Office cannot otherwise mitigate risk to the goverrunent, subject to the 

availability of funds, the Oftice of Goverrunent Contracting and Business Development, 

HUBZone Program, will consider providing travel resources to the District Office. 

4. If travel resources are not available in the Office of Government Contracting and 

Business Development, HUB Zone Program, the Office of HUBZone Program will 

collaborate with the District Office to conduct a desk audit of the firm, which is a 

limited scope examination of documents and records, away from the firm's location. 

3. Please specifY what resources (new employees, funding, co-sponsorships, etc.) have been used 

as a part of the Destination HUB initiative, as well as what the effects of this initiative have 

been, particularly how many new businesses have joined the HUBZone program as a result. 

Destination HUB is an outreach initiative that engages, informs, and educates small businesses 

located in urban and rural communities about the benefits of utilizing the HUBZone Program to 

gain access to federal procurement opportunities. Outreach for the program is done through a 

variety of education methods including individual speakers, panels, breakout sessions, 

matchmaking sessions with buyers, and roundtable discussions with local economic 

development partners regarding how the HUBZone program can be used as a tool for economic 

growth in a corrununity. 
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Questions for the Record 

Committee on Small Business 

Hearing: "Ensuring Opportunities: Oversight of the HUBZone Program" 

September 7, 2016 

Destination HUB is in its 2"d year and through this initiative, SBA has visited a total of 14 cities. 

Primary support for the program has been done by the Director of the HUB Zone Program, in 

addition to her daily workload, along with limited support from local district offices, as needed. 

We are currently in the process of reviewing what additional resources could be dedicated to the 

initiative, as it has the potential to be an even greater asset to the HUBZone program. The 

initiative has the opportunity to increase the number of firms that are aware of the program and 

subsequently apply to the program, match HUBZone firms with buyers to help agencies achieve 

their HUBZone goals, and bring together economic development organizations to benefit local 

communities. 

In support of the Destination HUB initiative, SBA entered into two co-sponsorship agreements: 

• Detroit, MI (Aug 2015)- Sprint Corporation 

• Baltimore, MD (Nov 20 16)-John Hopkins University and John Hopkins Health System 

SBA has conducted a total of 14 Destination HUB events: 

FYIS: Charles Town, WV; Nashville, TN; Tulsa, OK; Fresno, CA; Detroit, MI; 

FYI6: Baltimore, MD; Roosevelt Roads Navy Base, PR; Dayton, OH; Flint, MI; Fort 

Hood, TX; Killeen, TX; Dallas, TX; Newark, NJ; and NY, NY. 

4. What is the current recertification backlog (which includes businesses which have commenced 

but not yet completed the recertification process) for the HUBZone program? 

There currently is not a backlog. The total number of firms due to be re-certified in 2016 is 

2,516. The current status of re-certifications is presented below: 
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Questions for the Record 

Committee on Small Business 

Hearing: "Ensuring Opportunities: Oversight of the HUBZone Program" 

September 7, 2016 

5. What steps has SBA taken in anticipation .for the increase in HUBZone applicants in response to 

lifting of the 20% cap? 

The SBA has begun a variety of streamlining and process improvement efforts to enhance the 

HUBZone Program's customer service. The improvement efforts are helping to reduce the 

burden on applicants to the program and resulting in applications being processed within a 90 

day period. Additionally, we are in the process of finalizing our HUBZone Program's Standard 

Operating Procedures, which are nearing final agency clearance. 

a. Does SBA anticipate a backlog in certifications? 

SBA does not anticipate a backlog in certifications. The HUBZone Program is continually 

working to improve our processes and procedures to ensure that reviews of applications and 

certification are conducted in a timely manner. 

b. What effect will this have on transition HUBZone certification to the new website, 

certifY.sba.gov? 

Removal of the cap will not impact transition ofHUBZone certification to certify.sba.gov. 

We expect utilization of certify.sba.gov to result in improved processing times and 

application through-put. 

c. To correspond with the increased number of applications, does SBA plan on increasing the 

number of site visits to businesses? What is SEA's target percentage for businesses visited in 

the next fiscal year? 

HUB Zone site visits will be determined by a risk -based approach of approximately 10 

percent of the firms in the portfolio. Selection of HUB Zone firms for site visits will be 

based on the level of risk that they represent to the government. 
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Allied Research Technology, Inc. 

Veteran Owned Qualified HUBZone Small Business Concern 

US House of Representatives Small Business Committee 

Rayburn HOB, Room 2360 

Washington, DC 20515 

Tel (757) 464-3144 

FAX (757) 464-1018 

September 121h, 2016 

Good day Committee Members of the Small Business Committee 

This letter is submitted upon request of the HUBZone Committee for a call 

to action. Allied Research Technology provides labor to Hampton Roads area 

shipyards for over twenty-three (23) years and has obtained our HUBZone 

certification in January 2014. Currently, our labor force numbers one-hundred 

and fifteen (115), employees with our average annual sales at five million. 

Approximately forty percent (40%), of our work force resides within a HUBZone 

community. 

The goal of Allied Research Technology is to be the best labor provider, 

maintain our HUBZor'le certification in good standing and give back to our 

community to make a difference. We have in place a formal training program 

where we train Prospective Safety Professionals (PSPs), for the maritime 

industry. We pride ourselves on providing our employees with the proper training 

to do the work quoted to the customer and when necessary, providing additional 

training as our customer base expands. 

Our partnership with the HUBZone program fits rather well. We take 

unskilled persons and train them to work for the maritime industry. Over the 

years, our employees have been picked up by other firms as skilled tradesmen 

as well as branching into other industry areas. We have a full range of success 

stories from past employees and we run into our former employees in just about 

every shipyard serving the Hampton Roads area. 

Our clients look upon us in a favorable light as they are also able to gain 

the benefits of the HUBZone program when they contract our firm. Becoming a 

HUBZone firm has increased our value to our clients and our employees. To our 

clients, they gain the benefit of contracting a HUBZone company and our 

employees gain the benefit of job training and steady employment. 
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Allied Research Technology, Inc. 

Veteran Owned Qualified HUBZone Small Business Concern 

Tel (757) 464-3144 

FAX (757)464-1018 

We are a major donor of the Southside Boys and Girls Club at Berkley 

Avenue and Diggs Town sites, both sites support the HUBZone community. We 

donate to the fishing and golf tournaments they hold annually. In addition to 

these sporting events, we are the sole sponsore a public speakers club, for kids 

18 and under. It is called a Gavel Club and it is a part of the worldwide 

organization of Toastmasters International, known all over the world for building 

leadership and communication skills for all its many millions of members. The 

new club is gaining popularity with the kids and is making a difference in the lives 

of its members. We hope these kids will change their world and the world beyond 

Hampton Roads in ways we cannot even see at this moment. Allied Research 

Technology feels that contributing to our HUBZone community is the corner 

stone of the whole HUBZone program. In short, the HUBZone program fits an 

organization such as Allied Research like a glove. 

We know that supporting our local community is a good way for Allied 

Research to continue to prosper in this very diverse workplace. Our inclusion in 

the HUBZone will continue to make that a reality. 

Respectfully Submitted, 

William Hatfield 

500 Freeman Avenue 

Chesapeake, Virginia, 23342 

Phone: (757) 464-2261 

Email: whatfi1658@aol.com 

2 
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Committee Clerk, Delia Barr - delia.barr@mail.house.gov 

US House of Representatives Small Business Committee 

(Rayburn HOB, Room 2360, Washington, DC 20515) 

HUB Zone HlstoricallyUnde:ruti!imd Business lone 

Subject: Testimony for the Record - Ensuring Opportunities: Oversight of the HUBZone Program 

Because the HUBZone is so beneficial not only to our business, but also our community, 

we ask for your support to increase the HUBZone re-designation period from 3 to 7 years 

and your help to modernize the HUBZone program. 

~ 

~ 

1200 Ferry Avenue, Camden NJ, 08104 • Tet 800,575.4238 • Office856 663 7277 • Fax8564861466 • www.ContemporaryGS.com 
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us tom 

oftware 

ystems 

September 9, 2016 

U.S. House of Representatives Small Business Committee 

Rayburn HOB 

Room2360 

Washington, DC 20515 

RE: HUBZonc Program 

Dear U.S. House of Representatives Small Business Committee: 

Custom Software Systems, Inc. (CSS) is a small business located in Leesburg, Virginia. CSS 

has been in the business of providing information technology (IT) services to State and Local 

Government agencies for over 25 years. We knew absolutely nothing about Historically 

Underutilized Business Zones (HUBZones) until the Spring of2012, when we found out that our 

office was located in a newly designated HUBZone in the Town of Leesburg. We were surprised 

as Loudoun County is a pretty affluent county- one of the most affluent in the Nation in fact. 

We decided to drive around the area designated as a HUBZone. We discovered apartment 

complexes and rental properties, low income housing, homeless individuals and families, and 

pockets of economically depressed areas. We applied for our HUBZone Certification and 

received it in 2014. We truly believe that this program is a worthwhile one. Income received by 

us from ALL contracts (even non-HUBZone set-a-sides) is put into the Leesburg HUBZone 

through providing jobs in the community, leasing office space, and supporting local businesses. 

We currently employ 7 people from within the Leesburg HUBZone and a few more from other 

HUBZones in the United States. Per the program regulations, a minimum of 35% of our 

employees have to live in any HUBZone in the US; however, our goal is to hire from within our 

Leesburg HUBZone. 

We have been fortunate in that we were awarded a HUBZone set-aside prime contract within a 

year after certification; however, HUBZone opportunities seem to be few and far between. Our 

experience has been that agencies seem to continue using 8( a) vehicles because, as one agency 

flat out told us, they are much easier to usc and easier to keep extending. Very few agencies 

actually meet the HUBZone set-a-side goal of 3%. After speaking with many contracting 

officers and agency officials there seems to be an overall lack of knowledge of what the 

HUBZone Program is and how it works, and how it supports economically disadvantaged areas. 

We have noted a big difference between the HUBZone set-a-side program and other set-a-side 

programs in that the HUBZone program is the only one really designed to specifically help the 

economy of designated areas. We take this very seriously both personally and as a company. We 

work with local food banks and charitable organizations to help support their needs. We also 

work closely with the Loudoun Workforce Resource Center and the Town of Leesburg and 

Loudoun County Economic Development Centers to find local talent within the Leesburg 

Custom Software Systems, Inc. • 17 Loudoun Street SE • Leesburg, VA 20175 • 703-771-9757 

www.CustomSoftwareSystems.com 
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ustom 

oftware · ystems 

HUB Zone to hire. In this way, we maintain our HUB Zone percentage by providing jobs in our 

community, thereby putting money back in it to build it up. 

