Major Changes in HUBZone Program Eligibility and Certification Requirements

by: Paul Hawkins and Jake Noe

On December 17, 2024, the SBA published a final rule that will likely have a major impact on HUBZone businesses. This final rule implemented four (4) major categories of changes that HUBZone business will have to need to comply with. Specifically, these four (4) changes related to the following topics: (1) definition of principal office; (2) definition of employee; (3)

​definition of reside in a HUBZone; (4) HUBZone program eligibility and certification and recertification rules. The specific changes are briefly identified below.
 
I.  Changes to the Definition of “Principal Office”

• A location where a concern only receives mail or occasionally performs business will not qualify as a principal office for HUBZone program eligibility. Thus, the use of the office must be more substantial.
• Firms must now submit a deed or active lease that commenced at least 30 days before the date of the SBA’s review of the HUBZone firm and that ends at least 60 days after the date of the review.

 
II.  Changes to the Definition of an “Employee”

• An employee must now work at least 10 hours per week as opposed to 40 hours in a given 4-week period.  This is a significant change. A HUBZone business can be exempt from this requirement if the employee still works at least 40 hours per four-week period and the business can demonstrate “a legitimate business reason for that work schedule.”
• HUBZone firms must submit documentation showing their employees are performing meaningful work. This can include job descriptions, resumes, detailed timesheets, examples of work product, evidence of communication assigning work and responses to such, and other relevant documentation.
• An individual who initially qualified as a HUBZone resident employee by residing in a Redesignated Area or a Qualified Disaster Area no longer qualifies as a Legacy HUBZone Employee .
• If the Legacy Employee in question has worked less than 30 hours per week, excluding vacation, sick leave, and maternity/paternity leave, at any time during employment, that employee will no longer qualify as a Legacy HUBZone Employee.

 
III. Changes to the Definition of Reside

• Voter registration cards are no longer used to show residency but rather driver's licenses will be used.
• The 180-calendar day residency requirement has been decreased to 90 days.

 
IV. Changes to HUBZone Program Eligibility/Certification and Recertification

• HUBZone firms must now be certified HUBZone small businesses and eligible HUBZone firms on the date of the initial offer for HUBZone contracts.
• If the offeror is eligible as of the date of offer for a competitively awarded HUBZone contract, the firm is eligible for award. For HUBZone sole-source awards, a firm must be HUBZone certified and eligible as of time of award. For MACs where price is not required, you must be identified as a certified HUBZone small business concern in DSBS and meet the HUBZone requirements as of the date that you submit an initial offer, even if the offer does not include price.
• The “attempt to maintain” requirement was clarified to not be a substitute for the 35% HUBZone residency requirement. Instead, a firm that cannot show it is making “substantive and documented efforts” has failed to attempt to maintain the HUBZone residency requirement. There is a 12-month grace period in which the HUBZone firm can take steps to hire HUBZone employees.
• Recertification will now only be required every three (3) years instead of every year.

Please contact Reaves GovCon Government Contracts Attorneys Paul Hawkins or Jake Noe if you have any questions, or if you would like assistance assuring that your HUBZone business is fully compliant with the new regulations.