Contracting with HUBZone Small Businesses Historically Underutilized Business

Contracting with HUBZone Small Businesses “Historically Underutilized Business Zone Program” FAR 19. 13 SBA’ s 13 CFR part 126 20 3 / 11 0 /2 1

1. OVERVIEW 2. HUBZONE CONTRACTING: HUBZONE SET-ASIDES AND SOLE SOURCE: FAR 19. 1305 AND 19. 1306 3. SET ASIDE OF ORDERS, RESERVES, AND PARTIAL SET ASIDES 4. HUBZONE CONTRACTING: PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (FAR 19. 1307 ) 5. LIMITATIONS ON SUBCONTRACTING (LOS)/NONMANUFACTURER RULE (NMR) Tuesday, November 3, 2020 2

FAR 19. 1304 EXCLUSIONS This subpart does not apply to (a) Requirements that can be satisfied through award to— (1) Federal Prison Industries, Inc. ; or (2) Javits-Wagner-O’Day Act participating non-profit agencies for the blind or severely disabled (see Subpart 8. 7); (b) Orders under indefinite-delivery contracts (see subpart 16. 5). (But see 16. 505(b)(2)(i)(F) for discretionary set-asides of orders); (c) Orders against Federal Supply Schedules (see subpart 8. 4). (But see 8. 405 -5 for discretionary set-asides of orders); (d) Requirements currently being performed by an 8(a)…. , unless SBA has consented to release the requirements from the 8(a) Program; (e) Requirements that do not exceed the micro-purchase threshold; or (f) Requirements for commissary or exchange resale items. 20 3 / 11 0 /2 3

13 C. F. R. § 126. 600: HUBZone contracts, including Multiple Award Contracts, are those awarded through: (a) Sole source awards to qualified HUBZone SBCs; (b) Set-aside awards, including partial set-asides, based on competition restricted to qualified HUBZone SBCs; (c) Awards to qualified HUBZone SBCs through full and open competition after a price evaluation preference is applied …. ; (d) Awards based on a reserve for HUBZone SBCs in a solicitation for a Multiple Award Contract (see 13 C. F. R. § 125. 1); or (e) Orders set-aside for HUBZone SBCs against a Multiple Award Contract, which had been awarded in full and open competition. 4

HUBZONES AND PARITY FAR 19. 203 Policies: Relationship among small business programs. § There is no order of precedence among the 8(a) Program (subpart 19. 8), HUBZone Program (subpart 19. 13), Service-Disabled Veteran-Owned Small Business (SDVOSB) Procurement Program (subpart 19. 14), or the Women-Owned Small Business (WOSB) Program (subpart 19. 15). § Small business set-asides have priority over acquisitions using full and open competition. 20 3 / 11 0 /2 5

HUBZONES AND PARITY BELOW SAT ABOVE SAT At or below the simplified acquisition threshold. The requirement to exclusively reserve acquisitions for small business concerns at 19. 502 -2(a) does not preclude the contracting officer from awarding a contract to a small business under the 8(a) Program, HUBZone Program, SDVOSB Program, or WOSB Program. Above the simplified acquisition threshold. The contracting officer shall first consider an acquisition for the 8(a), HUBZone, SDVOSB, or WOSB programs before using a small business set-aside (see 19. 5022(b)). However, if a requirement has been accepted by the SBA under the 8(a) Program, it must remain in the 8(a) Program unless SBA agrees to its release in accordance with 13 CFR 124, 125 and 126. 20 3 / 11 0 /2 6

SBA regulates and implements the HUBZone program FAR 19. 1303: Status as a HUBZone small business concern. • Status as a HUBZone small business concern is determined by SBA per 13 CFR Part 126. • If the SBA determines that a concern is a HUBZone small business concern, it will issue a certification to that effect and will add the concern to the List of Qualified HUBZone Small Business Concerns at http: //dsbs. sba. gov/dsbs/search/dsp_searchhubzone. cfm. • Only firms on the list are HUBZone small business concerns, eligible for HUBZone preferences and awards 20 3 / 11 0 /2 7

19. 1303 STATUS AS A HUBZONE SMALL BUSINESS CONCERN § A joint venture may be considered a HUBZone small business concern if it meets the criteria in the explanation of affiliates (see 19. 101 affiliation). § NOTE: In order to submit an offer on a HUBZone contract, both venturers must be qualified HUBZone SBCs per 13 C. F. R. § 126. 616. The HUBZone JV will not be certified into the program – each party to the JV must be a HUBZone SBC. § To be eligible for a HUBZone contract, a HUBZone SBC must be a HUBZone small business concern both at the time of its initial offer and at the time of contract award. 20 3 / 11 0 /2 8