One issue that we have found with the current HUBZone program has to do with the fact that a 

HUBZone employee only has to work 40 hours a month to meet the requirements of the program 

and be counted as a HUBZone employee. Small businesses engaged in government contracting 

need to fill the positions required by their contracts with specific skills, in many cases highly 

technical. Most of the time, individuals with these skill sets cannot be found in designated 

HUBZonc areas. Therefore, mostly administrative type individuals are hired from the HUBZone 

for 40 hours a month to meet or exceed the 35% requirement. As a certified HUBZone company 

grows, the number of 40-hour-a-month administrative-type employees also grows. We believe 

that having the ability to provide full time jobs with benefits would help build up the individuals, 

their families and the area more effectively. Instead of counting individuals, we feel the program 

should count work hours. In this way, for each 40 hours a HUBZone employee works in a 

month, the company would receive 1 "credit" toward their HUBZone percentage. Therefore, 

instead of hiring four ( 4) 40-hour-a-month employees (160 hours total) to maintain/exceed their 

35%, a HUBZone company would be allowed to hire a single (1) full-time employee (40 

hours/week, 160 hours/month), provide that person benefits, and count that person as four ( 4) 

HUBZone "credits" toward the required HUBZone percentage. We believe this is a starting 

point for truly providing a better quality of life for those individuals and families living in a 

HUBZone. 

Overall, it has been an amazing personal and corporate journey for us. We have met many 

wonderful people and learned a tremendous amount about our community along the way. Our 

goal as a HUBZone company is to serve our community and its residents as we add value to the 

government agencies we support. 

Sincerely, 

Robert J. Cusack 

COO and Founder 

RCusack@CustomSoftwareSystems.com 

Custom Software Systems, Inc. • 17 Loudoun Street SE • Leesburg, VA 20175 • 703-771-9757 

www .CustomSoftwareSystems.com 
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FAIRFIEL513-

rEcHNoLoGIEs INC. 

September 13, 2016 

U.S. House of Representatives 

Small Business Committee 

Rayburn HOB, Room 2360 

Washington, DC 20515 

Attn: Committee Clerk, Delia Barr 

Information Technology and 

Management Consulting 

A CMMI Level 3 Company 

and SBA-Certified HUBZone Firm 

Testimony for the Record • Ensuring Opportunities: Oversight of the HUBZone Program 

For 25 years, Fairfield Technologies Inc. (FTI), an award-winning, SBA-certified HUBZone firm, 

has provided leading-edge technology, software development, cybersecurity, program 

management, and acquisition support to our Federal and commercial customers. Fairfield's 

Federal customers have included the Departments of Defense, Justice, Homeland Security, 

Commerce, Agriculture, Interior, Health and Human Services, NASA, and other agencies. A 

high-performance company, Fairfield Technologies received the 2015 DHS Small Business 

Achievement Award from the U.S. Department of Homeland Security, an award given to 

companies that have provided "outstanding work in support of the DHS mission." Fairfield 

Technologies is also a corporate member of the HUBZone National Contractors Council and 

appeared on a recent INC. 50015000 List of Fastest Growing Companies. 

The SBA's HUBZone program provides significant benefits to Fairfield Technologies at 

virtually no cost to the Government. We have never even seen a HUBZone sole-source 

procurement or used the 10% HUBZone price preference. However, when the Federal 

government just sets a 3% HUBZone prime and subcontracting goal, this symbolic action gives 

HUBZone firms such as Fairfield Technologies more procurement visibility, and thus a better 

chance to compete and earn the opportunity to deliver leading edge technology services to our 

Federal customers and to large systems integrators. When small HUBZone companies such as 

Fairfield have the chance, we can deliver exceptional results for Federal agencies at highlycompetitive prices, due to our lower overhead and the cost advantages of our hiring in 

economically-depressed areas. Our performance excellence is confirmed by our customers. 

We currently have projects that started out as 2 week assignments; 20 years later, we are still at 

the same agencies. Many of our contracts are of 5 and 10 year duration, with excellent 

performance reviews. However, Fairfield Technologies is not just in business to be a HUBZone 

firm. We are a high-end engineering firm focused on delivering critical mission support to our 

Federal customers. We are just doing so as a certified HUBZone firm. 

The HUBZone program is extremely focused on delivering jobs to communities with 

higher unemployment and lower wages. As a HUBZone company, Fairfield has delivered 

significant benefits financial and non-financial benefits to the communities that we are 

part of. 

• Good Jobs and Training in Areas of High Unemployment and Lower Income -

During the last 3 years, Fairfield Technologies has hired 60+ HUBZone residents 

as entry-level Research Assistants for our Research Center in Fredericksburg, 

520 WILLIAM STREET, SUITED FREDERICKSBURG, VIRGINIA 22401 PHONE: 703.968.7800 

WWW.FAIRFIELDTECH.COM 
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Virginia. For most of our employees, this is their first professional job. Fairfield 

provides extensive training for our employees in basic business skills and also in 

corporate functions such as HR administration, marketing, and computer technology. 

Fairfield personnel get "real world" experience, providing professional HR. recruiting, 

marketing and technology support both inside Fairfield and to our customers. Fairfield 

alumni graduating our program have gone on to professional jobs at various government 

agencies, and also with high-tech firms in the private sector. 

Ongoing Partnerships With Universities and Community Colleges Nationwide -

Fairfield Technologies has been recognized by the University of Mary Washington as a 

Featured Employer, for our partnership with the university in hiring, training, and 

providing opportunities to all UMW students, regardless of major, academic background 

or area of interest. We have also worked with educational institutions in Arizona, 

Kentucky, Alabama, Montana, Texas, Oregon, North Carolina and Florida, to hire their 

students and alumni as Fairfield employees, as well. 

Local Leadership and Commitment to Local Charitable Giving - Fairfield sponsored 

a breakfast fund raiser for Walter Reed Army Medical Center in Washington, DC, to 

benefit Operation Helping Hands, a support and assistance organization for families of 

active duty wounded and injured military personnel. Over $1 ,000 was raised for the 

families of veterans returning from theaters in Iraq and Afghanistan for medical 

treatment. Fairfield Technologies has sponsored raffles supporting the Fredericksburg 

and Farmville (VA) Food Banks, and has provided corporate support for the Fairfax 

County (VA) Animal Shelter and to the Wildlife Rescue League. 

We strongly believe that the HUBZone program benefits not only our communities, but our 

nation, and strongly urge Congress to continue to support and expand this program. 

Sincerely, 

Kenneth Fried 

President, Fairfield Technologies Inc. 

An SBA-Certified HUZone Firm 

14139 ROBERT PARIS COURT CHANTILLY, VIRGINIA 20151 VOICE: 703.968.7800 FAX: 703.961.8499 

WWW.FAIRFIELDTECH.COM 

Page2 
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Fearless Solutions is an agile software presentation company that specializes in creating 

applications that process complex data while maintaining efficiency, user-friendliness and visual 

appeal. We are passionate about the work we do, and we are passionate about making choices 

that allow us stand out from the crowd. We're not just a software shop: we are committed to 

being a company that invests in its people and its greater community. And the HUBZone 

program helps us do that. 

Through the HUBZone Program, Fearless has been afforded opportunities to grow that 

may have otherwise been out of reach. The HUBZone Program has allowed us to bid on 

contracts that are specifically set f!Side for HUBZone companies, and we have often been given 

an advantage in teaming with primes. Access to these resources has been key to our 

development and growth. But these .are not the only ways in which the HUBZone program has 

supported us as a company. Through this program, Fearless has been invited to speak on 

panels on topics such as HUBZone best practices in growing a company, and these discussions 

allow us to market our brand and network with audiences of likeminded organizations. The 

benefits that Fearless has reaped as a result of the HUBZone Program cannot be understated, 

and we encourage you to consider the wide-ranging and diverse opportunities that have been 

created as a result of this Program. 

Supporting our community is an integral part of Fearless's mission. We continuously 

strive to improve and invest in not only the field of technology, but also our community as a 

whole, and the HUBZone Program has kept us on track with both of these goals. By design, the 

Program encourages us to commit and tangibly invest in Baltimore City, where we have built our 

business and hired employees in historically low-income areas and regions of high 

unemployment We also work closely with Baltimore's own Digital Harbor foundation, and 

through this organization, Fearless is able to provide STEM-based internships to Baltimore City 

youth. While the HUBZone Program has inarguably helped our small business to grow, it has 

also helped us help our community by allowing us to invest our time and resources in areas that 

have so often been overlooked. 
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Ferguson Safety Products 

September 8, 2016 

Committee Clerk, Delia Barr 

US House of Representatives 

Small Business Committee 

(Rayburn HOB, Room 2360 

Washington, DC 20515 

Safety First-- Ferguson Safety 

Founded 1989 

RE: HUBZone Program Benefits for Businesses and Their Communities 

Dear Clerk Barr, 

Ferguson Safety Products, Inc is a micro-business that created the niche market of Suicide Prevention 

clothing and bedding for self-destructive inmates of jails and prisons and locked psychiatric wards. 

Our founder invented the Safety Smock and followed up with blankets, sleeping bags, mattresses and 

other products identified as needed by Mental Health Directors of Federal, State and County detention 

centers. Having been asked by our customers to expand our offerings we now offer LEED point, 

energy efficient, ceo-friendly construction products and are also a certified Green Business. 

Through our HUBZone classification we are solicited daily to bid on infrastructure projects we had not 

even heard of. The coaching and support we have received at six regional gatherings of Prime 

contractors seeking out HUB Zone small business partners has allowed us to grow. Our government 

customers appreciate that we are a HUB Zone business as some of their funding comes with target 

dollar amounts and we are one of the few businesses that can help them hit their goals. 

As our certification has benefited us, so it benefits our community. We have been able to provide long 

term stable employment for a Native American that was a single mother, a 70 year old homeless 

veteran, an individual with disabilities since their youth, a woman needing serious accommodations 

due to medical issues, and a young woman from Foster care that came from an abusive home. 

We share our successes with our community by helping fund educational programs brining current 

events to the classroom, donate to the Salvation Army as well as The Charlotte Maxwell House that 

cares for indigent women cancer patients. We have sponsored a Safe House for our local battered 

women's shelter and provide 50% of the funds needed for the Holiday Dinner for the Walnut Avenue 

Women's Center each year. Ferguson Safety has donated mattresses and blankets to the local Scout 

Reservation Campground that serves over I 0,000 Girl and Boy Scouts per year. 

Yours truly, 

Dennis Speer 

Vice President 

303 Potrero Street, #2, Santa Cruz, California 95060 

831-458-0223 800-515-0223 www.PreventSuicide.com 

Certified Woman Owned Economically Disadvantage Small Business, CA # 4882 

Certified Green Business 
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GeoControl Systems, Inc. 

September 12, 2016 

16-012-GCS 

U.S. House of Representatives Small Business Committee 

Raybum HOB, Room 2360, 

Washington, DC 20515 

Attention: Committee Clerk, Delia Barr (delia.barr@mail.house.gov) 

Reference: Testimony for the Record - Ensuring Opportunities: Oversight of the HUB.Zone 

Program 

To Whom It May Concern, 

We understand that the U.S. House of Representatives, Small Business Committee, recently held 

a hearing about the U.S. Small Business Administration, HUBZone Program. As a HUBZone 

certified firm, we wish to offer comments to the Congressional Record about our experience with 

the program. 

The name of my employer is GeoControl Systems, Inc. While we perfonn engineering and 

facility support services for the National Aeronautics and Space Administration (NASA) in 

several states, we are established and headquartered in Houston Texas. Also, we have been 

HUBZone certified since 2002, and have grown roughly fourteen fold since that time. Our 

growth is mainly attributable to the contracting preferences that are made part of the program 

and to our ability to recruit qualified applicants residing in HUBZone designated areas for work 

opportunities on our projects. Today, we actively participate in eight separate contracting 

activities and support several NASA programs including the International Space Station and 

Commercial Crew programs. Additionally, we hold strong business relationships with several 

large aerospace companies supporting NASA programs. 

