Small Business Administration HUBZone Program (R41268, Updated February 14, 2025)
Summary
This Congressional Research Service report, R41268, "Small Business Administration HUBZone Program," was updated February 14, 2025. It states the Historically Underutilized Business (HUBZone) program gives certified small businesses in areas with low income, high poverty or high unemployment contracting opportunities through set-asides, sole-source awards and price-evaluation preferences. It calls HUBZone the only federal contracting preference program that directs opportunities to small businesses by location. HUBZone firms must keep a principal office in a HUBZone and have at least 35% of employees residing in one. The report examines performance against the statutory goal of 3% of federal contract award dollars annually.
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“Small Business Administration HUBZone Program (R41268, Updated February 14, 2025).”
Original at www.congress.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/r41268-143-36bc177e40/
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Small Business Administration
HUBZone Program
Updated February 14, 2025
Congressional Research Service
https://crsreports.congress.gov
R41268
Small Business Administration HUBZone Program
Summary
The Historically Underutilized Business (HUBZone) program provides certified small businesses
located in areas with low income, high poverty, or high unemployment with contracting
opportunities in the form of set-asides, sole-source awards, and price-evaluation preferences. Its
primary objectives are job creation and increased capital investment in distressed communities.
HUBZones are designated in several different ways, and are revised based on updated economic
indicators. The six types of HUBZones include (1) Qualified Census Tracts (QCTs); (2) Qualified
Nonmetropolitan Counties; (3) Qualified Indian Lands; (4) Base Realignment and Closure
(BRAC) Areas (now obsolete); (5) Governor-Designated Areas; and (6) Qualified Disaster Areas.
The program has some similarities to other place-based economic development initiatives, such
as Opportunity Zones and state-level enterprise zone programs, which seek to target certain
incentives and benefits to businesses in specific geographic areas in order to spur investment and
employment in those areas. It is the only federal contracting preference program that directs
contracting opportunities to small businesses based on their location. Other contracting programs
tie eligibility to business size and the socioeconomic characteristics of a firm’s owners.
Apart from maintaining a principal office in a designated HUBZone, HUBZone firms must also
meet the Small Business Administration’s (SBA’s) definition of “small business”; be majority-
owned and controlled by U.S. citizens, or by a community development corporation, agricultural
cooperative, or Indian tribe; and meet a HUBZone employee residency requirement, so that at
least 35% of its employees reside in a HUBZone.
This report discusses the HUBZone program’s structure and operation, focusing on the definition
of HUBZone areas, HUBZone firms, and the program’s performance relative to the statutory goal
for contracts with HUBZone firms (3% of federal contract award dollars, annually). It includes
information on the SBA’s administration of the program and the map of HUBZone areas, which
must be updated every five years. It also discusses program issues that may be of interest to
congress, including contracting goal attainment, HUBZone area designation policies, and
program performance assessment.
The 3% goal for HUBZone small businesses has not yet been achieved, although HUBZone firm
awards have increased each fiscal year since 2018, and some individual agencies have exceeded
the goal in certain fiscal years. A 2021 evaluation of the program’s impact commissioned by the
SBA estimated select economic impacts on HUBZone communities, which may be compared to
future program studies or evaluations.
Congress may be interested in policies that promote program utilization as well as those that
expand the pool of areas or pool of firms with HUBZone status. Legislative options include
changes to HUBZone designations as well as to requirements for firms participating in the
program.
Congressional Research Service
Small Business Administration HUBZone Program
Contents
Introduction to the HUBZone Program ........................................................................................... 1
Targeting Assistance to Geographic Areas ...................................................................................... 2
Definition of a HUBZone ................................................................................................................ 3
Qualified Census Tracts ............................................................................................................ 4
Limit on Qualified Census Tract Designations ................................................................... 5
Qualified Nonmetropolitan Counties ........................................................................................ 6
Qualified Indian Lands .............................................................................................................. 7
Base Realignment and Closure (BRAC) Areas ......................................................................... 9
Governor-Designated Areas ...................................................................................................... 9
Qualified Disaster Areas ......................................................................................................... 10
Redesignated Areas .................................................................................................................. 11
HUBZone Business Requirements ................................................................................................. 11
HUBZone Federal Contracting Goals ........................................................................................... 13
Congressional Issues ..................................................................................................................... 15
HUBZone Certification ........................................................................................................... 15
Performance Measures ............................................................................................................ 15
Small Business Contracting Goal Attainment ......................................................................... 16
HUBZone Designations .......................................................................................................... 17
Figures
Figure 1. HUBZones on Indian Lands ............................................................................................ 8
Figure 2. HUBZones on Indian Lands ............................................................................................ 8
Tables
Table 1. Number of HUBZone-Certified Small Businesses Listed in the SBA’s Dynamic
Small Business Search Database, Selected Dates, 2012-2024 ................................................... 13
Table 2. Statutory Contracting Goals ............................................................................................ 14
Appendixes
Appendix. HUBZone Certification History .................................................................................. 19
Contacts
Author Information........................................................................................................................ 21
Congressional Research Service
Small Business Administration HUBZone Program
Introduction to the HUBZone Program
The Small Business Administration (SBA) administers several programs to support small
businesses and promote economic competition, including the Historically Underutilized Business
Zone (HUBZone) program. The program is a place-based contracting assistance program,
authorized in 1997 by the HUBZone Act of 1997 (Title VI of the Small Business Reauthorization
Act of 1997; P.L. 105-135).1 Congress has established in statute an annual HUBZone
procurement goal of 3% of prime contracts and 3% of subcontracts, as measured in dollars.2
The HUBZone program provides participating small businesses located in areas with low income,
high poverty, or high levels of unemployment with preferential contracting opportunities. The
HUBZone program is the only federal contracting program that assists firms based on their
geographic location rather than their characteristics or those of their owners (e.g., contracting
programs for small businesses, disabled-veteran owned small businesses). For HUBZones, these
take the form of set-asides, sole-source awards, and price-evaluation preferences.3
While a set-aside restricts competition for a contract to specified contractors (HUBZone firms), a
sole-source award is a contract awarded to a firm without competition. When a contract’s
anticipated total value, including any options, does not exceed $4.5 million (or $7 million for
manufacturing contracts), the contracting officer may award a qualified HUBZone small business
a sole-source contract without competition.4 Set-asides may be exclusive, if an entire procurement
is set-aside, or partial, if part of it is restricted to HUBZone firms. A price evaluation preference
occurs when an agency contracting officer treats the price offered by a certified HUBZone small
business as if it were lower than the price offered by non-small business offeror, even when it is
not.5 This may only be done when a contracting officer will award a contract in full and open
competition (not through a set-aside).6
In FY2023, the federal government awarded over $16.6 billion to HUBZone businesses but did
not reach the 3% statutory procurement goal; of that amount, $2.9 billion was awarded through a
HUBZone set-aside, $3 billion through sole-source awards, and $624 million through a contract
with a HUBZone price-evaluation preference.7
1 Program authorization is codified at 15 U.S.C. §657a. The SBA began accepting applications from interested small
businesses on March 22, 1999. See U.S. Congress, Senate Committee on Small Business, Small Business
Reauthorization Act of 2000, report to accompany S. 3121, 106th Cong., 2nd sess., September 27, 2000, S.Rept. 106-422
(Washington: GPO, 2000), p. 20.
2 15 U.S.C. §644(g)(1)(A).
3 Although the Competition in Contracting Act of 1984 (CICA) generally requires “full and open competition” for
government procurement contracts, certain statutory preferences are recognized as competitive procedures 41 U.S.C.
§253(b)(1); and 41 U.S.C. §259(b). For more information on how contracting programs such as the HUBZone program
impact federal procurement policies and practices, see CRS Report R45576, An Overview of Small Business
Contracting, by R. Corinne Blackford.
4 15 U.S.C. §657a(c)(2)(A); and 48 C.F.R. §19.1306. The Federal Acquisition Regulatory Council adjusts each
acquisition-related dollar threshold (including those for the HUBZone contracting program), on October 1, of each year
that is evenly divisible by five. As a result, these thresholds may differ from those in statute. The next inflation
adjustment will take place on October 1, 2025. See 41 U.S.C. §1908(c)(2).
