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HUBZone Residency Safe Harbor Limited

A protester's challenge to its decertification as a Historically Underutlilized Business Zone small business concern was rejected by the Court of Federal Claims because the 35% employee residency threshold is a requirement for obtaining new or additional HUBZone contracts, and the protester did not meet the requirement when it bid for and was awarded an additional contract. Even though its actual employee HUBZone residency had fallen below 35% when it bid on and was awarded the additional contract, the protester argued it remained a qualified HUBZone SBC because it had met the residency requirement for initial certification under SBA 126.200 (b)(4) and continued to meet the alternative, "safe harbor" requirement of "attempt[ing] to maintain" the 35% threshold while performing an existing HUBZone contract.

Continuing Requirement

The court found, however, the regulatory references to "attempt to maintain" in SBA 126.601 and SBA 126.602 appear in the context of the additional requirements a "qualified HUBZone SBC" must meet to bid on a contract and do not change the definition of a qualified HUBZone SBC. Thus, except for performance during an existing contract, the 35% residency requirement is a continuing requirement. In addition, the SBA's interpretation limiting the safe harbor "attempt to maintain" regulations to existing contracts was entitled to deference unless plainly erroneous, and it "align[ed] the HUBZone program with the evident desire of Congress to utilize the program to increase employment in the HUBZone areas." (Mission Critical Solutions, FedCl, 55 CCF 79,540)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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