The contracting preferences mentioned above not only help small businesses to grow, they also 

help individuals and communities grow and develop. This is done by establishing employment 

opportunities for folks residing in HUB Zone designated areas. For certain jobs in our company, 

we target in our recruiting efforts applicants from HUBZone populations. The resulting 

employment of these applicants contributes to employment and income security, which benefits 

household stability and, by connection, community development. 

Not only are our recruiting efforts targeting HUBZone communities, but our investment in 

personnel development is similarly targeting residents of these geographic areas. One such 

2900WoodridgeDr.,Ste.100 • Houeton, 'TX77087 • 71:3.649.8491 FAX713.649.8899 •IMNW.GEOCONTFOL.CCJM 
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Ms. Delia Bau 

16-012-GCS 

Page2 

investment targets students at the Booker T. Washington High School for Engineering 

Professions, a magnate school within the Houston Independent School District. Our after school 

projects-based program, which we call the Launch Program, supplements the math and science 

curriculum with hands-on design and development activities in the rocketry, robotics, and energy 

fields. We submit that these additional educational and employment experiences help prepare 

students for application to engineering programs at colleges and universities. 

Testimony from our Human Resources Manager, Robert Hudspeth: 

As a Human Resources Manager in the aerospace industry, I have had the opportunity to review 

1 OO's of resumes of candidates applying for jobs in Science, Engineering, Drafting, and a number 

of other jobs. One distinction in resumes submitted by HUB Zone residents is that they are often 

people who have done the right things but may not have been given the opportunity to use their 

talents in an industry in which previous experience is a general requirement. Through the 

HUB Zone program applicants are given the chance to enter into industries in lower level jobs to 

train and eventually become fully vested members of a professional culture. This process has not 

only worked well for those employed but it has opened the eyes of many in our industry as to the 

hidden jewels in these communities. A second group of people who have benefited from these 

programs are those who have been displaced through layoffs and thus whose economic 

conditions have confined them in areas which are deemed HUBZone. The opportunity for these 

persons who may not have worked in our industry in years to get a second chance because of the 

light shed upon them by this economic program has done wonders for the morale of older 

applicants who fmd themselves back In industry after years of strnggle. 

Perhaps most important is that companies in this program must become creative in order to 

maintain the 35% residency requirement. In our case, we have reached out to the community to 

create jobs even beyond those afforded us through our contracts to assure that we are making the 

full economic impact to the community the program was meant to provide. In doing so, we have 

created pools of candidates that can train and work in community projects until they are able to 

attain employment on our contracts. This means employing high school students who work on 

small projects with great impacts, like the work of the Launch Program which received a 

Certificate of Congressional Recognition and created a prosthetic arm for a young girl, a gift she 

could never have afforded otherwise. It means providing training programs to residents with no 

job skills and/or those freshly out of college who eventually are able to attain full time 

employment on our contracts. While these strategies increase the employment of folks residing 

in HUBZone communities, they are more than illustrations of employment. These are stories of 

empowennent. 

How is the community affected? Every time a HUBZone employee drives home from project 

work with NASA into a community with economic challenges which also includes educational 

challenges, they are a beacon of light and by their success renew the faith of their neighbors in 

the American dream. We are flooded with applications from friends and family of our employees 

who want to know how they can become part of what we do. As a company these stories endear 

us to our customers because our hires are a story of hope and what's good about our federal 
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Ms. Delia Barr 

16-012-GCS 

Page3 

government. Our employees give back to their communities, donating to the very churches, 

community centers, and programs where we recruited them. We have seen them open small 

businesses, place their children in dynamic afterschool programs, and volunteer to support the 

development of others in their local communities. Our HUBZone employees have spoken on 

school campuses about the opportunities afforded young people in their community by pursuing 

academics in mathematics and science, this we call a "Generational Recruitment Strategy". The 

program needs to be larger in scope, as large as the ambitions and hearts of those who reside in 

these areas who have taken portions of their paycheck and created healthy meal programs and 

exercise circles to maintain the health of residents. Every HUBZone employee is a story, and 

each of these stories builds confidence that the American dream can be a modem reality, which 

is something that we can all agree on. 

Our ownership, management, and employees would like to submit the testimony above to the 

U.S. House of Representatives in enthusiastic support of the HUB Zone program. 

Sincerely, 

~---- Michael Zarcaro 

Business Manager and Vice-President 
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HUB Zone 

Contractors National Council 

Written Testimony of 

The HUBZone Contractors National Council 

Before the 

House Committee on Small Business 

"Ensuring Opportunities: Oversight of the HUB Zone Program" 

September 7, 2016 
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Chaim1an Chabot, Ranking Member Velazquez, and Members of the Committee, we appreciate 

the opportunity to submit testimony about the Historically Underutilized Business Zones 

(HUBZone) program. The HUBZone Contractors National Council (Council) is a non-profit 

trade association providing information and support for companies and professionals interested 

in Small Business Administration's (SBA) HUBZone program. We would like to thank the 

Committee for their commitment to small businesses and for advancing small businesses in the 

federal marketplace. 

The HUBZone Council has existed since January 2000, and strives to contribute to the economic 

development of disadvantaged communities by reducing unemployment and homelessness by 

strengthening, improving, and promoting the HUBZone Program and by helping HUBZonecertified companies maximize their success in earning federal contracts. 

The Council's membership includes HUBZone-certified small businesses, other small businesses, 

prime contractors, and other organizations interested in the HUBZone Contracting Program. In 

addition, the HUBZone Council is an advocate as it relates to procurement and entrepreneurial 

policy and continues to seck needed modernization of the program from the Congress and SBA. 

The details of which are included. 

This goal of this testimony is to add to the Congressional Record the considerations of thousands 

offim1s nationwide seeking to advance the program. Additional testimony from the SBA and the 

Government Accountability Office (GAO) deal in greater details with the compliance and 

application requirement of the Program. As their testimonies were provided in advance, this 

testimony includes a response to their conclusions and recommendations. 

History of the HUBZone Program 

In 1996, President Clinton issued an Executive Order calling for "empowerment contracting", 

which sought to give price evaluation credit to small business contract activities by firms in areas 

of great distress. The goal of the order was, "Fostering growth of Federal contractors in 

economically distressed communities and ensuring that those contractors become viable 

businesses for the long term which will promote economy and efficiency in Federal procurement 

and help to empower those communities1

". 

While job training in distressed areas serves an important purpose, it is inadequate unless 

sustainable jobs come to those communities. Based on this need for jobs, Senator Kit Bond (RMO) and a bipartisan coalition including the Chairman and Ranking Member of the House Small 

Business Committee, Rep. Jim Talent (R-MO) and Rep. John LaFalace (D-NY), and Senators 

John Kerry (D-MA), Olympia Snowe (R-ME), sponsored the legislation which created the 

Historically Underutilized Business Zone federal contracting program. The goal was to provide 

real economic opportunity in our nation's most blighted areas by "creat[ing] 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 

1 William J. Clinton: Executive Order 13005 - Empowem1cnt Contracting 21 May 1996 

http: '\\ \\\\ .prc:-.id.:ncv.uc:-;b.edu \\ ~ ·?pid --.)2845 

HUBZone Contractors National Council 

PO Box 4041 Falls Church, VA 22044 

•hone 703-237-3674 Fax 703-229-6425 www.hubzonecoundl.org 

2 
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have suffered from a lack of investmcnt."2 The program was also established to assist in 

replacing lost jobs from our nation's declining manufacturing and industrial sectors. 

Economic development in distressed areas is particularly challenging due to the lack of an 

established customer base. While assistance -including tax abatement, regulatory relief, and other 

incentives to attract small businesses arc helpful- they are not enough. A business needs 

customers to succeed. Incentives for the federal government to be the customer, while HUBZone 

firms establish revenue, is a sustainable option for firms located in the nation's poorest 

communities. In fiscal year 2014, HUBZone firms reinvested $3.5 billion back into distressed 

communities nationwide3 

Like other SBA set-aside programs for economically disadvantaged, service-disabled veteranowned, and women-owned firms, there is a socio-economic utilization goal for HUBZone firms. 

As such, the HUBZone authorization bill, the Small Business Reauthorization Act of 1997, 

included a 3% prime contract goal for HUBZone firms, and increased the overall governmentwide contracting goal to 23%. The HUBZone goal serves as a benchmark to determine whether 

agencies are appropriately utilizing the program, and is a floor, not a ceiling. 

SBA finalized the regulations to implement the HUBZone program in the summer of 1998 and 

began accepting program applications in March 19994

• Early on, however, it became apparent 

the program needed an off-ramp. Going from federal assistance in creating jobs to losing that 

ability shortly thereafter did not serve the purpose of the program. Therefore, Congress passed 

the Small Business Reauthorization Act of 2000, to provide for a 3-year grandfathering period, 

or to extend participation tor 3 years after an area is no longer eligible. Congress understood that 

many HUBZonc areas rely on the designation to improve employment, and that immediate 

removal of the designation could hurt an area economically in such a way that it would become 

eligible for the program once again. 

In 2005, Congress expanded the HUBZone program to incorporate areas that have undergone 

Base Realignment and Closure (BRAC) through the Department of Defense. Large military 

installations are often a community's largest and most important employer. The loss of a base 

can hurt an area for decades afterwards. The incentive the HUBZonc program creates for new 

businesses to revitalize an area is just what a BRAC area needs. 

Improvements made by Congress throughout the early 2000s enabled the HUBZone program to 

reach a participatory high of over 14,000 firms5

, and in fiscal year 2009 the government awarded 

a record 2.81% of federal contracl~ to HUBZone firms. 

2 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. 3 American Express, The Crucial Role Small Businesses Play in Their Communities, October 28, 2014 (reporting 

that small businesses returned, on average, 52% of their revenues to the local economy). 4 Congressional Research Service, Small Business Administration HUBZone Program, R41268, August 4, 2016 5 U.S. Congress, House Committee on Small Business, Status of Efforts to Address Previous Recommendations on 

the HUBZone program, Statement delivered by William B. Shear available at 

http: ,,, W\\ .uao.uo\ a~s-::1:-. I 30 12~! 02.1nml 

HUBZone Contractors National Council 3 

PO Box 4041- Falls Church, VA 22044 

Phone 703-237-3674 Fax 703-229-6425 www.hubzonecouncil.org 
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However, data from the 2010 census showed that a large number of areas had improved enough 

to be removed from the program. These areas contained approximately one-third, or 2,400 

HUBZone businesses6

. While exiting the program should indicate economic revitalization, our 

nation was experiencing the worst recession in decades. Removing thousands of small businesses 

from the program designed to provide economic development, during the worst recession since 

the great depression indicated the program was not working to satisfY the program's goals. 

The removal of so many HUBZones businesses led government spending to decline for a number 

of years. In FY20 15, the government only awarded 1. 82% of contracts to HUB Zone firms; 

almost a full percentage point below where the program was six years prior. As of August 2016, 

there are only 5,500 certified firms, which represents a loss of over one-third ofHUBZone firms 

since the 20 I 0 census 7

• The program has not fully recovered because Congress has not addressed 

challenges in program eligibility. 