5 13 C.F.R. §126.613(a)(1). The contracting officer may not grant the preference, however, if that price is more than
10% higher than the price offered by the “otherwise lowest, responsive, and responsible offeror.”
6 13 C.F.R. §126.613(a)(1). The HUBZone price evaluation preference does not apply where the initial lowest
responsive and responsible offeror is a small business concern (13 C.F.R. §126.613(a)(2)).
7 GSA, “Final Data Report: FY2023 Federal Procurement Data System GSA Report,” at https://www.gsa.gov/policy-
regulations/policy/acquisition-policy/small-business-reports.
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Targeting Assistance to Geographic Areas
The HUBZone program was authorized by P.L. 105-135.8 Senator Christopher S. “Kit” Bond, the
legislation’s sponsor, described it as a “jobs bill and a welfare-to-work bill” designed to “create
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 have suffered from a lack of investment.”9 The Senate Committee on Small
Business’s report accompanying the HUBZone program’s authorizing legislation in 1997
presented arguments for adopting the HUBZone program such as job creation:
Creating new jobs in economically distressed areas has been the greatest challenge for
many of our nation’s governors, mayors, and community leaders. The trend is for business
to locate in areas where there are customers and a skilled workforce. Asking a business to
locate in a distressed area often seems counter to its potential to be successful. But without
businesses in these communities, we don’t create jobs, and without sources of new jobs,
we are unlikely to have a successful revitalization effort.
The HUBZone program attempts to utilize a valuable government resource, a government
contract, and make it available to small businesses who agree in return to locate in an
economically distressed area and employ people from these areas…. Contracts to small
businesses in HUBZones can translate into thousands of job opportunities for persons who
are unemployed or underemployed.10
Some HUBZone critics argued that the program would compete with, and potentially diminish
the effectiveness of, the SBA’s 8(a) Business Development program.11 The 8(a) program provides
business development support and contracting preferences to small businesses owned and
controlled by “socially and economically disadvantaged individuals.”12
Others contended that the experiences with “enterprise zone” programs suggested that HUBZones
would have, at best, a limited impact on the targeted area’s economic prospects:
the record of enterprise zones demonstrates that businesses that locate in an area because
of tax breaks or other artificial inducements (such as HUBZone contract preferences),
instead of genuine competitive advantages, generally prove not to be sustainable…. Thus,
the incentives generally go to businesses that would have located in and hired from the
8 The SBA officially established the HUBZone program on March 22, 1999, when it began to accept applications from
businesses interested in participating in the program. The SBA certified its first HUBZone business on March 24, 1999,
and issued the first HUBZone contract on April 8, 1999. See U.S. Congress, Senate Committee on Small Business,
Small Business Reauthorization Act of 2000, report to accompany S. 3121, 106th Cong., 2nd sess., September 27, 2000,
S.Rept. 106-422 (Washington: GPO, 2000), p. 20.
9 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.
10 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. 26.
11 U.S. Congress, Senate Committee on Small Business, S. 1574, The HUBZone Act of 1996: Revitalizing Inner Cities
and Rural America, 104th Cong., 2nd sess., March 21, 1996, S.Hrg. 104-480 (Washington: GPO, 1996), p. 17; U.S.
Congress, Senate Committee on Small Business, S. 208, The HUBZone Act of 1997, 105th Cong., 1st sess., February 27,
1997, S.Hrg. 105-64 (Washington: GPO, 1997), p. 15; and U.S. Congress, Senate Committee on Small Business, S.
208, The HUBZone Act of 1997, 105th Cong., 1st sess., April 10, 1997, S.Hrg. 105-103 (Washington: GPO, 1997), pp.
20, 23, 26, 27, 33, 35, 77, 147, 149, 153-157.
12 13 C.F.R. §124.101. For more information on the 8(a) program, see CRS In Focus IF12458, The SBA’s 8(a) Business
Development Program, by R. Corinne Blackford; CRS Report R44844, SBA’s 8(a) Business Development Program:
Legislative and Program History, by R. Corinne Blackford; and CRS Report R48190, SBA’s 8(a) Business
Development Program: Structure and Current Issues, by R. Corinne Blackford.
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target area anyway…. Therefore, we should be realistic about the impact the HUBZone
legislation will have on business relocation decisions.13
Business Incentives for Economic Development in Distressed Areas14
HUBZones exist amid various place-based economic development initiatives,15 such as Opportunity Zones and
state-level enterprise zone programs,16 which seek to target certain incentives and benefits to businesses in
specific geographic areas, to spur investment and employment in those areas. Some research analyzing these types
of efforts finds that there are common trade-offs to make in program design decisions. For example, a National
Bureau of Economic Research working paper notes that if areas designated for program benefits are too small,
“businesses that would have located in one location may be able to relocate only slightly (e.g., across the street) in
order to take advantage of zone benefits.” This may lead to “a cost to the taxpayers but with little (even local)
benefit.”17 This paper also identifies potential trade-offs related to the criteria for zone designation. For example,
“formulaic approaches” that designate an area’s eligibility for a program if it meets certain data thresholds (related
to poverty, income, unemployment, etc.) “risks designating areas as zones that, while technically eligible, are not
necessarily those that a policymaker (or an outside observer) would consider distressed or that would benefit
from subsidies.”18
How HUBZones are defined and designated is discussed below (see “Definition of a HUBZone”).
There are six possible types of HUBZones, two of which are based on formulaic eligibility
criteria, with certain limits. While HUBZone designations are periodically revised to reflect
economic data updates on a five-year cycle, as statutorily required, some HUBZone firms may
retain their HUBZone status for up to 10 years, even if they are located in a zone that loses its
designation as a result of an update. Per SBA regulations,
A concern that has purchased a building or entered a long-term lease of at least 10 years
for a property in a HUBZone (other than in a Redesignated Area or Qualified Disaster
Area) will be deemed to have its principal office located in a HUBZone for up to 10 years
from the date of the investment, as long as that building or property qualifies as the
concern’s principal office and continues to qualify as the concern’s principal office, and as
long as the firm maintains the long-term lease or continues to be the sole owner of the
property.19
Definition of a HUBZone
There are six types of HUBZone areas, or ways for a HUBZone to be designated, one of which
has become obsolete.20 Most HUBZones are designated based on Census data that indicate levels
13 U.S. Congress, Senate Committee on Small Business, S. 208, The HUBZone Act of 1997, S.Hrg. 105-64, p. 36.
14 For an analysis of what may constitute economically distressed areas, see CRS Report R48059, Identifying Areas of
Economic Distress: Examples and Considerations, by Joseph Dalaker, Julie M. Lawhorn, and Lisa S. Benson.
15 For an overview of place-placed economic development policy, see CRS In Focus IF12409, What Is Place-Based
Economic Development?, by Adam G. Levin.
16 The 2017 tax revision (P.L. 115-97) temporarily authorized Opportunity Zone (OZ) tax incentives, which are
intended to encourage private investment in economically distressed communities; see CRS Report R45152, Tax
Incentives for Opportunity Zones, by Donald J. Marples, for more information. Enterprise zones are designated by
states and typically involve business investment incentives from state and local governments.
17 Matthew Freedman and David Neumark, Lessons Learned and Ignored in U.S. Place-Based Policymaking, National
Bureau of Economic Research, Working Paper 33272, December 2024, p. 6, https://www.nber.org/papers/w33272.
18 Freedman and Neumark, p. 7.
19 13 C.F.R. §126.200(c)(1).
20 In accordance with P.L. 115-91, all HUBZone-qualified base closure (BRAC) areas designated on or before
December 31, 2019, retained that status until the SBA prepared its updated HUBZone map (July 1, 2023). Since the
update of the HUBZone map (effective July 1, 2023), this designation has become obsolete.
