HUBZone Help

Senate Amendment to Give Parity to HUBZone, 8(a), and SDVOB Set-Asides

The Senate passed an amendment to the Defense Authorization Act (S 1390) that changes the language in the Small Business Act 15 U.S.C. 657a(b)(2)(B) from "shall" to "may".  This was the language relied upon in the Contract Management cases I litigated and the recent GAO decisions to find the HUBZone program mandatory and to have a preference over other small business set-asides.  If this amendment remains in the final bill sent to the President it will give parity to the three programs consistent with SBA's current regulations.

HUBZone Set-Asides Mandatory or Not?

Since the decisions in the Contract Management cases I believe HUBZone set-asides are mandatory in certain circumstances.  I have advised HUBZone concerns to assert their right to have a requirement set-aside for HUBZone participation when those circumstances are met.  With the OMB memo and SBA changing its popsition taken in the Contract Management decision, it is now confusing to contractors, and I am sure contracting officers, when a HUBZone set-aside is mandatory. 

OMB says it is looking into the mandatory requirement and will issue another memo in 30 days. If OMB keeps its present position then it seems only further federal court litigation will settle the issue.  Unfortunately this is one of those issues where there seems to be no easy way to get a determination.  The Federal courts and GAO have ruled on the issue but OMB and SBA refuse to follow their clear direction.   I will address this issue in more depth in an article to appear on my websites, powerlawoffice.com and hubzonehelp.com.  Let me and others know what you think about this issue and file a comment.

GAO Says Mandatory HUBZone Decisions Correct

In a decision issued on July 6, 2009, GAO refused to reconsider its earlier decisions that the HUBZone program is mandatory and takes precedence over other set-aside programs.  It cites the district court and appeals court decisions in Contract Management which I linked to in my blog entry yesterday.  I was the attorney for Contract Mangement and agree with GAO that those court decisions held that the Small Business Act, not SBA nor FAR regulationss, make the HUBZone set-asides mandatory. 

Ironically, SBA argued to GAO in seeking reconsideration, that GAO's ruling would negatively impact the 8(a) and Veteran's set-asides.  When I argued in Contract Management that finding the HUBZone program mandatory could result in HUBZone set-asides taking away possible 8(a) set-asides, SBA rejected that argument pointing out the small number of HUCZone set-asides then being used.   

HUBZone Not Mandatory Says OMB

In a memo release on July 10, 2009 the Office of Management and Budget ordered executive agencies to ignore two recent GAO decisions holding the HUBZone set-aside mandatory and entitled to preference over 8(a) and Veteran owned business set-asides.  OMB ordered the agencies to follow "parity" regulations from SBA giving wqual treatment to all three programs.  In doing so OMB relied only upon the GAO decisions and ignored, or was simply unaware of, the Hawaii district court and Ninth Circuit Court of Appeals decisions predating the GAO decisions in declaring the HUBZone set-aside as mandatory and entitled to a preference.  The OMB memo can be seen here.  Download District Court HUBZone decision. Court of appeals decision Download Cmiccafc.

I was involved in the Hawaii case and the SBA argued, contrary to its "parity" position that the HUBZone set-aside was mandatory under the Small Business Act.  That position was upheld by the Ninth Circuit Court of Appeals.  As a mandatory program under the Small Business Act, OMB and SBA do not have authority to change this to a program that is equal to 8(a) and SDVOB, no matter how beneficial those programs are.  If there is a change, it has to come from Congress.