Hubzone Certification scrutinized

The federal Hubzone program was established for federal contractors located in econmically challenged areas. It is well intentioned. However, for many years, the system has been abused. The SBA simply did not have a process in place to audit whether or not the firms who applied for certification actually operated at the addresses they claimed to. Fortunately, someone must have taken notice at the General Accounting office (GAO). This past March, the GAO published a report exhibiting several cases of fraud and providing a handful of excellent recommendations. For those of us who follow the rules in federal contracting, this is a big breath of fresh air.

First, they are going to implement a series of spot checks. In fact, I personally received an unannounced visit from a rep in the local Chicago SBA office last month.

But there’s another important recommendation that also caught my attention. They are suggesting that the SBA audit awards to Hubzone firms to ensure that 50% of the personnel cost expended on contracts come from that company’s own payroll. This hopefully will eliminate any occurrrence of a company receiving a Hubzone set-aside award only to outsource the entire thing to another company. Unfortunately, this is a common occurrence as well.

For too long, the government procurement offices have had a policy of just collecting notarized statements with flase claims of compliance. This is a great step forward towards achieving what the original implementers hoped for. I got my fingers crossed that system integrity and transperency is back in place.

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