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of high poverty, high unemployment, or low income (areas known as Qualified Census Tracts21
and Qualified Nonmetropolitan Counties). The six possible HUBZone designations are as
follows, each of which are discussed below:
1. “Qualified Census Tracts” (QCT);
2. “Qualified Nonmetropolitan Counties”;
3. “Qualified Indian Lands”;
4. “Base Realignment and Closure (BRAC) Areas” (now obsolete);
5. “Governor-Designated Areas”;
6. “Qualified Disaster Areas.”22
The locations of HUBZones are shown in SBA’s online HUBZone map.23 The map has most
recently been updated to reflect 2020 Census data, and became effective as of July 1, 2023.24 The
map’s qualified census tracts and nonmetropolitan counties will be updated again in July 2028,
according to a five-year map update cycle that is required by the National Defense Authorization
Act for Fiscal Year 2018.25 Throughout any given year, the SBA makes governor-designated and
disaster area updates.26
Qualified Census Tracts
P.L. 105-135, the HUBZone Act of 1997, provided HUBZone eligibility to Qualified Census
Tracts. The term Qualified Census Tract (QCT) has the meaning given that term in Section
42(d)(5)(B)(ii) of the Internal Revenue Code of 1986. That section of the Internal Revenue code
refers to QCTs as determined by the Department of Housing and Urban Development (HUD), for
its low-income housing tax credit program. It has three subparts:
(I) In general
The term “qualified census tract” means any census tract which is designated by the
Secretary of Housing and Urban Development and, for the most recent year for which
census data are available on household income in such tract, either in which 50 percent or
more of the households have an income which is less than 60 percent of the area median
gross income for such year or which has a poverty rate of at least 25 percent [ ... ].
(II) Limit on MSA’s designated
21 A census tract is a geographic area delineated by the Census Bureau, that is smaller than a county, does not cross
county boundaries, and typically has a population of about 1,200 to 8,000 persons. For further information see
https://www.census.gov/programs-surveys/geography/about/glossary.html#par_textimage_13.
22 P.L. 105-135, the HUBZone Act of 1997 (Title VI of the Small Business Reauthorization Act of 1997) designated
qualified census tracts, qualified counties (originally only in nonmetropolitan areas), and qualified Indian
reservation/Indian Country (originally lands within the external boundaries of an Indian reservation) as eligible. P.L.
108-447, the Consolidated Appropriations Act, 2005, provided HUBZone eligibility for five years to bases closed
under the Base Realignment and Closure Act (BRAC). P.L. 109-59, the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users, provided eligibility to difficult development areas outside of the
continental United States (DDAs). P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, provided
eligibility to qualified disaster areas. P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018,
included DDAs in the definition of qualified nonmetropolitan counties.
23 The map is available at available at https://maps.certify.sba.gov/hubzone/map/help#navigate-updated-map.
24 SBA, “HUBZone program,” at https://www.sba.gov/federal-contracting/contracting-assistance-programs/hubzone-
program.
25 P.L. 115-91.
26 13 C.F.R. §126.105.
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The portion of a metropolitan statistical area which may be designated for purposes of this
subparagraph shall not exceed an area having 20 percent of the population of such
metropolitan statistical area.
(III) Determination of areas
For purposes of this clause, each metropolitan statistical area shall be treated as a separate
area and all nonmetropolitan areas in a State shall be treated as 1 area.27
Limit on Qualified Census Tract Designations
In metropolitan statistical areas (MSAs) in which more than 20% of the population qualifies for
QCT status, HUD orders the census tracts in that MSA from the highest percentage of eligible
households to the lowest, and then designates the tracts with the highest percentage of eligible
households as qualified until the 20% MSA population limit is exceeded.28 There is thus a limit
on the number of tracts that may be designated as a QCT.
P.L. 114-187, the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA)
exempts Puerto Rico from the 20% population cap for 10 years, or until the date on which the
Financial Oversight and Management Board for Puerto Rico ceases to exist, whichever comes
first.29
The SBA’s most recent update of QCT eligibility was completed July 1, 2023. Those designations
will be updated every five years thereafter, as required by P.L. 115-91.30
27 26 U.S.C. §42(d)(5)(B)(ii)(I)-(III). Note that the abbreviation, MSA, refers to “metropolitan statistical area.” For
information on the definition of an MSA, see https://www.census.gov/programs-surveys/metro-micro/about.html.
28 HUD, “Qualified Census Tracts and Difficult Development Areas,” at http://www.huduser.org/portal/datasets/qct/
qct99home.html. If a census tract is excluded because it would raise the percentage of the MSA population that
qualifies above 20%, then subsequent census tracts are considered to determine if a census tract with a smaller
population could be included without exceeding the 20% limit.
29 The SBA administratively waived the 20% population cap on QCTs in MSAs in 2016. On October 23, 2017, the
SBA announced in the Federal Register that unless significant adverse comment is received by November 22, 2017, it
would apply PROMESA’s statutory language (which effectively reinstates the 20% population cap on QCTs located in
MSAs and exempts Puerto Rico from the cap for 10 years, or until the date on which the Financial Oversight and
Management Board for Puerto Rico ceases to exist, whichever comes first) on December 22, 2017. The SBA indicated
that the statutory language “is specific, limited, and requires no interpretation.” See SBA, “HUBZone and Puerto Rico
Oversight, Management, and Economic Stability Act (PROMESA) Amendments,” 82 Federal Register 48903, October
23, 2017.
30 Prior to 2010, data required for QCT eligibility purposes were only available from the decennial census long form.
As a result, QCTs changed relatively infrequently, typically as new economic data from each decennial census became
available or when the Census Bureau undertook a new delineation of census tracts. However, for the 2010 decennial
census, the long form was replaced by the American Community Survey (ACS), an ongoing mailed survey of about
250,000 households per month that gathers largely the same income data as the long form. In 2012, HUD used that data
to determine the eligibility status of census tracts for the low-income housing tax credit program. The SBA applied the
changes in QCT status to the HUBZone program later that same year. HUD initially announced that it would update
the eligibility status of census tracts based on the release of new ACS economic data every five years but later decided
to update the eligibility status of census tracts annually. The increased frequency of QCT status reviews led to
increased anxiety among some small business owners and their advocates about their HUBZone eligibility. P.L. 115-91
addressed this issue by allowing small businesses with QCT status on or before December 31, 2019, to retain that status
from January 1, 2020, until the SBA prepared an updated online tool depicting HUBZone qualified areas, completed
July 1, 2023, and by requiring the SBA to update QCT status every five years instead of annually. See U.S. Census
Bureau, “Using 1-Year or 5-Year American Community Survey Data,” at https://www.census.gov/programs-surveys/
acs/guidance/estimates.html; SBA, “Small Business HUBZone Program; Government Contracting Programs,” 76
Federal Register 43572, July 21, 2011; HUD, “Statutorily Mandated Designation of Difficult Development Areas and
Qualified Census Tracts for 2012,” 76 Federal Register 66745, October 27, 2011; and HUD, “Statutorily Mandated
(continued...)
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Qualified Nonmetropolitan Counties
A qualified nonmetropolitan county is any county that is not located in a metropolitan statistical
area as defined in Section 143(k)(2)(B) of the Internal Revenue Code of 198631 and in which:
• the median household income32 is less than 80% of the state median household
income, based on a five-year average of the available data from the Bureau of the
Census of the Department of Commerce;
• the unemployment rate is not less than 140% of the average unemployment rate
for the United States or for the state in which such county is located, whichever is
less, based on a five-year average of the available data from the Secretary of
Labor;33 or
• the county has been designated by the Secretary of HUD as a difficult
development area (DDA) within Alaska, Hawaii, or any territory or possession of
the United States outside the 48 contiguous states.34
P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018, among other
provisions, amended the HUBZone eligibility criteria for nonmetropolitan counties, effective
January 1, 2020. The law changed the HUBZone eligibility formula for nonmetropolitan
counties.35
P.L. 115-91 also froze both QCTs and qualified nonmetropolitan county HUBZone areas as of
December 31, 2019 (one day prior to the formula change), until “the SBA prepares an updated
online tool depicting HUBZone qualified areas based on the 2020 Census.” The SBA therefore
initially delayed implementation of nonmetropolitan county formula change. The SBA had
anticipated that the updated online tool (the HUBZone map) would be ready by January 1, 2022,
and had planned to implement the formula change at that time. However, when the SBA realized
that the HUBZone map would not be updated until summer of 2023, the SBA decided to
Designation of Qualified Census Tracts for Section 42 of the Internal Revenue Code of 1986,” 77 Federal Register
23735-23740, April 20, 2012.