In fiscal year 2014, HUBZone firms reinvested $3.5 billion back into distressed communities 

nationwide8

. The continued analysis ofHUBZonc data since 2010 as well as the ongoing failure 

to meet the goal has increased attention of the program. As detailed below, legislation to revise 

the program was introduced in 2016. 

The National Defense Authorization Act for Fiscal Year 2016 expanded the use ofHUBZones in 

BRAC areas by extending both the area and the length of time an area qualifies. The Act also 

granted eligibility to Native Hawaiian Organizations, and included qualified Presidentially 

declared disaster areas that were previously in the HUBZone program. 

In June 2016, the Puerto Rico Oversight, Management, and Economic Stability Act 

(PRO MESA) expanded the HUBZone program in Puerto Rico, and required SBA to provide a 

"risk based approach" to application certification and recertification9 

Background on the Program 

Benefits of the HUBZone Program 

The HUBZone program has similar authorities to SBAs other set-aside programs by allowing 

contracting officers to utilize set-asides and sole source for HUBZonc firn1s. Also, for full and 

open competition, "the price offered by a qualified HUBZone business shall be deemed as being 

lower than the price of another offeror if the HUB Zone business price offer is not more than I 0% 

higher than the other offer10" The Price Evaluation Preference (PEP) is an important tool, but it 

is often misunderstood or misapplied by contracting officers of federal agencies. Simply put, in 

full and open competition, a HUBZone bid can be up to 10 percent higher than another offer, and 

6 SBA, FY2014 Congressional Budget Justification and FY2012 Annual Performance Report, p. 43, at 

https://www.sba.gov/sites/default/files/files/l-FY%202014%20CBJ%20FY%202012%20APR.PDF. 

7 ibid. 

8 American Express, The Crucial Role Smail Businesses Play in Their Communities, October 28, 2014 (reporting 

that small businesses returned, on average, 52% of their revenues to the local economy). 9 Puerto Rico Oversight, Management, and Economic Stability Act (PRO MESA) P.L. 114-187 (June 2016) 10 Small Business Reauthorization Act of 1997, S. 1139, 105th Cong., 1st sess., August 19, 1997 (Washington: 

GPO, 1997), 

HUBZone Contractors National Council 

PO Box 4041- Falls Church, VA 22044 

Phone 703-237-3674 Fax 703-229-6425 www.hubzonecouncil.org 

4 
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the HUBZone offer should nevertheless be accepted. As discussed later, price-evaluation 

preferences accounted for only 2 percent, or $36 million ofHUBZone program contract dollars 

in FY20 15 and its use is widely regarded as a rarity11 • 

HUBZone Program Eligibility 

To quality for the program, companies must have a "principal office" in a HUBZone. SBA 

defines principal office to be the location where the greatest number of employees at any one 

location perform their work12. 

HUBZone areas can quality under one of six criteria including qualified census tracts (QCTs), 

qualified non-metropolitan counties, difficult development areas, qualified Indian lands, military 

property closed under the Base Realignment and Closure (BRA C), and qualified disaster areas. 

Qualified Census Tracts 

Qualified census tracts are defined based on current eligibility from the U.S. Department of 

Housing and Urban Development (HUD) for the Low Income Housing Tax Credit (LIHTC) for 

the most recent year census data is available. To quality, at least 50% of households must have 

income "below 60% of the median gross income of the metropolitan statistical area (in 

metropolitan census tracts) or the median gross income for all nonmetropolitan areas of the state 

(in nonmetropolitan census tracts) or a poverty rate of at least 25%IJ. 

Non-Metropolitan Counties (NMC) 

Qualified non-metropolitan counties can become HUBZone eligible by having median household 

income less than 80% of the non-metropolitan state median household income, based on Census 

data, or an unemployment rate not less than 140% of the average unemployment rate for the state 

or for the U.S., whichever is lower 14". Unlike QCTs, qualified NMC designations are annually 

determined by SBA. 

The qualified nonmetropolitan county designation is the only type ofHUBZone that is 

determined by the SBA. The formula is set in law and the data are derived from other agencies, 

but the designation is made by SBA. 

Additional HUBZone eligible areas are Indian Country, HUD-designated difficult development 

areas (DDA) which are areas with high construction, land, and utility costs relative to area 

median gross income, Department of Defense property that has undergone BRAC, and areas that 

were previously HUBZones, and experienced a Presidentially declared disaster. 

Employee Requirements 

An additional program requirement is that a least 35% of employees must live in a HUBZone. 

While other SBA socio-economic programs focus on the characteristics of the owner, the 

11 Congressional Research Service, Small Business Administration HUBZone Program, R41268, August 4, 2016 12 SBA has an exception for construction and service industries, which have exemptions based on their occasional 

need to assign employees a! !he contract location. 13 13 C.F.R. §126.103 and 26 U.S.C. §42(d)(5)(B)(ii)(l). 14 13 C.F.R. §126.103. 

1tractors National Council 

41- Falls Church, VA 22044 

x 703-229-6425 www.hubzonecouncil.org 

5 
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HUBZone program is focused on firm employees. This requirement ensures that jobs are not just 

located in distressed areas, but HUB Zone firms are creating jobs for those living in distressed 

areas, as well. This allows HUBZone firms to empower communities through sustainable jobs 

and an economic multiplier effect. This requirement is often the most challenging for firms to 

comply. 

Redesignation 

To improve the program, Congress passed the Small Business Reauthorization Act of2000, to 

provide for a 3-year grandfathcring period or to extend participation for 3 years after an area is 

no longer eligible. Congress believed that many HUBZone areas rely on the designation to 

improve employment, and that immediate removal of the designation could hurt an area 

economically in such a way that it would become eligible for the program once again. 

HUBZone Program Impact 

While there are currently only 5,500 HUBZone firms, these businesses have had substantial 

impact on their communities. Federal contracts awarded to HUBZone companies directly support 

40,000 jobs every year15 and the average HUBZone company is awarded over $1 million in 

federal contracts, a critical revenue threshold in business sustainability16• 

If each HUBZone qualified area had a single HUBZonc business, it would generate an additional 

$17 billion in economic activity and support over 100,000 jobs. This is such a large number 

because almost 90% ofHUBZone areas do not have a single HUBZone certified company. 

Largely due to this underutilization, the government has never met the goal of awarding 3% of 

federal contracts to HUBZone firms 17. Failure to meet the 3% goal resulted in over $4 billion left 

on the table that economically stressed communities would have benefitted from, just last year. 

Program Challenges 

Program Integrity & Funding 

The HUBZone program has suffered from chronic underfunding since it was first authorized in 

1997. When the program was first established, it was authorized between $5 and $10 million to 

set up the program office, conduct outreach to both federal agencies and small businesses, and 

ensure program integrity18 . However, the program has rarely received more than $2-$3 million in 

a given fiscal year though it currently costs SBA more than $15 million to operate the program 

annually19• In FY2016, the program received received an appropriation of $3 million20• 

15 Maria Contreras-Sweet, SEA Fiscal Year 2015 in Review, October 2, 2015 (Stating that small businesses received 

$91.7 billion dollars, supporting 550,000 jobs in the economy). 16 Small Business Dashboard, available at hltp:<,sHwllhusines,ulata,gov, (Reporting that in FY 2014, HUBZone 

contracts totaled $6.7 billion. The average tlrm received approximately $1.3 million). 17 Government Accountability Oftlce, Small Business Contracting: Opportunities Exist to Further Improve 

HUBZone Oversight, at 37, February 2015. Available at http: /\V\'1\.eao.em aS>eh.'670 6684(,g_pdL 18 http://www.sbc.senate.gov/republican/HTML!agencies/hubzones/hubzone24.pdf 19 Congressional Research Service, Small Business Administration HUBZone Program, R41268, August 4, 2016 20 SBA, FY20!7 Congressional Budget Justitlcation and FY2015 Annual Performance Report, p. 26, at 

http,: 1111 11.sbcl.eo1 sites de hull llb+Y 17-CB.I FY 15-APR.pdL 

HUBZone Contractors National Council 6 

PO Box 4041- Falls Church, VA 22044 

Phone 703-237-3674 Fax 703-229-6425 www.hubzonecouncil.org 
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While SBA has supplemented program costs through the appropriations provided for general 

administrative expenses, it is a challenge to improve the program without the necessary support. 

After years ofundcrfunding the program, SBA has experienced difficulties in building 

mechanisms to support audit controls that reduce waste, fraud, and abuse. While these changes 

will help the program, it is imperative that Congress further assist SBA with program 

administration. 

Program Utilization 

Throughout the early 2000s both SBA and federal agencies improved their utilization of 

HUBZone firms. Data from the 2010 census showed that approximately one-third, or 2,400 

HUBZone businesses should be removed from the program21 . While exiting the program should 

indicate economic revitalization, our nation was experiencing the worst recession in decades 

when the 20 I 0 Census was conducted yet thousands of small businesses were removed from 

the program designed to provide economic development. 

By removing so many HUBZones businesses, government spending in the program has declined 

steadily since 2011, to 1.82% in FY2015. During the great recession, almost 2,400 firms were 

removed from the program22. As of August 2016, there are only 5,500 certified firms, which 

represented a loss of over one-third of HUB Zone firms in a five-year period23 . 

Streamline HUB Zone Program Data 

Previously, economic data to determine HUBZone eligibility was primarily available through the 

decennial census. As a result, QCTs most often changed as new economic data became available 

every ten years. However, the Commerce Department is increasingly utilizing the American 

Community Survey (ACS) to produce housing and population data annually. In response to 

annual ACS data, HUD announced it would update eligible census tracks every five years. 

However, when comparing ACS data from the 2006-2010, the 2007-2011, and 2008-2012 

surveys, they found some statistical anomalies. 

In response, and to avoid making QCT designations on a single, possibly inaccurate data point, 

HUD announced QCT designations would be made using all three surveys (2006-2010, 2007-

2011, and 2008-2012). Now to qualifY for HUBZone, census tracks are required to meet the 

thresholds in at least two ACS surveys. Additionally, HUD is now updating eligible areas with 

the release of new ACS data annually. 

The burden to qualifY a specific HUBZone has increased substantially since the program was 

created. What used to be a potential change in eligibility that would most likely occur every ten 

years, is now an annual test. Furthermore, requiring areas to qualifY under two different ACS 

surveys means areas that may be close the margins of eligibility are likely to be left behind. 

21 SBA, FY2014 Congressional Budget Justification and FY2012 Annual Performance Report, p. 43, at 

http~: '\\ \\\\ .:-.ba.i.!O\'Isites ·Jcfaul! files files I-FY0 n2020 14° o20CB.JO o20f\' 0 u2010! 2°·o20APR.PDF 22 ibid. 23 ibid. 

HUBZone Contractors National Council 

PO Box 4041- Falls Church, VA 22044 

Phone 703-237-3674 Fax 703-229-6425 www.hubzonecouncil.org 

7 
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Proposed Legislation 

The Council is interested in advancing legislation seeking to make structural improvements to 

the HUBZone program. H.R. 5250, introduced by Representative Delaney, addresses that need 

for providing participating companies program certainty by lengthening the redesignation period 

from three to seven years. Increased time in the program will build the lasting economic benefit 

for communities that the HUBZone program provides. 

