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HUBZone Program Going Unfunded

As Congress debates whether to fund the HUBZone program, businesses in these economically disadvantaged areas are feeling the pinch.

Opinions expressed by Entrepreneur contributors are their own.

When the government created the HUBZone (Historically Underutilized Business Zone) Empowerment contracting program in 1997, the aim was to help entrepreneurs bid on federal government contracts as well as promote the creation of businesses in economically disadvantaged areas. The program does not dole out grants; instead it provides a 10 percent preference in the bidding process to businesses headquartered in HUBZones, which are identified using U.S. Census data to identify areas with chronic unemployment and poverty.

Despite the significance of the program, it has gone unfunded during the past year and may face the same fate during fiscal year 2004. The SBA is currently using other line budget items to fund the program. Meanwhile, Sen. Olympia Snowe (R-ME), chair of the Senate Committee on Small Business and Entrepreneurship, recently wrote a letter to the Subcommittee on Commerce, Justice, State and the Judiciary urging $5 million in HUBZone funding. The program has never been funded for more than $2 million, even though funding has been authorized for a range of $5 million to $10 million since 1998. The Senate Appropriations Committee has until September 28 to make a final determination on whether to fund the program.

"It's an ongoing struggle in trying to give small businesses as much opportunity to get federal contracts as possible," says Craig Orfield, communications director for the Senate Committee on Small Business and Entrepreneurship. "Historically a contract with a federal agency has been shown to be one of the most valuable tools that a small business can acquire to provide a stable source of income and real fuel for adding jobs and expanding in their marketplace."

The idea behind the program is for those small businesses in HUBZones to employ locals and generate revenue that they can continue investing into the community. According to one HUBZone business owner, lack of funding is already affecting the program. "We've noticed a difference, and it is struggling," says Ron Newlan, president and founder of Global Solutions Network in Alexandria, Virginia. "They don't have enough people to ensure that the other federal agencies follow the law that relates to HUBZone set-asides."

The program is important, asserts Newlan, and it works: Only having to compete with other HUBZone companies for contracts has helped him grow his business, which he started in 1999. "Being certified by the SBA as a HUBZone business gives you several advantages and opportunities to grow your business over a firm that's not," says Newlan, whose sales are expected to exceed $4 million this year, half of which he attributes to HUBZone contracts. "You get to participate in federal procurements that are set aside for only HUBZone bidders--your only other competition would be another HUBZone firm. You wouldn't have to compete with large businesses or other small businesses."