31 Section 143(k)(2)(B) of the Internal Revenue Code of 1986 indicates that “the term ‘metropolitan statistical area’
includes the area defined as such by the Secretary of Commerce.”
32 A household consists of all persons living together in the same housing unit. Household income is the sum of the
incomes of all persons within the household. The median household income is the dollar amount that divides a group of
households into two equal parts: one with incomes less than the median, the other with more.” See U.S. Census Bureau,
American Community Survey and Puerto Rico Community Survey: 2023 Subject Definitions, at
https://www2.census.gov/programs-surveys/acs/tech_docs/subject_definitions/2023_ACSSubjectDefinitions.pdf, pp.
85 (for household) and 94 (for median income).
33 13 C.F.R. §126.103.
34 P.L. 109-59, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA),
provided HUBZone eligibility to difficult development areas (DDAs) within Alaska, Hawaii, or any territory or
possession of the United States outside the 48 contiguous states. These areas are designated annually, typically in
September or October, by the Secretary of HUD in accordance with Section 42(d)(5)(B)(iii) of the Internal Revenue
Code, which applies to HUD’s low-income housing tax credit program. DDAs are defined as “areas designated by the
Secretary of Housing and Urban Development as having high construction, land, and utility costs relative to area
median gross income.” For more information, see 74 Federal Register 51305, October 6, 2009.
35 Specifically, the first portion of the nonmetropolitan county eligibility formula was changed from “less than 80% of
the nonmetropolitan state median household income, based on the most recent data available from the Bureau of the
Census of the Department of Commerce” to “less than 80% of the state median household income based on a five-year
average of the available data from the Bureau of the Census of the Department of Commerce.” At the time, this change
was expected to add at least 1,000 additional HUBZone areas to the HUBZone map. U.S. Congress, House Committee
on Conference, National Defense Authorization Act of Fiscal Year 2018, report to accompany H.R. 2810, 115th Cong.,
1st sess., November 11, 2017, H.Rept. 115-404 (Washington: GPO, 2017), p. 1049.
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implement the formula change on August 25, 2021, noting that this action “would be more in line
with congressional intent.”36 The SBA added 452 new qualified nonmetropolitan counties at that
time to the HUBZone map.
SBA’s most recent update of nonmetropolitan county eligibility was completed July 1, 2023.
Those designations will be updated every five years thereafter, as required by P.L. 115-91.37
Qualified Indian Lands
P.L. 105-135, the HUBZone Act of 1997, provided HUBZone eligibility to “lands within the
external boundaries of an Indian reservation.” Since then, the term Indian reservation has been
clarified and expanded to include the following:
• Indian trust lands and other lands covered under the term Indian Country, as used
by the Bureau of Indian Affairs;
• portions of the state of Oklahoma designated as former Indian reservations by the
Internal Revenue Service (Oklahoma tribal statistical areas); and
• Alaska Native village statistical areas.38
In accordance with P.L. 115-91, all HUBZone-qualified Indian lands designated on or before
December 31, 2019, retained that status until the SBA updated the HUBZone map (July 1, 2023).
Figure 1 and Figure 2 show the locations of existing HUBZone-qualified Indian lands.
36 SBA, Office of the HUBZone Program, “Designation of Additional Qualified Non-Metropolitan Counties,” SBA
Information Notice: 6000-818116, August 25, 2021.
37 Prior to P.L. 115-91, nonmetropolitan county status was updated as many as three times a year, with determinations
based on income typically taking place in January, determinations based on unemployment typically taking place in
May, and determinations based on DDA status typically taking place in November.
38 Henry Beale and Nicola Deas, “The HUBZone Program Report,” Washington, DC: Microeconomic Applications,
Inc., prepared for the SBA, Office of Advocacy, May 2008, p. 160. This report was the result of P.L. 108-447, which
directed the Office of Advocacy to study the HUBZone program, including measuring the effectiveness of definitions
used for the program (SBA, Office of Advocacy, “The Small Business Economy: A Report to the President,” 2009,
p.130).
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Figure 1. HUBZones on Indian Lands
Continental United States
Source: SBA, HUBZone map, accessed 1/27/2025, at https://maps.certify.sba.gov/hubzone/map/help.
Figure 2. HUBZones on Indian Lands
Alaska
Source: SBA, HUBZone map, accessed 1/27/2025, at https://maps.certify.sba.gov/hubzone/map/help.
Notes: Most of the state of Alaska is covered by HUBZones when QCTs and nonmetropolitan counties are
taken into account.
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Base Realignment and Closure (BRAC) Areas
P.L. 108-447, the Consolidated Appropriations Act, 2005, provided HUBZone eligibility for five
years to “lands within the external boundaries of a military installation closed through a
privatization process.”39 The military base’s HUBZone eligibility commenced on the effective
date of the initial law (December 8, 2004) if the military base was already closed at that time or
on the date of formal closure if the military base was still operational at that time. Since the
update of the HUBZone map (effective July 1, 2023), this designation has become obsolete.
During the 113th and 114th Congresses, several bills were introduced to make it easier for
businesses located in a BRAC military base closure area to meet the HUBZone requirement of
having at least 35% of their employees reside within a HUBZone.40
In accordance with P.L. 115-91, all HUBZone-qualified base closure areas designated on or
before December 31, 2019, retained that status until the SBA prepared its updated HUBZone map
(July 1, 2023).
Governor-Designated Areas
P.L. 115-91 authorizes governors, as of January 1, 2020, to petition the SBA annually to grant
HUBZone eligibility to areas in their state (or territory) that are:
• located outside of an urbanized area;
• have a population of 50,000 or fewer;
39 P.L. 101-510, the Defense Base Closure and Realignment Act of 1990 (BRAC—Title XXIX of the National Defense
Authorization Act for Fiscal Year 1991); title II of P.L. 100-526, the Defense Authorization Amendments and Base
Closure and Realignment Act; and any other provision of law authorizing military base closures or redevelopment.
“Base closure area means lands within the external boundaries of a military installation that were closed through a
privatization process under the authority of: (1) The Defense Base Closure and Realignment Act of 1990 (part A of title
XXIX of division B of P.L. 101-510; 10 U.S.C. 2687 note); (2) Title II of the Defense Authorization Amendments and
Base Closure and Realignment Act (P.L. 100-526; 10 U.S.C. 2687 note); (3) 10 U.S.C. 2687; or (4) Any other
provision of law authorizing or directing the Secretary of Defense or the Secretary of a military department to dispose
of real property at the military installation for purposes relating to base closures of redevelopment, while retaining the
authority to enter into a leaseback of all or a portion of the property for military use.” See 13 C.F.R. §126.103.
40 During the 113th Congress, H.R. 489, the HUBZone Expansion Act of 2013, and its companion bill in the Senate (S.
206) would have expanded the area eligible for HUBZone status as a result of a BRAC military base closure to include
a military installation’s municipality, county, census tract, or contiguous census tract having a total population of no
more than 50,000 as determined by the most recent decennial census. S. 2410, the Carl Levin National Defense
Authorization Act for Fiscal Year 2015, included a provision that would have allowed businesses to count employees
residing in the base closure area and (1) the census tract in which the base closure HUBZone is wholly contained, (2)
any census tract that intersects the boundaries of the base closure HUBZone, and (3) any census tract contiguous with
those census tracts to meet the 35% employee residence threshold. The bill also would have extended HUBZone
eligibility for BRAC base closure areas from five years to eight years. During the 114th Congress, the HUBZone
provisions included in S. 2410 were reintroduced as S. 1266, the HUBZone Expansion Act of 2015. S. 1292, the
HUBZone Revitalization Act of 2015 (later included in the Senate-passed version of H.R. 1735), included the
provisions in S. 1266 and would have provided qualified disaster areas HUBZone eligibility for five years if the
President has declared the qualified area a major disaster and 10 years if a catastrophic incident had occurred in the
qualified area. On May 15, 2015, the House passed H.R. 1735, the National Defense Authorization Act for Fiscal Year
2016. It included a provision to expand the area that can be used by businesses located in a BRAC base closure area to
meet the HUBZone program’s 35% employee residence threshold to include lands within 25 miles of the external
boundaries of the closed military installation, excluding any lands that are not within a qualified nonmetropolitan
county. It would have also extended HUBZone eligibility for BRAC base closure areas from five years to at least eight
years.
