Bill would end HUBZone primacy

HUBZone businesses have priority over companies owned by service-disabled veterans and those in the 8(a) program, but that might change.

The Senate has approved legislation that would eliminate the advantages that small businesses in economically depressed areas have over some firms, and the House also might approve that change.

Government Accountability Office (GAO) attorneys say the existing law puts businesses in Historically Underutilized Business Zones (HUBZone) ahead of other categories of disadvantaged businesses in gaining access to some contracts. The HUBZone businesses have first crack at those contracts — ahead of companies owned by service-disabled veterans and those in the Small Business Administration’s 8(a) business development program.

Sen. Mary Landrieu (D-La.), chairwoman of the Small Business and Entrepreneurship Committee, proposed the legislation as an amendment to the fiscal 2010 National Defense Authorization Act (S. 1390). The amendment approved on July 23 would replace the word “shall” with the word “may” in the law, a small change that could make a big difference in the contracting landscape.

The House version of the bill did not include such language. However, as lawmakers meet to resolve differences between the House and Senate measures, the change in wording might not meet any resistance. Rep. Roscoe Bartlett (R-Md.), co-chairman of the HUBZone Caucus and among those considered likely to oppose such a measure, said he supports the statutory change.

“Small-business owners from these three categories endure different types of disadvantages, but they all create invaluable opportunities and magnified benefits in our communities,” Bartlett said. “They deserve equal priority consideration for federal government small-business contracts.”

Landrieu drafted the amendment in response to recent GAO rulings on bid protests that said agencies had to consider HUBZone businesses first in awarding set-aside contracts. Only if there were not enough HUBZone businesses to compete for the work could agency officials open it to other categories of disadvantaged businesses, according to GAO.

GAO, the Small Business Administration and the Office of Management and Budget have disagreed over the interpretation of the law and regulations. But Landrieu’s amendment seeks to quiet the disagreement by supporting SBA’s interpretation.

“All small businesses should be given an equal opportunity to succeed,” Landrieu said.

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