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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.

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When the government created the HUBZone (HistoricallyUnderutilized Business Zone) Empowerment contracting program in1997, the aim was to help entrepreneurs bid on federal governmentcontracts as well as promote the creation of businesses ineconomically disadvantaged areas. The program does not dole outgrants; instead it provides a 10 percent preference in the biddingprocess to businesses headquartered in HUBZones, which areidentified using U.S. Census data to identify areas with chronicunemployment and poverty.

Despite the significance of the program, it has gone unfundedduring the past year and may face the same fate during fiscal year2004. The SBA iscurrently using other line budget items to fund the program.Meanwhile, Sen. Olympia Snowe (R-ME), chair of the Senate Committeeon Small Business and Entrepreneurship, recently wrote a letter tothe Subcommittee on Commerce, Justice, State and the Judiciaryurging $5 million in HUBZone funding. The program has never beenfunded for more than $2 million, even though funding has beenauthorized for a range of $5 million to $10 million since 1998. TheSenate Appropriations Committee has until September 28 to make afinal determination on whether to fund the program.

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

The idea behind the program is for those small businesses inHUBZones to employ locals and generate revenue that they cancontinue investing into the community. According to one HUBZonebusiness 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 Networkin Alexandria, Virginia. "They don't have enough people toensure that the other federal agencies follow the law that relatesto HUBZone set-asides."

The program is important, asserts Newlan, and it works: Onlyhaving to compete with other HUBZone companies for contracts hashelped him grow his business, which he started in 1999. "Beingcertified by the SBA as a HUBZone business gives you severaladvantages and opportunities to grow your business over a firmthat's not," says Newlan, whose sales are expected toexceed $4 million this year, half of which he attributes to HUBZonecontracts. "You get to participate in federal procurementsthat are set aside for only HUBZone bidders--your only othercompetition would be another HUBZone firm. You wouldn't have tocompete with large businesses or other small businesses."

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