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• and have an unemployment rate at least 120% of the unemployment rate for the nation or
state in which it is located, whichever is less.41
However, total number of areas included in each governor’s petition may not exceed 10% of the
total number of the covered areas in that state.42 Among the SBA’s FY2025 Legislative Proposals
was a recommendation to allow governors “to select all eligible areas that meet the definition
rather than only 10% of eligible areas each year and align expiration of all Governor’s Designated
Covered Areas with five-year map update.”43
These areas are added to the HUBZone map after SBA approves a Governor’s petition and are
removed on the effective date of the five-year HUBZone map update following petition approval,
or one year after the petition is approved, whichever is later.44
Qualified Disaster Areas
P.L. 114-92 provided HUBZone eligibility for qualified disaster areas, defined as “any census
tract or nonmetropolitan county for which the President has declared a major disaster under
section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act45 or located
in an area in which a catastrophic incident has occurred (on or after the date of enactment) if such
census tract or nonmetropolitan county ceased to be qualified [as a HUBZone] ... during the
period beginning five years before the date on which the President declared the major disaster or
the catastrophic incident occurred and ending two years after such date.”46
However, the following exceptions apply: (1) in the case of a major presidentially-declared
disaster, such census tract or nonmetropolitan county may be designated a qualified disaster area
only during the five-year period beginning on the date on which the President declared the major
disaster for the area in which the census tract or nonmetropolitan county is located; and (2) in the
case of a catastrophic incident, such census tract or nonmetropolitan county may be designated a
qualified disaster area only during the 10-year period beginning on the date on which the
41 P.L. 115-91, the National Defense Authorization Act for Fiscal Year 2018, authorizes governors, starting on January
1, 2020, to submit no more than one petition each calendar year to the SBA to provide HUBZone eligibility to
designated covered areas that (1) are located outside of an urbanized area, as determined by the Bureau of the Census;
(2) have a population of 50,000 or fewer; and (3) have an average unemployment rate of at least 120% of the average
unemployment rate for the nation or the state (or territory) in which the covered area is located, whichever is less, based
on the most recent data available from the American Community Survey conducted by the Bureau of the Census.
42 P.L. 115-91. If the petition is approved, the governor must submit data to the SBA, at least once a year, certifying
that each designated covered area continues to meet these requirements. In reviewing the petition, the SBA may
consider the potential for job creation and investment in the covered area, the demonstrated interest by small businesses
in the covered area to be included in the HUBZone program, how state and local government officials have
incorporated the covered area into an economic development strategy, and, if the covered area was previously a
HUBZone, the impact on the covered area if the SBA did not approve the petition. See SBA, “HUBZone Program
Provisions for Governor-Designated Covered Areas,” 84 Federal Register 62447-62449, November 15, 2019.
43 SBA, FY2025 Congressional Budget Justification, p. 15, at https://www.sba.gov/document/report-congressional-
budget-justification-annual-performance-report.
44 13 C.F.R. §126.105(e).
45 For information on disaster declarations and authorities granted by the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, see CRS Report R43784, FEMA’s Disaster Declaration Process: A Primer, by Bruce R.
Lindsay. A major disaster declaration is made as a result of a disaster or catastrophic event and constitutes a broader
authority that helps states and local communities, as well as families and individuals, recover from the damage caused
by the event (42 U.S.C. §5122).
46 P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, Section 866. Modifications to
Requirements for Qualified HUBZone Small Business Concerns Located in a Base Closure Area.
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catastrophic incident occurred in the area in which the census tract or nonmetropolitan area is
located.47
Qualified disaster areas are generally added to the HUBZone map on a monthly basis, based on
data received by SBA from the Federal Emergency Management Agency (FEMA), and removed
on the effective date of the five-year HUBZone map update that follows the declaration.48
Redesignated Areas
Congress created “redesignated areas” to delay the loss of HUBZone status for census tracts and
nonmetropolitan counties that lose HUBZone eligibility. Because of concerns that some
HUBZone areas could “shift in and out of eligibility year after year,” Congress included a
provision in P.L. 106-554, the HUBZones in Native America Act of 2000 (Title VI, the
Consolidated Appropriations Act, 2001), to address this issue.49 The provision provided census
tracts and nonmetropolitan counties that lose HUBZone eligibility an automatic extension “for the
3-year period following the date on which the census tract or nonmetropolitan county ceased to
be so qualified.”50 The act labeled these census tracts and nonmetropolitan counties as
redesignated areas.
In accordance with P.L. 115-91, all redesignated areas on or before December 31, 2019, retained
that status until the SBA prepared an updated HUBZone map (July 1, 2023). The act also required
the SBA to update the map immediately after an area becomes, or ceases to be, a redesignated
area.51 Although the SBA will not update the HUBZone map again until 2028, HUBZones that
became redesignated areas at the time of the 2023 map update will expire on July 1, 2026.
HUBZone Business Requirements
Only firms certified by the SBA may participate in the HUBZone program. Table 1 indicates the
number of HUBZone-certified small businesses listed in the SBA’s Dynamic Small Business
Search database for selected dates. The SBA’s database contains information provided by small
businesses interested in obtaining federal contracts.
To become certified and maintain certification through periodic recertification,52 firms must:
• meet SBA size standards for the firm’s primary industry;
47 SBA, “HUBZone and National Defense Authorization Act for Fiscal Year 2016 Amendments,” 81 Federal Register
51314, August 4, 2016.
48 13 C.F.R. §126.105(d).
49
SBA, “Small Business Size Regulations; Government Contracting Programs; HUBZone Program,” 67 Federal
Register 3828, January 28, 2002.
50 P.L. 106-554, the HUBZones in Native America Act of 2000 (Title VI, the Consolidated Appropriations Act, 2001).
51 During the 114th Congress H.R. 5250, the Growing and Reviving Rural Economies Through Transitioning HUBZone
Redesignation Act of 2016, and S. 2838, the Small Business Transforming America’s Regions Act of 2016, would
have extended the eligibility of redesignated HUBZones to seven years from three years. During the 115th Congress,
H.R. 2013, the Growing and Reviving Rural Economies Through Transitioning HUBZone Redesignation Act of 2017,
and S. 690, the HUBZone Investment Protection Act, would have extended the eligibility of redesignated HUBZones to
seven years from three years; H.R. 2592, the Expanding the Impact of the HUBZone Program Act of 2017, would have
extended HUBZone eligibility to not more than 10 years; and H.R. 3294, the HUBZone Unification and Business
Stability Act of 2017, would have provided HUBZone eligibility for at least five years beginning on January 1, 2020.
52 To maintain certification, a small business must recertify to SBA that it continues to meet all HUBZone eligibility
criteria. 13 C.F.R. §126.500(a).
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• be at least 51% owned and controlled by U.S. citizens, a community
development corporation, an agricultural cooperative, or an Indian tribe
(including Alaska Native Corporations and Native Hawaiian Organizations);
• maintain a principal office located in a HUBZone;53
• ensure that at least 35% of its employees reside in a HUBZone;54
• attest that it will “attempt to maintain” having at least 35% of its employees
reside in a HUBZone during the performance of any HUBZone contract it
receives;55
• attest that it will ensure that it will comply with certain contract performance
requirements in connection with contracts awarded to it as a qualified HUBZone
small business (such as spending at least 50% of the cost of the contract incurred
for personnel on its own employees or employees of other qualified HUBZone
small businesses, and meet specified subcontracting limitations to nonqualified
HUBZone small businesses).56
53 Effective December 26, 2019, if a small business owns a building in a HUBZone at the time of its certification and
that location meets the definition of principal office, the small business will be deemed to meet the principal office
requirement for 10 years, starting from the date of recertification, as long as the firm continues to own the building and
that location remains the small business’s principal office, even if the area loses its HUBZone designation. See SBA,
“Small Business HUBZone Program and Government Contracting Programs,” 84 Federal Register 65228, 65242,
November 26, 2019; 13 C.F.R. §126.200(c)(1).