S. 2838, the Small Business Transforming America's Regions Act of2016, introduced by 

Senator Vitter, and passed by the Senate Small Business Committee, will also lengthen the 

redcsignation period from three to seven years. The legislation authorizes governors to annually 

petition SBA to designate one or more NMCs in the governor's state as a HUBZone. The 

legislation seeks to empower governors to further invest in state economic development by 

seeking to make NMCs HUBZones. 

Responding To Testimony of SBA and GAO 

Both the Small Business Administration and the Government Accountability Office prepared 

testimony for this hearing. Their accounts tell a similar story of a program with enormous 

potential suffering from systemic and administrative constraints. 

The Council agrees with much of GAO's findings as it relates to the need for increased oversight 

and the addition of technology to ensure firms arc both compliant and have open communication 

withSBA. 

Both testimonies highlighted the concern of limited resources for the program, to which the 

Council wholeheartedly agrees. The onerous nature of application and re-certification were 

discussed and align with the need to streamline the certification process. 

Finally, and most importantly, the GAO included in its testimony the impact modifying certain 

eligibility criteria would have on program users. Of most consequence and this testimony will 

not digest all of the conclusions- is that many businesses in census tracts and non-metropolitan 

counties facing severe poverty and unemployment arc shut out of the program. Critically, SBA 

also noted that current program criteria in place serve far fewer finns in 2016 than when the 

program was designed almost twenty years ago. 

HUBZone Council Recommendations to Congress 

The Council appreciates Congressional interest in making improvements to the program and 

would like to offer the following suggestions. 

HUBZone Contractors National Council 

PO Box 4041- Falls Church, VA 22044 

Phone 703-237-3674 Fax 703-229-6425 www.hubzonecouncil.org 

8 
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Program Certainty 

HUBZone Application Improvements 

To ensure compliance, SBA certifies all HUBZone companies. While Congress recently changed 

some of the elements of certification, SBA's timeline to process applications is far too long. This 

summer, SBA updated HUBZone program regulations to increase the application review period 

from 30 to 120 days24• Requiring over four months to process and application is far too long. 

Increase the Redesignation Period. 

To determine program eligibility, SBA uses data from several sources including the decennial 

Census and the American Community Survey (ACS). While Census data is updated every 10 

years, ACS data is updated annually. For certain areas, this means minor changes in economic 

data can lead a community's eligibility to change annually. 

To create better program certainty, increasing the current three-year redesignation period to 

seven years will allow firms to make more substantial, long-term investments without the fear of 

losing their status before the business has had an opportunity to succeed. 

Support Capital Investment of Principal Office 

Many firms make significant capital investments to locate their principal office in a HUBZone, 

only to face substantial losses when the HUBZone is re-designated. To resolve this issue, the 

principal office requirement will remain fulfilled, regardless of redesignation, until the firm 

relocates or no longer meets other requirements of the program (like the employee residency 

requirement). This will encourage long-term investment by providing business with certainty. 

SimplifY Employee Residency Requirement for Smallest Businesses 

By changing the current 35% threshold to 33%, one in three employees would be required to 

reside in a HUBZone. In addition to simplifying the calculation for employers, this also helps 

small firms to ensure they meet their requirements after the unforeseen departure of one 

employee. 

Program Modernization 

Encourage Investment Throughout Entire Metropolitan Areas 

HUD's Low-income Housing Tax Credit (LIHTC) program limits the amount of qualified census 

tracts in any Metropolitan Statistical Areas (MSA) to no more than 20 percent of the total 

population of the MSA. Because of this restriction, many disadvantaged communities have not 

received a HUBZone designation, because they are better off- relatively - than the surrounding 

area. 

24U.S. Small Business Administration, HUBZone and National Defense Authorization Act for Fiscal Year 2016 

4, 2016. Available at 

HUBZone Contractors National Council 

PO Box 4041- Falls Church, VA 22044 

Phone 703-237-3674 Fax 703-229-6425 www.hubzonecouncil.org 

9 
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Limiting the number ofHUBZones only serves to inhibit program growth. In Spring 2016, SBA 

Administratively removed the 20 percent limitation on all HUBZones and announced that an 

additional2,015 census tracks now quality for the program. SBA's removal of this unnecessary 

barrier will assist countless small businesses who are interested in participating. 

Increase Participation in Non-Metropolitan Counties (NMC) 

Fewer than expected NMCs quality for the HUBZone program due to having more burdensome 

requirements for median income and unemployment than MSAs in metropolitan areas. While 

rural areas tend to have lower median income and higher unemployment, non-metropolitan 

counties are not homogenous. Certain county areas may be better off due to the presence of a 

single employer, like a college, and could cause the county to be ineligible. Therefore, the NMC 

qualification levels should be lessened to account for the diversity in rural areas. 

Conclusion 

The HUB Zone program was created with the intent of moving individuals into meaningful jobs 

in communities that have suffered from a lack of investment. It is unlike other SBA programs in 

that the focus is not on the company, but the community. It is an economic development 

program. 

Since its inception, the program has underperformed. While Congress has addressed expansions 

of the program to certain places, it has been more than fifteen years since changes were made to 

the primary program structure. In order for the HUBZone program to reach its full potential as 

outlined in 1997, the program needs to be modernized. The Council listed a number of proposals 

in this testimony and is open to working with the Committee on other ideas. 

The removal of the 20 percent limitation on HUB Zones in a specific area, in order to broaden the 

reach of the program, should be applauded as a good initial step. But more is needed and will 

require Congressional efforts. 

The HUB Zone Council strives to contribute to the economic development of disadvantaged 

communities by reducing unemployment and homelessness and by strengthening, improving, 

and promoting the HUBZonc Program. We would like to thank the committee for their support 

of our efforts and the efforts of all small businesses seeking to do work for the federal 

government. 

HUBZone Contractors National Council 

PO Box 4041- Falls Church, VA 22044 

Phone 703-237-3674 Fax 703-229-6425 www.hubzonecouncil.org 

10 
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12 September 2016 

US House of Representatives 

Small Business Committee 

Rayburn HOB, Room 2360 

Washington, DC 20515 

RE: Testimony for the Record- Ensuring Opportunities: Oversight of the HUBZonc Program 

Committee Members: 

ITC Defense Corp. is a Historically Underutilized Business Zone (HUBZone)-certified 

defense firm, specializing in software engineering, modeling and simulation, cybersecurity, and 

missile defense. Our work has transnational implications, supporting DOD efforts to ensure the 

security of our nation through the Ballistic Missile Defense System, as well as helping our 

nation's allies establish missile defense bases in Romania and Poland. 

ITC's HUBZone status has been critical to the company's ability to compete as a small 

business. The 3% contract award target set aside for HUBZone businesses has helped us 

establish connections with larger·firms, including Parsons Corporation, Northrop Grumman, 

General Dynamics IT and others. Furthermore, HUB Zone employees have been some of our 

most dynamic workers, bringing a diverse and out-of-the-box perspective to our support of the 

Warfighter. 

Even though our contracts sometimes bring us halfway around the globe, it is always at 

home where our work begins. ITC's decision to locate in Gainesville, FL, a HUBZone area, was 

not made flippantly. We have a personal attachment to the city, having seen the potential of the 

students at the University of Florida. lTC is proud to have employed numerous students, giving 

them unique opportunities and insight into an industry critical to our nation's future. In our two 

years as a HUBZone small business, we have introduced 11 students to the inner workings of 

government contracting (an often nebulous process) and the defense industry. Former student 

employees have then gone on to the Department of Energy, Department of State, and prestigious 

law schools to further pursue a career in GovCon. Furthermore, lTC has always maintained 

diversity as a core value; over a third of our HUBZone employees are minorities. 

lTC and the Gainesville community at large have benefited immensely from the 

HUBZone program. The modemization legislation is essential to the continued success of the 

HUBZone program and we hope our input has helped illustrate its necessity. 

Thank you, 

I' ,I 

N6ene A. Shema 

Vice President, Operations 

ITC Defense Corp. 

ZOOljefferson Davis Hwy, Suite 1005, Arlington, VA 22202 • Office: 703·842·4852 • Fax: 703·229·0568 
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September 8, 2016 

US House of Representatives Small Business Committee 

Rayburn HOB, Room 2360 

Washington, DC 20515 

MINPACK 

400 2"0 St. SE 

Pine City, MN 55063 

Re: Testimony for the Record -Ensuring Opportunities: Oversight of the HUBZone Program 

Dear US House of Representatives Small Business Committee: 

MINPACK is a contract manufacturing company providing converting, assembly, packaging and 

printing services to a broad range of customers. The plant began operations in 1968 as a 3M 

manufacturing plant In 2005, Bob Thompson (retired 3M Plant Manager) acquired the plant to 

diversify the business and preserve jobs in the community. When MINPACK acquired the plant 

there were 18 employees Today MINPACK has 37 employees. 

MINPACK became HubZone Certified in 2016 The certification has created many new business 

contacts and opportunities for growth MIN PACK was recently awarded new printing business as 

a result of the HubZone Certification. This new business created three new positions in the print 

department and is supporting significant capital investment in new technology 

Min pack is the largest private employer in the community. We believe a diverse workforce is good 

for our community and it makes MINPACK a more attractive place of employment. Programs like 

the HubZone Certification do make a difference in a small community 

I encourage you to continue to support for this program. 

Sincerely, 

'? >--~.~cf-J il'"')"-

MINPACK 

www,_rnJ.ml_f!S:J<,corn 

P: 320-629-8223 

F: 320-629-8201 

email: n.h~~l!J.LI..DiDPack . .:nm 
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12 September 2016 

U.S. House of Representatives Small Business Committee 

Attn: Ms. Delia Barr, Committee Clerk (delia.barr@mail.house.gov) 

Rayburn HOB, Room 2360 

Washington, DC 20515 

RE: Testimony for the Record- Ensuring Opportunities: 

Oversight of the HUB Zone Program 

Dear Representatives, 

Founded in 2013, Nyla Technology Solutions, Inc. (Nyla) is a woman-owned, HUBZonecertified small business located in the thriving city of Baltimore, Maryland, focusing on 

providing superb software systems development services to the federal government. Nyla's core 

competencies cover a wide array of disciplines, including software engineering, electrical 

engineering, cyber defense, systems engineering, optical and computer network protocols and 

architecture, and technology leadership. Nyla's employees have over 20 years of combined 

experience completing missions for the U.S. Government. 

The Historically Underutilized Business Zones (HUBZone) program helps small businesses in 

urban and rural communities gain preferential access to federal procurement opportunities. 

Eligible HUBZone firms can qualify for higher Small Business Administration guaranteed surety 

bonds on constmction and service contract bids, and those in Empowerment Zones and 

Enterprise Communities (EZ/EC) can also benefit from employer tax credits, tax-fl·ec facility 

bonds, and investment tax deductions. The federal government has a goal of awarding three 

percent (3%) of all dollars for federal prime contracts to HUBZone-certified small business 

concerns and HUBZone-certified small businesses receive a ten percent (10%) price evaluation 

preference in full and open contract competitions, as well as subcontracting opportunities. As a 

result of its HUBZone classification, N yla has been awarded a federal government prime 

contract and has submitted a bid for another prime contract, all within 3 years of its inception. 

