Construction Law

Congress Acts, Ends HUBZone Priority

By Michael Payne

By: Edward T. DeLisle

On September 23, 2010, we wrote an article regarding the current status of the HUBZone priority fight between the GAO, the Court of Federal Claims and a number of federal agencies. That article followed another that we wrote on this issue on August 27, 2010. In a series of cases, the GAO and the Court of Federal Claims took the position that contracting officers were required to consider set-aside contracts for HUBZone entities, prior to considering set-asides for any other small or small, disadvantaged companies. In reaching this conclusion, the GAO and the Court of Federal Claims focused on the enabling legislation for the HUBZone program, which stated:

Notwithstanding any other provision of law…a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.

Based upon this language, the GAO and the Court of Federal Claims took the position that contracting officers did not have any discretion in deciding whether to set-aside a contract for HUBZone entities. They had to do so, unless they could show that there were not at least two qualified HUBZone companies that would submit offers at a reasonable price. That has all changed.

On September 27, 2010, President Obama signed the 2010 Small Business Jobs Act. As part of the Act, the language of the HUBZone statute was changed. The legislation now states that 'a contract opportunity may be awarded pursuant to this section', eliminating the mandatory nature of the original version. Based upon this simple change, the HUBZone program has been placed on equal footing with all other small and small, disadvantaged business programs, including, but not limited to, those relating to Service-Disabled, Veteran Owned Small Businesses and 8(a) companies.

As we stated in our last article, it was not likely that Congress intended to establish a priority for HUBZone companies. The problem was borne out of sloppy drafting. That drafting problem has now been corrected. It will be interesting to see how this change impacts the HUBZone program in the months to come.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

Full post as published by Federal Construction Contracting Blog on October 13, 2010 (boomark / email).