54 Effective May 3, 2010, “employee means all individuals employed on a full-time, part-time, or other basis, so long as
that individual works a minimum of 40 hours per month. This includes employees obtained from a temporary employee
agency, leasing concern, or through a union agreement or co-employed pursuant to a professional employer
organization agreement.” See SBA, “HUBZone and Government Contracting,” 74 Federal Register 56702, November
3, 2009. Prior to May 3, 2010, the definition of employee was based on full-time equivalency and only permanent
positions were counted.
Effective December 26, 2019, to count as residing in a HUBZone, employees must live in a location full-time and for at
least 180 days immediately prior to the date of application or date of recertification, as applicable. When determining
the percentage of employees that reside in a HUBZone, if the percentage results in a fraction, SBA rounds to the
nearest whole number (up or down). See SBA, “Small Business HUBZone Program and Government Contracting
Programs,” 84 Federal Register 65228, November 26, 2019. Also effective December 26, 2019, “An employee who
resides in a HUBZone at the time of certification (or time of recertification where the individual is being treated as a
HUBZone resident for the first time) shall continue to count as a HUBZone resident employee if the individual
continues to live in the HUBZone for at least 180 days immediately after certification (or recertification) and remains
an employee of the concern, even if the employee subsequently moves to a location that is not in a HUBZone or the
area in which the employee’s residence is located no longer qualifies as a HUBZone.” See SBA, “Small Business
HUBZone Program and Government Contracting Programs,” 84 Federal Register 65242, November 26, 2019. Prior to
December 26, 2019, employees who had moved out of a HUBZone were not counted toward meeting residency
requirements.
55 This provision is designed to assist HUBZone-certified firms maintain eligibility if they need to hire additional
employees to perform a federal contract. “A certified HUBZone small business concern that has less than 20% of its
total employees residing in a HUBZone during the performance of a HUBZone contract has failed to attempt to
maintain the HUBZone residency requirement.” Firms have an affirmative duty to notify the SBA if they fall below the
20% standard. See SBA, “Small Business HUBZone Program and Government Contracting Programs,” 84 Federal
Register 65240, November 26, 2019; and 13 C.F.R. §126.103. Prior to December 26, 2019, the SBA did not specify a
minimum percentage of employees needed to maintain eligibility under the “attempt to maintain” provision.
56 13 C.F.R. §126.200.
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Table 1. Number of HUBZone-Certified Small Businesses Listed in the SBA’s
Dynamic Small Business Search Database, Selected Dates, 2012-2024
Date Number
July 5, 2012 6,602
July 24, 2014 5,808
July 6, 2016 5,476
July 10, 2018 6,335
July 7, 2020 7,461
July 29, 2022 6,407
October 15, 2024 4,678
Sources: SBA, “Dynamic Small Business Search Database,” at https://dsbs.sba.gov/search/dsp_dsbs.cfm; accessed
on the dates provided in the left-hand column.
Note: The System for Awards Management (SAM) also provides certified HUBZone firm records, available at
SAM.gov by performing a search of “entities” and filtering by “socio-economic status” at https://sam.gov/search/.
On October 15, 2024, an entity search for certified HUBZone firms showed 4,337 results.
The SBA processes approximately 700-900 HUBZone applications each year, and met the
statutory requirement for 60-day processing for complete applications in FY2023.57
Certification procedures for firms are outlined in regulations, and include an electronic
application to SBA’s HUBZone Program Office via SBA’s website.58 A certified firm must
“recertify to SBA that it continues to meet all HUBZone eligibility criteria” every three years.59 In
addition, SBA conducts periodic “program examinations” of HUBZone firms to verify their
continuing eligibility for the program.60
HUBZone Federal Contracting Goals
Since 1978, federal agency heads have been required to establish federal procurement contracting
goals, in consultation with the SBA, “that realistically reflect the potential of small business
concerns and small businesses concerns owned and controlled by socially and economically
disadvantaged individuals” to participate in federal procurement.61
Between the late 1980s and end of the 1990s, Congress established five government-wide
contracting goals:
1. A goal for small businesses generally (P.L. 100-656);
2. A goal for small businesses owned and controlled by socially and economically
disadvantaged individuals (P.L. 100-656);
57 SBA, FY 2025 Congressional Budget Justification, p. 85, at https://www.sba.gov/document/report-congressional-
budget-justification-annual-performance-report.
58 13 C.F.R. §126.303-126.304.
59 13 C.F.R. §126.500(a)(1).
60 13 C.F.R. §126.500(b). Regulations state that SBA conducts an examination of “of each certified HUBZone small
business concern at least once every three years to ensure continued program eligibility, but may conduct more frequent
program examinations using a risk-based analysis to select which concerns are examined.” For background information
on the development of program certification, see the Appendix.
61 See 15 U.S.C. §644(g)(2) and P.L. 95-507, a bill to amend the Small Business Act and the Small Business
Investment Act of 1958.
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3. A goal for women-owned small businesses (P.L. 103-355);
4. A goal for small businesses located within a HUBZone (P.L. 105-135);62 and
5. A goal for service-disabled veteran-owned small businesses (SDVOSBs) (P.L.
106-50).
The current goals are outlined in Table 2, below:
Table 2. Statutory Contracting Goals
Type of Firm Goal Measure of Contract Awards
Small Businesses 23% Dollar value of prime contract awards
Small Disadvantaged Businesses (SDBs) 5% Dollar value of prime and subcontract
awards
Women-Owned Small Businesses (WOSBs) Dollar value of prime and subcontract
5%
awards
Service-Disabled Veteran-Owned Small Businesses Dollar value of prime and subcontract
5%
(SDVOSBs) awards
HUB (Historically Underutilized Business) Zone Small Dollar value of prime and subcontract
3%
Businesses awards
Source: 15 U.S.C. §644(g)(1)(A); P.L. 118-31.
Notes: Prime contracts are made directly to a business from an agency. Subcontracts are made between prime
contractors and businesses. Some federal prime contracts require a contractor to subcontract with small
businesses to create more opportunities for those firms. Executive action increased the statutory SDB goal; In
FY2024, agencies must collectively award at least 13% of contract spending to SDBs, per Office of Management
and Budget Memorandum M-24-01, in order to increase this share of award dollars to 15% by 2025.
The federal government has had difficulty meeting the prime contracting goals for WOSB and
HUBZone small businesses. The 5% goal for WOSBs was achieved in two fiscal years (FY2015
and FY2019).63 The 3% goal for HUBZone small businesses has not yet been achieved, although
HUBZone firm awards have increased each fiscal year since 2018. In contrast, the 23%
procurement goal for all types of small businesses was achieved in 10 of the 19 fiscal years
(FY2005 and FY2013-FY2023), including the past 11 fiscal years.64
For more information on annual procurement goals, see CRS Insight IN12018, Federal Small
Business Contracting Goals.
62 When created, the HUBZone contracting goal was phased in from 1% to 3%, over the course of five fiscal years. The
goal was required to be
not less than 1 percent of the total value of all prime contract awards for fiscal year 1999, not less
than 1.5 percent of the total value of all prime contract awards for fiscal year 2000, not less than 2
percent of the total value of all prime contract awards for fiscal year 2001, not less than 2.5 percent
of the total value of all prime contract awards for fiscal year 2002, and not less than 3 percent of the
total value of all prime contract awards for fiscal year 2003 and each fiscal year thereafter.
63 The subcontracting goal for WOSBs has been achieved for each of the last five fiscal years.
64 SBA, Government-wide FY2019-2023 Small Business Procurement Scorecard; and U.S. General Services
Administration (GSA), “Sam.Gov Data Bank, Static: Small Business Goaling Report [FY2005-FY2019],”
at https://sam.gov/reports/awards/static.