Nyla provides full and part-time employment to 12 people, with a 50:50 split in male and female 

employees from diverse backgrounds, races, and ethnicities. Nyla's fast growth is attributed to 

its ethos and corporate culture. At Nyla, philanthropy is at the heart of our corporate culture and 

one of the motivating factors driving our shared philosophy. We recognize the essential bonds 

that weave together both our local communities and country as a whole. It is vital, for this 

reason, to not only engage with, but also support organizations who work hard to strengthen 

neighborhoods, promote education, and help those who have bravely served our nation. In 

addition to volunteering our time to such events like the Baltimore Running Festival, the 

charities which Nyla supports include the Maryland Food Bank, Girls Who Code, K9s for 

Warriors, Wikipedia, Second Chance, the American Cancer Society, the American Heart 

Testimony for the Record - Ensuring Opportunities: Oversight of the HUBZone Program 

Page 1 of2 
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Association, the Downtown Baltimore Family Alliance, Meals on Wheels, NPR, the American 

Red Cross, and Ronald McDonald House Charities of Baltimore. 

Nyla's HUBZone certification has aided it in its success, growth, and community contributions. 

As such, it is imperative for the Small Business Committee to increase funds for the HUBZone 

program and support modernization of the program to keep up with growing small business 

concerns and competition. A federal investtnent in the HUBZone program is an investtnent in 

small business, diverse hiring practices, and underrepresented and underserved communities. 

More than any other time in our nation's history, supporting small business and the HUB Zone 

program means keeping jobs in the U.S., fostering conmmnity well-being, building local 

character and prosperity, increasing jobs and wages, growing the economy, and encouraging 

American entrepreneurship and competition. Thank you tor your consideration and please feel 

free to contact me if you would like to further discuss Nyla's benefits from the HUBZone 

program, as well as Nyla' s support for the program. 

Sincerely, 

Is! Michelle R. Daley 

Michelle R. Daley 

Operations Manager 

cc: John P. Sarbanes, 3rd Congressional District, Maryland 

john.sarbanes@mail.house.gov 

Testlmony for the Record- Ensuring Opportunities: Oversight of the HUBZone Program 

Page 2 of2 

1125 South Hanover Street, Baltimore, MD 21230 

ny!atechnologyso!utions.com 
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4641 Montgomery Avenue Suite 208 

Bethesda MD 20814 

T: 301-229·5561 F: 301-229-6133 

www.setasidealert.com 

Small Business Committee 

US House of Representatives 

Rayburn House Office Building, Rm 2360 

Washington DC 20515 

Dear Members: 

September 9, 2016 

Subj: Testimony for the Record- Ensuring Opportunities: Oversight of the HUBZone 

Program 

In 2013, I wrote a white paper for our clients and Set-Aside Alert subscribers. The 

problems I identified at that time are still in place. It is time to re-engineer this important 

program. Since writing the paper in 2013, the percentage of HUBZone contracts has further 

declined, from 2.01% in FY12 to 1.23% for FY16 as of today. 

I have been a contractor and consultant focused solely on the Federal contracting 

market since 1978. Over the years, I worked with many large, mid-sized and small firms. I 

have seen many programs come and go, get revised over and over, and often miss the mark 

as to what they were intended to accomplish. The H UBZone program may be one of the 

biggest failures -why? Regulations designed, written and implemented without any 

consideration of the real world environment in which they must exist. 

Historical 

The program is intended to revitalize geographic areas that have historically faced 

elevated unemployment, yet the area designation criteria can result in continual revisions of 

which areas qualify. Small business owners take on many risks in establishing and managing 

a small business. It takes a number of months to apply for and become certified as a 

HUBZone business. An interested firm faces the risk that his geographic area could be 

decertified a year or two after qualifying, or even while she is in the process of being 

certified. 

One would think that an area of historically high unemployment and/or low income 

would require a number of years to recover. If the firms that come into that area to help it 

improve are successful, they should be rewarded with stability in that location for a 

reasonable period of time, especially if they have made a significant capital investment in 

permanent facilities such as factories and warehouses. After all, they took on the task that 

the government wanted accomplished, and succeeded. Further, if those firms pull up stakes 
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and move their headquarters to another HUBZone, unemployment may return to the place 

they left 

Decisions as to whether an area is designated as a HUBZone are distributed across 

HUD, Labor, Census, Interior, DoD and IRS. SBA's role is to meld all these stovepipes into a 

comprehensive mapping tool. Yet each agency does its work and establishes its qualified 

areas on varying schedules. The HUBZone map tomorrow might look quite different than it 

did today. One would think that since the census is done every ten years, that at least that 

component would be stable, but no. 

Excessive Granularity 

The prior government program, Labor Surplus Areas, used common, well-defined 

geographic boundaries, namely counties, parishes and independent cities. You could see the 

lines on most any map. But in today's HUBZone program, most urban area designations are 

based on census tracts. You won't find those lines in your local Rand McNally or Mapquest or 

local street atlases. My own census tract is eight blocks of residential Washington DC. Why 

on earth must we use this micro-granular approach to area designations? 

Worse yet, this granular approach leads to HUBZone-designated situations such asK 

Street NW, a popular location for all the lobbying firms and law offices of Washington. Or the 

Southern Towers apartment complex in Alexandria VA. sitting as a HUBZone across the 

street from DoD's new Mark Center headquarters. Look for your nearest college campus and 

chances are that it may be a designated HUBZone. 

Despite the granularity noted above, when it comes to rural areas, you may have 

great difficulty getting qualified. The mapping tool accepts traditional addresses containing 

house number, street, city and state.! grew up in a rural area of Northern Illinois. Half my 

friends lived on farms and nearby small villages, and they had rural route addresses. Indian 

reservations are a key target of the HUBZone program, and yet companies are thwarted 

when their headquarters and their employees' homes are served by rural routes. There is a 

provision on the mapping tool for entering latitude-longitude designations, but we are aware 

of companies well qualified and highly suited for the HUBZone program, even companies 

that have previously been certified, being denied certification. These companies are deterred 

from providing good jobs to residents in areas of high unemployment. 

It's time to set this program right so that it can provide the benefits intended and 

refocus jobs on high-unemployment targets. Let's mount a call for: 

1. A return to designations at the county /independent city level - designations that are 

easy to understand, assess and evaluate. 

2 
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2. Certification that would last at least five and perhaps ten years, so that a firm is 

encouraged to apply and get certified, and is rewarded for sticking with the program 

long enough to establish the benefits in the designated community. 

3. Fixing the rural route/PObox conundrum by designation at the county /independent 

city level. 

4. Establishing a fixed schedule of when areas are added/removed so that the map 

remains stable and reliable for a reasonable period. 

I would be pleased to work with the Committee to develop solutions to make this program 

productive. 

Sincerely yours, 

/signed/ 

Thomas D. johnson, President 

TD)/me 

3 
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10: 

FRO\!: 

U.S. SMALL BUSINESS ADMINISTRATION 

WASHINGTON, DC 20416 
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FR 7 
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the additional step,; fi1r MSAs creates caps on participation within a QCT. The definition upon 

which SBA relies is for QCTs generally. not variations or specific categories. 

Based on the foregoing it is appro priate t<.Jr SBA to use the QCT datu ns proposed without 

the population caps as it is consistent wi th the Small Business Act and IRS definition of QCTs. 

I " U.S.C. § 632(pl(4)(A). Although SBf\ relies on the QC'T analysis by H li D. the additional 

steps HUD takes in the L.IHTCanalysis. including DDAs and :viSAs is not consistent with our 

statute and the spirit and intent of the HUBZonc program. 

If you have any funher questir>ns, pl~ase contact Lara Hudson at 202-619-0564. 
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September 12, 2016 

U.S. House of Representatives 

Small Business Committee 

Rayburn HOB, Room 2360 

Washington, DC 20515 

Storage Strategies, Inc. 

Subj: Testimony for the Record- Ensuring Opportunities: Oversight of the HUBZone Program 

Dear Small Business Committee: 

I had the distinct pleasure of attending the hearing on Wednesday, September 7, 2016 in which you 

received testimony regarding oversight of the HUBZone program. It was a privilege and honor to 

witness our Government in action. As the owner of a small business that participates in the HUBZone 

program, I was grateful to hear the Committee's interest in ensuring the Small Business Administration 

(SBA) has the resources and support necessary to ensure effective operation of this vital program. I am 

also pleased to offer this testimony to the Committee. 

Storage Strategies, Inc. (dba: SSI) is contracting firm which has supported the DoD and Federal civilian 

agencies with enterprise information technology engineering and operations support since our founding 

in 2007. Our customers include the Defense Logistics Agency, U.S. Navy, Department of Veterans Affairs 

(VA), Department of State, and National Geospatiallntelligence Agency. SSI is a VA verified Service 

Disabled Veteran Owned Small Business and SBA certified HUBZone Small Business. SSI moved to a 

HUBZone in Manassas Park, Virginia in 2014 to establish ourselves as a HUBZone Small Business. As a 

high tech firm, SSI took a different approach toward the HUBZone program by setting up a community 

service project to obtain and maintain our HUBZone certification. In March of 2014 SSI hired seven 

local HUBZone residents and established the SSI Career Resource Center in our new principal office in 

Manassas Park. In July of 2014 SSI was certified as a HUBZone Small Business. 

SSI recruits tech savvy students from the local high school, trains and certifies them as Microsoft Office 

Specialists, and employs them in our Career Resource Center (CRC) to provide free IT basic skills 

coaching to local adults. SSI has partnered with the Manassas Park High School to enroll students hired 

in the school's work study program which provides class credit for students enrolled. SSI's CRC is also 

staffed with receptionists, administrative assistants, and an office manager- all from local HUBZones. 

The CRC provides free use of an IT training lab, English language training, and free resume development 

assistance to local residents. To date, SSI has hired 20 local HUBZone residents and maintained an 

average HUBZone employee percentage of 40 percent. In 2015, SSI paid over $147,000 in wages to local 

HUBZone residents and provided over $63,000 of free IT coaching and job search services to local 

residents. 

The HUBZone program has benefited SSI from a business and revenue perspective, attributing to 

approximately half of our $3 million in annual revenue from subcontracts from prime contractors. SSI's 

current prime contract was won as a competitive award as a Service Disabled Veteran Owned Small 

2049 Old Centreville Road, PO Box 788, Manassas Park, VA 20111 
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Subj: Testimony for the Record- Ensuring Opportunities: Oversight of the HUBZone Program 

Business set aside. We have neither been awarded any HUBZone set aside contracts, nor competed on 

any contracts as a prime which included the 10 percent price preference. 

In May of 2016, 551 was informed by the SBA that the census tract where our principal office resides, 

and most of our HUBZone employees reside, was re-designated as a Previously Qualified Tract. 551 has 

until March of 2019 to relocate our business and hire at least 12 new employees from other HUBZones 

or lose our HUBZone status. While we are grateful for the policy for continued HUBZone status in a 

Previously Qualified Tract for three years, for small businesses like us who recently established a 

HUBZone location, three years is a very challenging time line to recoup investments made in moving into 

a HUBZone. SSI invested over $100,000 in initial labor and buildout of our principal office in Manassas 

Park, and renovated an abandoned building into a modern IT training facility. SSI would deeply 

appreciate the extension of the three-year grace period to seven years to ensure small businesses like us 

have adequate time to find a new office locations and gracefully transition their work forces. 

