HUBZone: Eligibility and the 35% Rule

How the Historically Underutilized Business Zone program works and the hiring requirement that trips firms up.

The HUBZone program helps small businesses in historically underutilized business zones gain access to federal contracting. It is a place-based program with a hiring requirement.

Three legs of eligibility

  • The firm must have its principal office in a designated HUBZone.
  • It must be at least 51% owned and controlled by U.S. citizens.
  • At least 35% of its employees must reside in a HUBZone (the "35% rule").

The part that catches people

Eligibility is not fixed once granted. Because the 35% rule and the principal-office location are both maintained conditions, changes in where your people live or where you are headquartered can jeopardize status. Re-verify before relying on HUBZone set-asides, and keep your records showing where employees actually reside.

How it helps

When the Rule of Two is met, contracts can be set aside for HUBZone firms, and sole-source awards are sometimes possible. For a construction firm willing to recruit locally in a HUBZone, it can be a durable advantage.

General information for construction small businesses, not legal advice.

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