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Congressional Issues
HUBZone Certification
Throughout the HUBZone program’s history, policymakers have contended with tradeoffs
between efforts to mitigate program fraud and efforts to make the program accessible to eligible
firms. Program certification can prevent ineligible firms from receiving program benefits.
However, increasing certification requirements may reduce certification processing times for
qualified firms, or even deter eligible firms from seeking program certification. Currently firms
must be certified by the SBA after submitting an application that is reviewed by the agency and
apply for recertification every three years, although earlier on in the program’s history, there was
a self-certification requirement that was supplemented by an SBA verification process.65
Information on the evolution of the HUBZone program certification is available in the Appendix.
Congress may wish to consider whether the existing certification process balances fraud
prevention with program accessibility.
Performance Measures
Congress has required the SBA to publish performance metrics measuring the HUBZone
program’s success in meeting the program’s objective of promoting economic development in
economically distressed areas.66 A 2021 evaluation of the program’s impact estimated impacts
from HUBZone firm contracts on geographic areas by looking at employment, earnings, value
added, and gross output in those areas. Using an “input-output model” for its analysis, the
evaluation found that the HUBZone program had “a moderate impact on all 30 counties [studied]
in terms of value added and employment supported by contract awards to HUBZone firms.”67 It
also found that HUBZone contract awards “materially impact some economically distressed rural
counties.”68 In general, counties with smaller economies (in terms of employment and economic
output) were among those that saw greater shares of employment supported by HUBZone
investments. Study recommendations included further analysis, such as case studies, and a
“monitoring tool” for the HUBZone program. Congress may be interested in further impact
assessments and/or regular updates to previous analyses.
65 See 63 Federal Register 31911, June 11, 1998. Certification included “an applicant’s representations and SBA’s
ability to request additional information to verify those representations, along with the program examination
[verification] process.”
66 P.L. 115-91 required SBA to publish this no later than one year from December 2017. A 2018 program evaluation
report prepared for the SBA examined “factors that contribute[d] to federal agencies reaching the HUBZone Program
socioeconomic [contracting] goal.” See SBA, HUBZone Program Evaluation, prepared by Global Evaluation and
Applied Research Solutions, September 26, 2018, p. 1.
P.L. 115-91 also requires SBA to submit, not later than 90 days after the last date of each fiscal year, a report to the
House Committee on Small Business and the Senate Committee on Small Business and Entrepreneurship, including
data on the number of firms that lost certification due to SBA examinations of their documentation and the number that
did not submit documentation for recertification.
67 SBA, HUBZone Economic Impact Report, Prepared by Optimal Solutions Group, LLC, February 2021, p. 2.
68 SBA, HUBZone Economic Impact Report, Prepared by Optimal Solutions Group, LLC, February 2021, p. 10.
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Small Business Contracting Goal Attainment
Congressional interests in the HUBZone program include the program’s difficulty in meeting the
government-wide contracting goal for HUBZone firms.69 The 3% goal has not yet been achieved
by the government as a whole, although some individual agencies have exceeded the goal in
certain fiscal years. For example, the Department of Agriculture awarded 6.72% of eligible
contract award dollars to HUBZone small businesses in FY2023, the Department of Commerce
awarded 6.53% to HUBZone small businesses in FY2023, and the General Services
Administration awarded 5.69% to HUBZone small businesses in FY2023.70
A 2018 program evaluation report prepared for the SBA found that challenges preventing some
federal agencies from reaching the 3% HUBZone procurement goal included “untargeted
marketing strategies”71 and agency perceptions that there is “a lack of small businesses in
HUBZones that can meet … contract demands.”72 The evaluation also found that the 35%
employee residence requirement may hinder the ability of firms to maintain HUBZone
certification. 73 Congress may wish to explore how the SBA and purchasing agencies are working
to improve program utilization. Congress may also be interested in establishing or codifying
policies that expand either the pool of areas or pool of firms that apply for HUBZone status (see
“HUBZone Designations” and “HUBZone Certification”).
In December 2019, the SBA issued new regulations intended, in part, to make the HUBZone
program more attractive to procuring agencies. The “long-term investment provision” in these
regulations allows HUBZone firms to maintain HUBZone status for up to 10 years by owning or
making a long-term investment (such as a long-term lease) in a principal office in an area that
qualifies as a HUBZone at the time of the firm’s initial certification.74 With a qualified long-term
investment in a HUBZone, a firm can continue to participate in the HUBZone program, even if
69 In addition, Congress addressed the potential consequence of two Court of Federal Claims decisions that directed
federal agencies to provide HUBZone set-asides preference when two or more set-aside programs could potentially be
used. Providing the HUBZone program preference over other small business contracting programs could have resulted
in an increase in the percentage of federal contract dollars awarded to HUBZone small businesses and a decrease in the
percentage of federal contract dollars awarded to other small businesses. P.L. 111-240, the Small Business Jobs Act of
2010, amended the Small Business Act (15 U.S.C. 657a(b)(2)(B)) to remove the language that the court relied upon in
finding that HUBZone set-asides have “precedence.” Specifically, the act struck the phrase “a contract opportunity
shall” and replaced it with “a contract opportunity may.” See DGR Assocs., Inc. v. United States, 2010 U.S. Claims
LEXIS 588 (August 13, 2010); and Mission Critical Solutions v. United States, 2010 U.S. Claims LEXIS 36 (March 2,
2010); GAO, Mission Critical Solutions, B-401057, May 4, 2009; and Office of Legal Counsel, Department of Justice,
Permissibility of Small Business Administration Regulations Implementing the Historically Underutilized Business
Zone, 8(a) Business Development, and Service-Disabled Veteran-Owned Small Business Concern Programs, August
21, 2009, at http://www.justice.gov/sites/default/files/olc/opinions/2009/08/31/sba-hubzone-opinion082109.pdf.
70 SBA, Small Business Procurement Scorecard for FY2023, at https://www.sba.gov/federal-contracting/contracting-
data/small-business-procurement-scorecard. Some agencies that account for large amounts of contracting dollars did
not reach the goal, which hampers the government’s ability to meet the government-wide goal. For example, the
Department of Defense and Department of Health and Human Services did not meet the goal.
71 SBA, HUBZone Program Evaluation, prepared by Global Evaluation and Applied Research Solutions, September
26, 2018, p. 4.
72 SBA, HUBZone Program Evaluation, prepared by Global Evaluation and Applied Research Solutions, September
26, 2018, p. 3.
73 SBA, HUBZone Program Evaluation, prepared by Global Evaluation and Applied Research Solutions, September
26, 2018, p. 2.
74 84 Federal Register 65228, 65242, November 26, 2019; 13 C.F.R. §126.200(c)(1). The 10-year principal office long-
term investment protection period starts to run on the firm’s HUBZone certification date (if the investment was made
prior to the firm’s certification) or on the date of the investment (if the investment was made after the firm’s HUBZone
certification date).
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the area loses its HUBZone designation. Congress may wish to consider how this regulation has
impacted HUBZone area investment and program participation, and whether to codify this type of
policy.
HUBZone Designations
Designation of HUBZones is a key feature of the program and determines whether small
businesses and communities can benefit from the program. Congress may wish to reconsider
designation criteria and processes. Among the SBA’s FY2025 Legislative Proposals are four
related to the designation of HUBZone areas. Specifically, the SBA recommended statutory
revisions to several HUBZone designations, “to enable more communities and small businesses
to benefit from greater stability and alignment of HUBZone designations.”75 The
recommendations included:
1. Permitting Governors to select all eligible areas that meet the criteria for a governor-
designated HUBZone (rather than only 10% of eligible areas each year) and aligning
expiration of all governor-designated areas with the five-year map update.