SSI also strongly supports the SBA's efforts to lift the 20 percent population cap on the HUD Qualified 

Census Tract (QCT) list. The HUBZone program is a job creating program which directly impacts local 

communities providing employment opportunities to many in economically stressed areas. Limitation of 

HUBZone census tracts to the HUD QCT list, which is intentionally constrained to limit low Income 

Housing Tax Credit liabilities, is at crossed purposes with the intent of the HUBZone program. An 

expansion of the HUBZone census tract list to include all Qualified Census Tracts in any metropolitan 

statistical area (MSA) will not result in a sudden flight of HUBZone Small Businesses from existing 

HUBZones to new HUBZone qualified tracts. Any census tract which qualifies is, by definition, 

economically stressed due to poverty or low median income. Established HUBZone Businesses will have 

no economic incentive to move to newly designated tracts. 

lastly, I urge the Committee to consider this figure: if only half of the current 5,600 HUBZone qualified 

firms provided half of the amount of wages to HUBZone residents that 551 provided last year, that would 

equate to over $205 million in wages to HUBZone residents. From a purely fiscal perspective, the $3 

million SBA spends to run the HUBZone program yields a 6,733 percent return on investment. 

Thank you again for the opportunity to participate in the legislative process and for all the Committee 

does to support the Small Business Community and local economies. 

Very Sincerely, 

Steve Mackie 

President 

Digitalty signed by 

Mackie.Steven.CORCl 000031 052.10 

DN: c=US, o::o:U.S. Government, ou=ECA, 

ou-::=ORC, ou=Storage Strategies !nc., 

cn=Mackie.Steven.C.ORC 1000031052.10 

Date: 2016.09.12 10:23:53 ~04'00' 

2 
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September 15,2016 

Testimony for the Record 

Ensuring Opportunities: Oversight of the HUBZone Program 

U.S. House Small Business Committee 

The Honorable Steve Chabot The Honorable Nydia Valazquez 

U.S House Small Business Committee U.S. House Small Business Committee 

Dear Chairman Chabot and Ranking Member Valazquez, 

Thank you for the opportunity to provide information to the House Small Business 

Committee on the importance of the HUB Zone program to our nation and small 

government contractors such as SupplyCore Inc. We are an integrated logistics solutions 

company headquartered in Rockford, Illinois, which serves our military around the world. 

I appreciate the Small Business Committees' focus on the importance of enhancing and 

improving this underutilized and potentially very impactful HUBZone program in order 

to foster the maximum benefit of lifting up distressed economic areas of our 

communities, both in urban centers and rural areas throughout our nation. I would like to 

provide some input on how this program can help small business contractors grow and be 

even more impactful in revitalizing our communities. 

Our small business located its principal office and company headquarters in the heart of a 

HUBZone designated area in Rockford, Illinois. This location is one of the most 

impoverished urban centers in the state of Illinois with high poverty rates, lack of safe, 

affordable housing options and chronic high unemployment. We are a small business 

concern by SBA standards, and cun-ently have over 50 percent of our 200 employees 

performing their work at our HUBZone location in Rockford. 

The presence of our company headquarters provides significant economic benefits to this 

blighted area of our city by creating activity for other local small businesses, which 

creates a multiplier effect with employees spending money at local shops, restaurants, 

and other businesses. Our company has invested $15 million in renovating its own 

building, and is cun-ently dedicating its govenunent profits by investing into other central 

city revitalization projects in blighted areas and program initiatives in the HUBZone. 

CmTently, our company anticipates investing up to $30 million in revitalizing local 

abandoned buildings tore-purpose and start new businesses. In addition, we have 

implemented a robust philanthropy program with strong engagement from our workforce 

dedicating volunteer time and financial resources to local non-profit organizations within 

303 North Main Street, Suite 800 Rockford, Illinois 61101 www.SupplyCore.com 
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the HUBZone. Our growth strategy is to expand our federal government business even 

further, and invest even more revenue from our primary business into the local 

community. 

Unfortunately, under current eligibility criteria, a small business such as ours cannot 

qualify as a HUBZone certified business which would significantly enhance our ability to 

grow, and have an even greater impact into the local economy of the HUBZone 

designated area. The company meets all requirements, with one exception, it only has 17 

percent of its employees residing in the HUBZone areas. This does not meet the 35 

percent residency threshold required for eligibility. 

The 35 percent workforce residency requirement is one of the biggest challenges to 

allowing the overall HUBZone program to expand nationally and have an even greater 

positive impact in low income areas. Many small businesses have difficulty finding 

employees that reside directly in the HUBZone where there are limited housing options is 

very difficult. In addition, companies that may have operations in multiple locations 

around the nation only add to this challenge. Yet, the impact of the presence of a 

company's principal headquarters, with a majority of its employees working there is 

helping lift up an area that has been riddled with poverty and blight. 

In order to address this challenge, I propose a slight modification to the program that will 

incentivize more companies like ours to start up, or locate their principal operations in 

HUBZone designated areas. I recommend establishing a modified HUBZone, secondary 

certification, which requires a business to establish its principal headquarters in the 

HUBZone, along with a requirement that at least 50 percent of the employees work 

directly at this location. The residency requirement would be eliminated for this 

secondary certification. This narrowly defined new designation under the HUB Zone 

program would only allow the small business concern to be eligible to benefit from the 

1 0 percent price evaluation preference in competing for full and open federal government 

agency competitions_ This new designation would not be eligible for HUBZone sole 

source or set-aside acquisition strategies at the federal agencies, and therefore would not 

compete with current certified companies. 

The impact of this enhancement to program eligibility criteria would be a very significant 

incentive for government contractors and serve as a major economic development tool for 

communities stmggling to attract new employers to economically distressed areas. Under 

the secondary certification. the company would still need to meet the requirements as a 

small business by SBA standards. Again, this new designation would not compete with 

current HUBZone certified businesses, but greatly enhance the ability of the program to 

be one of the most successful federal programs revitalizing our urban centers, and low 

income mral areas around the United States. 

303 North Main Street, Suite 800 Rockford, Illinois 61101 www.SupplyCore.com 
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Once again, thank you for your strong support of the HUBZone program and the 

Committee's interest in giving our communities another important tool to strengthen and 

revitalize their local economies that are most in need. 

Sincerely, 

Bryan Davis, 

Vice President of Government Affairs and Community Engagement 

SupplyCore Inc. 

Rockford, Illinois 

303 North Main Street, Suite 800 Rockford, Illinois 61101 www.SupplyCore.com 
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-#A 

SUMMIT 

Technoklgtes & Solution<:. lnL 

Matthew Kennedy, President 

Summit Technologies & Solutions, Inc. 

7686 Richmond Highway, Suite 110 

Alexandria, VA 22306 

United States House of Representatives Small Business Committee 

Rayburn HOB 

Room2360 

Washington, D.C. 20515 

September 9, 20 16 

Dear Representatives, 

On September 7, 2016 a hearing was held concerning the Historically Underutilized Business 

Zone (HUBZone) Program. Summit Teclmologies & Solutions, Inc. (Summit) would like to 

contribute additional information in hopes that the importance of the HUBZone Program and the 

need for further economic development of the Program's goals are fully recognized. 

The HUBZone Program helps to promote job growth, capital investment, and economic 

development by providing contracting assistance to small businesses located in areas 

characterized by higher than average unemployment and lower than average income. Summit is 

proud to be a HUBZone-certified company. First located in Ranson, West Virginia, Summit is 

now headquartered in Alexandria, Virginia. As a company in the Aerospace and Defense 

Industry, we provide teclmically skilled personnel and specialized solutions in Systems 

Engineering, Program Management, Safety and Mission Assurance, and Infonnation Technology 

to large engineering enterprises. In addition to these services, Summit also hires and trains 

administrative staff to help build the resumes of our part-time employees as they transition into 

full-time careers. 

The Small Business Administration (SBA) and the Government Accountability Office (GAO) 

currently require a minimum of three percent (3%) of all federal prime contract and subcontract 

dollars go to businesses in economically disadvantaged communities. These earmarks for 

funding and contract awards help HUBZone-certified businesses compete with larger companies. 

Assigning contracts to HUBZone-certified businesses helps to create jobs, promote economic 

growth, and improve communities throughout the country. The HUBZone Program and the setaside of HUBZone-designated work has contributed significantly to Summit's success as a 

federal government supplier. Since our inception in February 2009, Summit has been able to 

participate on more than twenty (20) contracts at five (5) NASA Centers. Our work at these 

Centers has been as both a prime contractor and subcontractor. Without the specific HUBZone 

goals set forth on contracts such as the Engineering Services Contract at the Kennedy Space 

Center, the Extra-Vehicular Space Operations Contract at the Johnson Space Center, the Ground 
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-#A 

SUMMIT 

Te<:hno!09ie-s & Solutions, Inc 

Systems and Mission Operations, and the Geophysics Geodynamics and Space Geodesy Contract 

at the Goddard Space Flight Center, and the HUBZone set aside Project Management Support 

Services Contract at Glenn Research Center, Summit would not have enjoyed the success it has 

over the last several years. It is because of opportunities like these that Summit has been able to 

grow and make a name for ourselves within an extremely competitive market. Summit hopes 

that the SBA, GAO, and Congress continue to hold large businesses accountable for meeting 

these set-aside goals. In 2015, for example, NASA awarded prime contracts to HUBZone 

contractors at only .62% of its total dollars, significantly less than the 3% goal set by the federal 

government. Additionally, only 2.3% of subcontract dollars were awarded to HUBZone 

contractors, well below the 3% goal. Until larger businesses and federal government agencies 

are required to fully meet the set-aside goals, companies like Summit will continue to struggle to 

compete and our communities will remain stagnant and not see their full potential. 

Summit believes in the potential of the HUB Zone Program to transform communities and has 

dedicated itself to assisting in the economic development of the area by providing high-quality 

jobs, frequenting other small business, supporting charitable efforts, and living and working in 

these areas. Since our inception, we have employed more than fifty-five people from HUBZone 

areas. We help individuals build their qualifications, self-confidence, family life and social 

contributions so that they can better their communities and help in the revitalization of the areas 

where they live. We fund charity races and science fairs; we dedicate time and resources to the 

Red Cross and Wounded Warriors Project; we even sponsor youth athletic teams and charity 

drives. Summit is fully invested in the HUBZone Program; we believe it is our duty and 

responsibility to positively change our community. Our employees work, live, and volunteer in 

HUBZone areas across the country, and if the SBA, GAO, and Congress continue to support the 

HUBZone Program, Summit will be able to continue to hire within the nation's HUBZone areas 

and our communities will continue to improve and compete with the more economically stable 

and affluent areas around us. 

It is imperative that this program receive the support and commitment that it so desperately 

needs. Continuing to treat it in the same old fashion does nothing to build upon the limited 

success that it has seen. Congress and the federal government must recognize the importance of 

this program, acknowledge the good it is doing as a result of businesses such as Summit in 

employing individuals that otherwise would not have such opportunities, and commit to 

providing the program with the support and opportunities necessary to allow it to continue to 

grow. 
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Thank you tor your time and whatever assistance you 

program. 

Sincerely, 

Matthew Kennedy, President 

Summit Technologies & Solutions, !nc. 

7686 Richmond Highway, Suite 110 

Alexandria, VA 22306 

provide to support the HUBZone 
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Making intelligent decisions possible. 