1. Overview 2. HUBZone contracting: HUBZone set-asides and sole source: FAR 19. 1305 and 19. 1306 3. Set aside of Orders, Reserves, and Partial Set Asides 4. HUBZone contracting: Price evaluation preference in full and open competition (FAR 19. 1307 ) 5. LOS/NMR 20 3 / 11 0 /2 9

19. 1305 HUBZONE SET-ASIDE PROCEDURES (a) The contracting officer— (1) May set aside acquisitions exceeding the micro-purchase threshold for competition restricted to HUBZone small business concerns…. ; and (2) Shall consider HUBZone set-asides before considering HUBZone sole source awards (see 19. 1306) or small business set-asides (see subpart 19. 5). (b) To set aside an acquisition for competition restricted to HUBZone small business concerns, the contracting officer must have a reasonable expectation that— (1) Offers will be received from two or more HUBZone small business concerns; and (2) Award will be made at a fair market price. 20 3 / 11 0 /2 10

19. 1305 HUBZONE SET-ASIDE – ONLY ONE OFFER • If the contracting officer receives only one acceptable offer from a qualified HUBZone small business concern…. , the contracting officer should make an award to that concern. • If the contracting officer receives no acceptable offers from HUBZone small business concerns, the HUBZone set -aside shall be withdrawn and the requirement…. set aside for small business concerns, as appropriate (see 19. 203)…. 20 3 / 11 0 /2 11

19. 1306 HUBZONE SOLE SOURCE AWARDS (a) A contracting officer may award contracts to HUBZone small business concerns on a sole source basis…. before considering small business set-asides…. , provided none of the exclusions at 19. 1304 apply; and— (1) The contracting officer does not have a reasonable expectation that offers would be received from two or more HUBZone small business concerns; Check (a) (2) The anticipated price of the contract, including options, will not exceed— for FAR (i) $6. 5 million for a requirement within the North American Industry Classification System inflation (NAICS) codes for manufacturing; or change (ii) $4 million for a requirement within all other NAICS codes; (3) The requirement is not currently being performed by an 8(a) participant under the provisions of Subpart 19. 8 or has been accepted as a requirement by SBA under Subpart 19. 8; (4) The acquisition is greater than the simplified acquisition threshold (see Part 13); ***** (5) The HUBZone small business concern has been determined to be a responsible contractor with respect to performance; and (6) Award can be made at a fair and reasonable price. (b) The SBA has the right to appeal the contracting officer’s decision not to make a HUBZone sole source award. 20 3 / 11 0 /2 12

1. OVERVIEW 2. HUBZONE CONTRACTING: HUBZONE SET-ASIDES AND SOLE SOURCE: FAR 19. 1305 AND 19. 1306 3. SET ASIDE OF ORDERS, RESERVES, AND PARTIAL SET ASIDES 4. HUBZONE CONTRACTING: PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (FAR 19. 1307 ) 5. LOS/NMR Tuesday, November 3, 2020 13

SET-ASIDES OF ORDERS § Subpart 19. 5 - agencies may: § set aside part or parts of a multiple-award contract for SBCs, including set-asides for small business concerns under the 8(a), HUBZone, SDVOSB and the WOSB Programs; § set-aside orders placed against multiple-award contracts for SBCs, including small businesses in the 8(a), HUBZone, SDVOSB, and WOSB Programs; and § reserve one or more contract awards for SBCs, including small businesses in the 8(a), HUBZone, SDVOSB, and WOSB Programs, under full and open multipleaward procurements. § Subpart 8. 4 – agencies may set-aside orders and BPAs under the GSA Schedule; § Subpart 16. 5 - agencies may set-aside orders for SBCs in connection with multiple award contracts and no justification for this exception to fair opportunity required 20 3 / 11 0 /2 14

SET-ASIDE OF ORDERS – FAR PART 19 FAR 8. 405 -5(a)(2) states that when setting aside orders and BPAs against the Schedule: § The specific small business program eligibility requirements identified in part 19 apply. FAR 16. 505(b)(2)(i)(F) states that when setting aside orders for small business concerns: § The specific small business program eligibility requirements identified in part 19 apply. What does this mean? Examples: § Offer and acceptance requirements apply for 8(a) set-aside § Dollar thresholds apply (e. g. , 8(a) set-aside threshold) § Joint venture requirements 20 3 / 11 0 /2 15

SET-ASIDE OF ORDERS – CLAUSES FAR also amended § Current contract clauses re: set-asides to address this new authority § This means that subcontracting limitations and NMR apply to these set-asides and reserves FAR added a new clause added § 52. 219 -13 which states that the CO will give notice of which orders, if any, to be set aside under a multiple award contract 20 3 / 11 0 /2 16