Currently, the total number of areas included in a governor’s petition may not exceed 10% of the
total number of HUBZone areas in the state. A state with a high number of covered areas (that are
not governor-designated) would therefore be prevented from having as many designations as a
state with fewer covered areas—this might be seen as a disadvantage for states with more
distressed areas. This “cap” on governor-designated areas is one way that the program limits the
total number of areas eligible for HUBZone designation. As discussed earlier in “Targeting
Assistance to Geographic Areas,” economic development policy debate exists around how to
appropriately direct benefits to distressed areas.
2. Removing the 20% cap applied by HUD in selecting Qualified Census Tracts (QCTs)
eligible for HUBZone designation.
The cap on QCTs is another way in which the program limits the number of possible HUBZone
areas, by disqualifying some areas that technically meet HUBZone eligibility criteria. Removing
this cap would make economic indicators the only factor for a census tract’s HUBZone eligibility.
3. Extending eligible periods for “redesignated areas” (census tracts and nonmetropolitan
counties that lose HUBZone eligibility) from the current three years to five years in order
to align with the current five-year map updates.
One of the implicit goals of the HUBZone program is to improve the economic standing of the
geographic areas receiving assistance. It could be argued that it is a program success when a QCT
or a qualified nonmetropolitan county loses its HUBZone status when new economic data are
published. However, redesignations allow former HUBZone firms to adjust to the loss of
HUBZone status, and aligning the timeframe of status changes for redesignated areas with that of
other HUBZone areas may streamline program administration.
4. Amending the definition to specify that Qualified Disaster Area (QDAs) will be treated as
HUBZones for 5 years.
Aligning the timeframe of status changes for QDAs with that of other HUBZone areas may also
streamline program administration.
75 SBA, FY2025 Congressional Budget Justification, p. 15, at https://www.sba.gov/document/report-congressional-
budget-justification-annual-performance-report.
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If increasing the number of HUBZone areas is a policy aim, Congress may wish to consider
additional legislative options that expand HUBZone eligibility. Additional non-formula based
program designations, for example, could increase the number of HUBZones.
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Appendix. HUBZone Certification History
Following the passage of P.L. 105-135, the HUBZone Act of 1997, the SBA issued a final rule
implementing parts of the law by adding regulations pertaining to HUBZone program eligibility
and certification requirements and processes. At the time, certification included a self-
certification and SBA verification process, whereby SBA’s staff conducted random program
examinations to verify the accuracy of program applications. Recertification was required of
program participants annually.76
In 2006, the SBA committed to reviewing 5% of all certifications “through a full-scale program
of examinations.”77
At a 2009 House Small Business Committee hearing, Representative Velázquez commented that
“the [HUBZone] program has been undermined by chronic underfunding, inherent program flaws
and sloppy management. Instead of being incubators for growth and development, HUBZones
have become breeding grounds for fraud and abuse.”78
In 2009, the SBA began conducting program examinations of all firms that received a HUBZone
contract in the previous fiscal year, or verifying 100% of HUBZone contractors. SBA also began
a two-year effort to reengineer its applicant review process, requiring applicants to submit
documentation such as lease or rental agreements, three years of tax returns, citizenship
documentation, and payroll records to prove they meet program requirements. In addition, SBA
district field offices conducted site visits to validate the geographic requirement for principal
offices. HUBZone small businesses had to recertify with full documentation every three years and
to certify to federal contracting officers offering a contract of their eligibility at both the time of
the firm’s initial offer and at the time of award. Initially, depending on the complexity of the
application and the need for additional information, the SBA took from 5 to 12 months to make
application determinations, according to the SBA’s FY2013 Congressional Budget Justification
and FY2011 Annual Performance Report.
During the 114th Congress, P.L. 114-187, the Puerto Rico Oversight, Management, and Economic
Stability Act (PROMESA), required the SBA to implement a risk-based approach to requesting
and verifying information from firms applying to be designated or recertified as a qualified
HUBZone small business. GAO was required to begin an assessment of the SBA’s risk-based
approach within a year of the approach’s implementation and complete the assessment, along
with any recommendations for improvement, within the following six months.
76 See 63 Federal Register 31911, June 11, 1998.
77 U.S. Congress, House Committee on Small Business, Full Committee Hearing to Consider Legislation Updating and
Improving the SBA’s Contracting Programs, 110th Cong., 1st sess., October 4, 2007, Serial Number 110-50
(Washington: GPO, 2007), p. 6.
78 U.S. Congress, House Committee on Small Business, Full Committee Hearing on Oversight of the Small Business
Administration and Its Programs, 111th Cong., 1st sess., March 25, 2009, Small Business Committee Doc. 111-012
(Washington: GPO, 2009), p. 1.
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Risked-Based Approaches to Program Management
According to GAO, “risk-based” refers to the use of a “risk assessment to identify and analyze risks related to
achieving the defined objectives to form a basis for designing risk responses … [and an analysis of] the identified
risks to estimate their significance and design responses to the analyzed risks.”79 GAO publishes Standards for
Internal Control in the Federal Government (the “Green Book”), which “sets the standards for an effective
internal control system for federal agencies” and includes guidance on assessing and responding to risks such as
fraud risks.80
On March 27, 2017, the SBA adopted a risk-based approach for certifying and recertifying
HUBZone small businesses. GAO’s assessment of the new approach, published on September 24,
2018, found that the SBA did not change the HUBZone certification process, but introduced some
documentation requirements to the recertification process.81 Previously, HUBZone small
businesses seeking recertification were not required to submit documentation to demonstrate
continuing compliance with eligibility requirements. The SBA began requiring any certified
HUBZone small business seeking recertification that received $1 million or more in HUBZone
contract dollars since its last certification or recertification, to demonstrate compliance with the
35% HUBZone employee residency requirement and the principal office location requirement.82
In June 2017, P.L. 115-91 required the SBA to “conduct program examinations of qualified
HUBZone small business concerns, using a risk-based analysis to select which concerns are
examined, to ensure that any concern examined meets the [program's] requirements.” This was to
begin two and a half years later, on January 1, 2020. The act also specified that any small
business that misrepresented its status as a qualified HUBZone small business concern shall be
subject to liability for fraud. P.L. 115-91 also required verification of the accuracy of certified
HUBZone firms’ documentation every three years.
Starting December 26, 2019, certified HUBZone small businesses are required by regulation to
annually represent to the SBA that they continue to meet all HUBZone eligibility criteria. Firms
are not required to submit supporting information or documentation unless the SBA has reason to
question the firm’s representation of itself. HUBZone firms must recertify via a program
examination with full documentation every three years. In addition, a HUBZone small business
competing for a contract is also required at the time of each contract offer to represent to the
contracting officer that it is a certified HUBZone small business—however, its eligibility for
preferences would relate to the date of its certification or recertification, not to the date of the
contract offer.83
In September 2024, SBA issued a proposed rule that would “consolidate and redesignate the
separate recertification requirements for SBA’s 8(a) Business Development Program, HUBZone,
Woman-Owned Small Business, and Service-Disabled Veteran-Owned Small Business programs
79 GAO, Small Business Contracting: Small Business Administration Could Further Strengthen HUBZone Eligibility
Reviews in Puerto Rico and Programwide, GAO-18-666, September 24, 2018, p. 15, at https://www.gao.gov/products/
gao-18-666.
80 GAO, Standards for Internal Control in the Federal Government, GAO-14-704G, September 10, 2014, pp. 40-41, at
https://www.gao.gov/products/gao-14-704g.
81 GAO, Small Business Contracting: Small Business Administration Could Further Strengthen HUBZone Eligibility
Reviews in Puerto Rico and Programwide, GAO-18-666, September 24, 2018, p. 12, at https://www.gao.gov/products/
gao-18-666.
82 GAO, Small Business Contracting: Small Business Administration Could Further Strengthen HUBZone Eligibility
Reviews in Puerto Rico and Programwide, GAO-18-666, September 24, 2018, pp. 12-13, at https://www.gao.gov/
products/gao-18-666.
83 See 84 Federal Register 65222, November 26, 2019.
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to a new section to reduce confusion and to ensure consistent application of the size and status
recertification requirements.”84
Author Information
R. Corinne Blackford
Analyst in Small Business and Economic
Development Policy
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.
84 See 89 Federal Register 76751, September 19, 2024.
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