September 12,2016 

US House of Representatives Small Business Committee 

(Rayburn HOB, Room 2360, Washington, DC 20515) 

Subject: Testimony for the Record Ensuring Oppottunities: Oversight of the HUBZone 

Program 

Chairman Chabot, Ranking Member Velazquez, and Members of the Committee, my name is 

Stephen Synnott, the President/CEO and owner of Syntelligent Analytic Solutions, LLC 

(Syntclligent). I wish to show my support for the HUBZone Program. 

Syntelligent, a Certified Service Disabled Veteran Owned Small Business (SDVOSB) and an 

SBA certified HUBZone Small Business Concern, was founded in 2010 and provides 

professional, management and technical services and solutions in the areas of: Program 

Management & Support, Analytic & Intelligence Operations, lnfonnation Technology, and 

Security Operations. 

In April 2012, when we opened our HUBZone Principal Office in Luray (Page County), VA, we 

had a total of seven employees (2 full-time and 5 part-time). Since that time, we have 

experienced a ten-fold increase in growth and currently support operations as a subcontractor at 

the Department of Homeland Security, Transportation Security Administration and the Defense 

Intelligence Agency. This work is directly tied to our participation in the HUBZone program. 

Since entering the HUBZone Program, we have created 28 new jobs (6 full-time and 22 parttime) within HUBZones. These jobs are in the areas of infonnation technology, human 

resources, administrative suppo1i, business development and recruiting. Many of the employees 

filling these positions were unemployed (some for quite some time) prior to corning to work for 

Syntclligent. These jobs would not exist in Luray, if it were not for the HUBZonc program. 

An additional six part-time employees have received training and experience and have moved to 

full-time positions with other companies over the past 4 years. 

As part of our commitment to the local Page County community, Syntelligent provides paid 

internships for high school and college students providing them not only with finances to help 

with their education, but with meaningful professional work experience and job skills that will 

help guide them on a career path in the future. 

The HUBZone Program enables Syntelligent and thousands of other small businesses to 

... contribute to the economic development of their communities by creating jobs and opportunities 

for their residents. 

Headquarters: 200 l11!1e fdlls St, Suite 407, Ll!ls ChuHh, VA 27046 • T: 540.736.4570 • F: 877.813.4960 • www.sy 
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September 12, 2016 

Mr, Steve Chabot 

Chaim1an 

US House of Representatives 

Small Business Committee 

Rayburn HOB 

Room2360 

\Vashington, DC 20515 

Dear Mr. Chabot. 

Information Ready,. 

The Data Entry Company (TDEC) is a 58 year old HUBZone Small Business based in Oakland, 

Maryland (Garrett County). TDEC employs 100 people in Oakland who work in a 15.000 

square foot data processing t:1cility owned by the company. The company as a whole has 325 

employees nationwide. 

The HUBZonc program has been valuable tool for TDEC. We have expanded our business by 

leveraging the programs benefits growing from 50 people when we started in the HUBZonc 

program in 2001 to 325 people today. We have won prime federal!TUZonc Set-Aside contracts 

and we subcontract to larg<: businesses required to fill HUBZone contracting goals. 

We are actiYe members of the Garrett County Community hiring many people. creating well 

paying fully benefited jobs and we actively bring work to our facility which creates even more 

jobs and more opportunities. 

That said. please work to increase the I!UBZone re-designation period from 3 to 7 years which 

will keep this valuable program going in the right direction. 

With best regards. I am 

Sincerely. 

8120 VVOODMONT AVENUE, SUITE 550, BETHESDA, MD 20814 

PH: 301-718-0703 I F: 301-718-1615 I WWVV.TOEC.COM 
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Telephone#: (276) 957-2281 Fax#: (276) 957-1049 

Triangle Electric Corporation 

September 9, 20 16 

560 Bouldin Road 

Ridgeway, Virginia 24148 

"HubZonel Woman Owned Small Business" 

US House Of Representatives Small Business Committee 

Rayburn HOB, Room 2360 

Washington, DC 20515 

Attn: Delia Barr; Committee Clerk 

Located in Horsepasture, Virginia, Triangle Electric Corporation is a privately owned and operated business. Triangle 

Electric Corporation has been in business since 1965 and has provided safe, efficient, cost effective, reHable contracted 

electrical services and products for over 50 years. 

Being a HUB Zone certified company has benefited our company in numerous ways. Due to some government requirements 

to have a certain percentage of HUBZonc participation, it has opened doors to us with the Federal Government. In return, it 

has opened up doors for our employees and our community. We have been able to hire additional staff as well as place 

employees on government contracted work. We have been able to expand areas of our company to meet the needs of the 

Federal Government. Due to Martinsville I Henry County having such a high unemployment rate, being a HUB Zone cer1ified 

company has helped with, unemployment issues in the area. 

Triangle Electric Corporation is very involved in the community. Nancy K. Bradshaw (President) is a member of the 

Mrutinsville-Henry County Chamber Of Commerce. The Chamber Of Commerce is always seeking ways to increase the 

economy of our area. Nancy K. Bradshaw and Charles H. Bradshaw (Vice President) are both active members of the 

Horsepasture Ruritan Club and Horsepasture Christian Church. Triangle Electric Corporation prides itself on being a small 

company that is community orientated. 

Regards, 

7 

;J 

-f!JtJ ;/ gtftA Charles H. Bradshaw 

Vice President 

Triangle Electric Corporation 
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~ TEVET Your Veteran Source ~ A Service Disabled Veteran Owned & HUBZone Small Business (866) 886-8527 

"Testimony for the Record- Ensuring Opportunities: Oversight of the HUBZone Program" 

12 September, 2016 

To: US House of Representatives Small Business Committee 

Recently, the Small Business Committee of the US House of Representatives reviewed the HUBZone 

Program, specifically reports of potential fraud and recent SBA actions to expand the number of Qualified 

Census Tracts in the program. 

As a small business owner, I understand the value of oversight and accountability. As an SBA Subcontractor of 

the Year, I rely on that accountability in the SBA programs to discourage fraud and waste. What concerns me 

is that I see little attention paid to the value that HUBZone companies have to their communities. And I am 

equally concerned that our HUBZone is to expire here in rural Appalachia TN in 2018. 

As TEVET CEO, I have established and grown a stable business through innovation, while at the same time 

significantly improving the economic, educational and social quality of life in and around Greeneville, 

Tennessee. At TEVET, we have focused on both job development and extensive community outreach and 

support. This is what lead to our being named SBA Subcontractor of the Year as well as SBA HUBZone 

Corporate Citizen of the Year. 

I am a proud US Navy veteran, and I am equally proud of the investment we have provided to our rural, 

economically-challenged region of East Tennessee. Growing up here, I saw many people lose their jobs as 

local companies moved manufacturing operations out of the country. TEVET supports many communities with 

regular donations to the Wounded Warrior Project, the Niswonger Children's Hospital, Holston Home for 

Children and in the revitalization of the Capitol Theatre of Greeneville. There are many many other areas of 

investment in outreach as well both here and nationally. 

We HUBZone businesses know best: the program is essential to our continued success and ability to invest in 

local long term infrastructure. Without our HUBZone designation, TEVET would seriously consider and pursue 

relocation (even to another state) should our HUBZone shrink as planned for 2018. 

Most importantly, we at TEVET want HUBZone policy to extend the redesignation to a full 7 years (instead of 

the current 3 years) to maintain our HUBZone status so that we and others have stability and can invest more 

heavily in infrastructure and job creation. Extending to seven years will encourage other companies to grow 

and assist their communities similarly as we are doing here in Eastern Tennessee. 

The true value of HUBZone is just that: sustained growth and recovery in regions that need it most. I can't 

think of a region in the country that needs it more than those in rural Appalachia. "Please" consider and pass 

legislation to extend the redesignation period from 3 to 7 years in the HUBZone program. 

Very truly, 

Rev. 08 15 2016 
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Workforce 

Wf 

September 12, 2016 

US House of Representatives Small Business Committee 

Rayburn HOB, Room 2360 

Washington, DC 20515 

I am writing this testimony on behalf of Work Force Now, a coalition of HUBZone small businesses, nonprofit organizations (including Still Serving Veterans), and large businesses in the Huntsville, Alabama 

area. 

The current HUBZone small business participants in this coalition are Canvas, Inc., Cortina Consulting 

Group, LLC, JBS Solutions, Inc., Line Research Incorporated, and Maximum Technology Corporation 

(MTC). These HUBZone companies are all engineering and professional services companies and 

collectively employ 150+ employees. Over 50 of these employees reside in designated HUBZone areas. 

Workforce Now's mission is to prepare individuals in under resourced communities, who want a career, 

to enter the workforce through HUBZone companies. 

Compare this to the SBA HUBZone programs stated mission: "to provide federal contracting assistance 

for qualified Small Business Concerns (SBCs) located in historically underutilized business zones in an 

effort to increase employment opportunities, investment, and economic development." 

The primary difference is that we've just taken it one step further. 

Our goal is not just to provide jobs but to provide careers. There is no better path to economic 

prosperity than jobs, especially jobs with a high potential for professional growth. 

We not only want to provide careers to currently eligible employees now but also to provide career 

visioning to the entire HUBZone community including schools down to the elementary level. The other 

aspect to our career emphasis is that we feel we should be representative of the large high-tech 

workforce in the Huntsville, Alabama area. 

We believe that to be a successful and sustainable HUBZone business, you really have to be about the 

"HUBZone" just as much if not sometimes more than the "Business". 

We accomplish our mission by providing resources to our local under resourced communities for Job 

Skills Training, Life Skills Training, Mentoring, Job Placement, and On-The-Job-Training. We host periodic 

job recruiting fairs that also include resume writing, interviewing, and job skills coaching. 
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Workforce 

Wf 

The SBA HUBZone program has been instrumental in our success at creating jobs and careers in 

distressed areas. Because of the preferential treatment afforded to HUBZone companies, we can 

succeed with a business model that invests resources to develop our employees from part-time entry 

level jobs to full time professional careers. 

It is critical to our on-the-job-training programs that we continue to receive credit for part-time 

employees. 

Although the HUBZone program has been successful at creating jobs in our community, it could be even 

more effective if regulations were modified to reduce some of the risks associated with HUBZone 

certification. 

One ofthe biggest challenges to HUBZone companies is the ability to remain certified after we make an 

investment in our HUBZone communities. 

Under current regulations, it is very risky for HUBZone companies to invest in long term leases or 

purchase office space in HUBZone areas. This risk could be mitigated by allowing an office location to be 

remain compliant, even if the office location is later re-designated. 

And because 35% or more of our employees live in designated HUBZone areas, we are at significant risk 

for our employees becoming ineligible as a result of re-designations. This risk could be prevented by 

allowing employees of certified HUBZone companies to remain eligible as long as they remain at the 

same address, even if that address is subsequently re-designated. 

As HUBZone companies succeed in creating jobs in disadvantaged areas, our companies and our 

employees should not suffer the detrimental consequences of decertification; especially, when redesignation is caused by the economic development and prosperity that our efforts and investments 

created. 

The HUBZone program has the most far reaching impact of any of the other socioeconomic programs. 

The HUBZone program helps entire communities, instead of just the disadvantaged individuals that own 

the business. 

With some modifications to the current program, the HUBZone program could stimulate major jobs 

creation and economic development across the country. 

Sincerely, 

Edwina Musante