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Statement of the Hon. Kweisi Mfume on A Review and Assessment of the SBA HUBZone Program

In 1997, Congress created the Historically Underutilized Business Zone program, also known as the HUBZone program, as part of the Small Business Reauthorization Act. The program was intended to provide small businesses in economically distressed areas with greater access to federal procurement opportunities.

This is a worthy goal. The US government is the largest purchaser of goods and services, and it is vital that underserved small businesses have access to this marketplace. When small firms can compete for and win federal contracts, they create jobs and support their local economies.

Firms that are certified by SBA as “Qualified HUBZone Small Business Concerns” have access to a range of incentives, including set-asides, sole-source contracts, and a ten percent price evaluation preference during full and open competition.
The Small Business Act also sets a government-wide contracting goal for participation by qualified HUBZone small business concerns of not less than 3 percent, both for prime contracts and subcontracts.

Unfortunately, this goal has never been met in the program’s 20-plus years of existence. If we want to make progress towards achieving the 3% milestone, it is vital that we understand the factors limiting HUBZone’s reach.

For example, consolidation is a significant inhibitor to small business utilization in contracting. The small business contracting base has shrunk substantially over the years due to initiatives like Category Management. Category Management has driven a decline in the number of small firms serving as federal prime contractors, resulting in fewer contracting opportunities awarded to HUBZone businesses.

Another vexing issue is the limited number of businesses participating in the program. Despite the considerable number of areas that have HUBZone designation, there were only 4,870 participants in the program as of May 20, 2022. This is down from more than 8,500 participants in 2011.

Maryland’s 7th Congressional District is home to more than 75 economically distressed HUBZone areas, and there are approximately 288 HUBZone areas in the entire state of Maryland. Yet, there are only 355 HUBZone certified firms in the state, which is on average less than two HUBZone certified firms per HUBZone area.

So today, I want to hear more from our panel about their experience with the HUBZone program and what reforms Congress can pursue to increase program utilization. I also want to examine the efficacy of previous program changes that this committee and the SBA have instituted.
Over the years, this committee and the SBA have worked to provide stability, certainty, and flexibility when it comes to complying with eligibility requirements. As we chart a path forward, it is vital that we examine how these changes are working for program participants.

By improving the HUBZone program to meet its full potential, we can empower small businesses to support local economies and uplift socially and economically disadvantaged communities. I thank the witnesses for contributing to this hearing and look forward to gaining more insight into how we can make the HUBZone program more effective in meeting its mission.
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