PARTIAL SET ASIDE/RESERVE PARTIAL SET ASIDE §a multiple award CONTRACT is unsuitable in its ENTIRETY for a small business set aside §BUT it is determined that SOME requirements of that multiple award contract can be broken down into clearly defined requirements (segments, line items, …etc. ) - suitable for a small business set aside AT THE CONTRACT Level §those items are identified as a “partial set aside” in the solicitation and small businesses can submit proposals to be awarded a set aside contract §small businesses can submit proposals for the unrestricted portion of that contract, the partial set aside portion or both. §a partial small business set aside has the set aside requirements (orders to be competed) in place at time of contract award RESERVE § § § a multiple award CONTRACT is unsuitable in its ENTIRETY for a small business set aside used when contract requirements are NOT clearly defined, AND cannot be broken down individually at the contract level for order competition HOWEVER, CO has determined that the possibility exists to set-aside some orders once defined requirements are determined the contract is competed on an unrestricted basis (Large and Small businesses submit offers for the multiple award contract), the contracting officer notifies all potential offerors in the solicitation of the intent to do a “reserve” of some of the contract awards for small businesses awards are made to both large and small businesses and once a requirement (order) is identified that is suitable for small businesses, that “order” competition may be “set-aside” for small business participation 17

DOCUMENTATION, TARGETS, RAMPS § Although partial set aside, reserves and set aside of orders on F&O contract are discretionary, CO must document why he/she did not use these authorities § CO may set targets in contract with a reserve that estimate $ value or % of total contract to be awarded to small businesses § CO may use on ramps and off ramps to ensure sufficient SBs on contract § Discretion of CO to move a business from one portion of contract to another (e. g. , move from set aside to non set aside) 18

1. OVERVIEW 2. HUBZONE CONTRACTING: HUBZONE SET-ASIDES AND SOLE SOURCE: FAR 19. 1305 AND 19. 1306 3. SET ASIDE OF ORDERS, RESERVES, AND PARTIAL SET ASIDES 4. HUBZONE CONTRACTING: PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (FAR 19. 1307 ) 5. LOS/NMR Tuesday, November 3, 2020 19

19. 1307 PRICE EVALUATION PREFERENCE FOR HUBZONE SMALL BUSINESS CONCERNS. § The price evaluation preference for HUBZone small business concerns shall be used in acquisitions conducted using full and open competition. The Only applied in preference shall not be used— § Where price is not a selection factor so that a price evaluation preference would not be considered (e. g. , Architect/Engineer acquisitions); or F&O, including on nonreserved portion or non setaside portion § Where all fair and reasonable offers are accepted (e. g. , the award of multiple award schedule contracts). 20 3 / 11 0 /2 20

19. 1307 PRICE EVALUATION PREFERENCE FOR HUBZONE SMALL BUSINESS CONCERNS. § The contracting officer shall give offers from HUBZone small business concerns a price evaluation preference by adding a factor of 10 percent to all offers, except— § Offers from HUBZone small business concerns that have not If waive preference, then not submitting offer as waived the evaluation preference; or HZ SBC and do not need to meet LOS or NMR § Otherwise successful offers from small business concerns. § The factor of 10 percent shall be applied on a line item basis or to any group of items on which award may be made…. 20 3 / 11 0 /2 21

PRICE EVALUATION PREFERENCE - EXAMPLES OFFER: APPLY PEP: HUBZone $113 HUBZone $100 Small $103 Small $97 Large $100 Large $110 Large $95 Large $104. 5 The large business is the lowest, responsive and responsible offeror. After applying the 10% PEP to the large business, the large business is still the lowest, responsive and responsible offeror as compared to the HUBZone SBC. After applying the 10% PEP to the large business, the large business is no longer the lowest, responsive and responsible offeror as compared to the HUBZone SBC. In this example, the application of the PEP does not benefit the HUBZone SBC. In this example, the application of the PEP does benefit the HUBZone SBC. In addition, the application of the PEP cannot be used to benefit the non-HUBZone SBC. The base offer is therefore used and the large business is the apparent successful offeror. 20 3 / 11 0 /2 22

19. 1307 PRICE EVALUATION PREFERENCE FOR HUBZONE SMALL BUSINESS CONCERNS When the two highest rated offerors are a HUBZone small business concern and a large business, and the evaluated offer of the HUBZone small business concern is equal to the evaluated offer of the large business after considering the price evaluation preference, the contracting officer shall award the contract to the HUBZone small business concern. In GAO protest where HUBZone SBC was the lowest priced offeror, GAO stated: In sum, we find that the Army deviated from the solicitation requirement to apply the HUBZone price evaluation preference before performing its best value tradeoff, and we sustain the protest on this ground. (Explo Systems, Inc. , B-404952; B-404952. 2, July 8, 2011) 20 3 / 11 0 /2 23

