Deadlines are Looming: HUBZone and SBA 8(a) Regulations are Changing!

Written by Jon M. DeVore

The U.S. Small Business Administration (SBA) announced that it is holding three consultations to solicit input and suggestions from Native American Tribes (Tribes) and Alaska Native Corporations (ANCs) to eliminate burdensome regulations and procurement procedures in the HUBZone and the SBA’s Minority Business Development Program (8(a)) .

The first consultation took place in Anchorage, Alaska, on May 9, 2018.  The second and third consultations are scheduled for June 7, 2018, in Albuquerque, New Mexico, and June 8, 2018, in Oklahoma City, Oklahoma.  Pre-registration deadlines for the two remaining consultations are May 31, 2018 and June 1, 2018, respectively.  Testimony presented at the consultations will become part of the administrative record for the SBA when it considers changes in the regulations pertaining to these programs.  Information and guidelines regarding pre-registration, submission of comments, and meeting times and locations, have been published in the Federal Register.

Robb Wong, Associate Administrator, and John Klein, Associate General Counsel for Administrative Law, led the May 9, 2018, Anchorage consultation at which there were about 75 attendees.  During the meeting, John Klein announced that the SBA would accept written comments for the two-week period following the meeting.  (The comment period for attendees of the May 9^th meeting has closed.)  During the meeting, some of the comments and concerns expressed by attendees were:

• NAICS codes could be improved or better defined; two federal agencies could classify the same work with different NAICS codes; SBA’s unilateral ability to change a firm’s NAICS code.
• Paperwork: constant monitoring of contracts of multiple firms.
• Multiple subsidiaries with differing program dates require that the same information about the parent company and benefits must be repeated and recertified. Perhaps this could be done once a year based on the parent company’s fiscal year.
• How to calculate the performance requirements based on contract values given the high cost of transportation and materials in many rural and overseas work sites.
• The conflict between SBA regulations and statutes.  SBA regulations require the head of an 8(a) firm to devote 100% of their time to running the firm while the statute allows the head of an 8(a) firm to run two firms at the same time.
• Designate every village as a HUBZone (much like reservations in the Lower 48).

John Klein and Robb Wong offered a number of insights into proposed changes:

• New regulations will clarify the concept of a follow-on contract (similar to the recent opinion Klein issued on this subject).
• Simplify the burdensome regulations that impact firms with minor changes of ownership. For example, an increase of the ANC’s overall share changes the corporate structure, such as company mergers or converting from a corporation to an LLC.
• Ease the HUBZone’s 35% requirement if an employee moves out of the HUBZone so that it will not lose its status. Veterans – regardless of where they live – count towards the 35% requirement.
• Congressional amendment to change the competitive threshold measure by eliminating option years.

There was no announcement regarding how long the changes to the HUBZone and the SBA 8(a) Program will take.  It appears that the HUBZone changes are closer to release than the 8(a) Program.

A representative from the Office of Senator Dan Sullivan (R-Alaska) spoke at the consultation and announced that the Senator had reached several accords with the Department of Defense related to Section 811.  These changes should enhance the ability of Tribes and ANCs to use the Justification & Approval process for contracts above the $22 million threshold.  The essence of the commitments obtained by Senator Sullivan are:

1. The ‘head of agency’ threshold for Native 8(a) contracts from $22-93 million is no longer at the head of agency level; it is now at a lower level of approval (below head of agency).
2. The aforementioned approval threshold should NOT be seen as a barrier to awarding these contracts.
3. There should be an effort to streamline each service’s approval processes.

This is significant progress in streamlining Section 811.  These policy clarifications could be best used by the business development people of Tribes and ANCs when discussing contracts as the end of the fiscal year nears.