1. OVERVIEW 2. HUBZONE CONTRACTING: HUBZONE SET-ASIDES AND SOLE SOURCE: FAR 19. 1305 AND 19. 1306 3. SET ASIDE OF ORDERS, RESERVES, AND PARTIAL SET ASIDES 4. HUBZONE CONTRACTING: PRICE EVALUATION PREFERENCE IN FULL AND OPEN COMPETITION (FAR 19. 1307 ) 5. LOS/NMR Tuesday, November 3, 2020 24

LIMITATIONS ON SUBCONTRACTING/ NONMANUFACTURER RULE Ø LOS and NMR apply • Full or partial set aside, reserve or set aside of orders Ø Compliance Period • Full or partial set aside: base term and each subsequent option period § HOWEVER, CO may require concern to perform the LOS or NMR for each order • Reserve or order set aside under F&O: term of order 25

19. 1303 - NMR • A HUBZone small business concern may submit an offer for supplies as a nonmanufacturer if it meets the requirements of the nonmanufacturer rule set forth at 13 C. F. R. § 121. 406(b)(1) and if the small business manufacturer providing the end item is also a HUBZone small business concern. • There are no waivers to the nonmanufacturer rule for HUBZone contracts. • For HUBZone contracts at or below $25, 000 in total value, a HUBZone small business concern may supply the end item of any manufacturer…. so long as the product acquired is manufactured or produced in the United States. 20 3 / 11 0 /2 26

19. 1308 PERFORMANCE OF WORK REQUIREMENTS (LIMITATIONS ON SUBCONTRACTING) - CONSTRUCTION • Before issuing a solicitation for general construction or construction by special trade contractors, the contracting officer shall determine if at least two HUBZone small business concerns can spend at least 50 percent of the cost of contract performance to be incurred for personnel on their own employees or subcontract employees of other HUBZone small business concerns. • If the CO determines that at least two HUBZone SBCs cannot meet the 50% requirement, the CO can waive it by using the Alternate I to the 52. 219 -3 or -4 clause. HUBZone SBCs would then need to meet general LOS requirements. 20 3 / 11 0 /2 27

Limitations on subcontracting 13 CFR 126. 700, FAR 52. 219 -3 or 52. 219 -4 Services Provide 50% of personnel costs on the concern's employees or on the employees of other HUBZone SBCs General Construction Perform at least 15% of cost of contract with own employees, excluding materials but 50% with one or more HUBZone SBCs Waiver: Perform at least 15% with own employees 20 3 / 11 0 /2 Supplies Provide 50% of cost of manufacturing, excluding materials, on performing the contract in a HUBZone. One or more qualified HUBZone SBCs may combine to meet this percentage. Special Trade Construction Perform at least 25% of cost of contract with own employees, excluding materials but 50% with one or more HUBZone SBCs Waiver: Perform at least 25% with own employees 28

? H S ’ AT W W E N 1. Recertification 2. Proposed Rules/Final Rules 20 3 / 11 0 /2 29

STATUS ØContract §Date the concern submits initial offer (or other formal response to a solicitation), which includes price AND date of award ØOrder §Date the concern submits offer for the contract §If business was HUBZone for the underlying contract, it is generally HZ for the order §Or date of recertification if requested or required by CO for the order 30

RECERTIFICATION – CHANGES Ø Size “recert rule” now applies to HUBZone, SDVOSB and WOSB programs for status purposes Ø If set aside, partial set aside or reserve of a multiple award contract and business recertifies as not a HZ, new orders are not considered awards to HZs May also affect eligibility for the award of the order Example: HUBZone at time of offer for contract, then HUBZone for life of contract and orders, unless recertification (novation, merger, acquisition, +5 years (and then options) or at contracting officer’s discretion for orders). 31

RULES Advisory Small Business Size Decisions § Proposed Rule: 79 FR 35963, June 25, 2014 § Final Rule: 80 FR 7533, Feb. 11, 2015 § Businesses cannot be penalized if they rely, in good faith, on an advisory opinion re: size issued by a PTAC or SBDC Mentor Protégé § Proposed Rule: 80 FR 6618, Feb. 5, 2015 § Two MP programs (8(a) and SBC – to include HZ, SDOSBC, WOSB/EDWOSB) Limitations on Subcontracting/PCR duties § Proposed Rule: 79 FR 77955, Dec. 29, 2014 § Similarly situated entity (SSE) § SBC/SBC, HZ/HZ, 8(a)/8(a), SDVOSB/SDVOSB, WOSB/WOSB, EDWOSB/EDWOSB § each small for NAICS codes assigned RFP § For services, no more than 50% of amount paid to prime may be paid to subcontractors, at any tier, that are NOT SSEs Example – $100 paid to prime, no more than $50 can be paid to NON SSEs § Prime pays $25 each to two SSE subs and $50 to a NON SSE sub § One SSE sub pays its share of $25 to a NON SSE sub § Prime has now paid $75 to NON SSEs and does not meet LOS 20 3 / 11 0 /2 32