SMALL BUSINESS

Do HUBZone firms have an image problem?

Misperceptions limit opportunities for these small businesses, execs say

HUBZone companies are suffering an image problem that many executives say has reduced the amount of business that these contractors are winning.

Too often, the thought is that companies in HUBZones, or historically underutilized business zones, are construction companies, and that misconception is hurting efforts for the government to hit its 3 percent goal of spending with HUBZone companies.

“When I went to the national HUBZone conference last year, I sat in on six agency presentations, and one of the questions I asked them is, ‘are you meeting your mandate?’ and not one of them were,” said Jeff A. Thomas, president of SHINE Systems & Technologies, an IT services firm with a HUBZone designation.

Most of the agencies he spoke to were hitting around 1 percent or below, Thomas said.

This wasn’t always the case; at one point, the federal government just barely missed the 3 percent goal, weighing in at around 2.7 percent earlier this decade, said Mark Crowley, executive director of HUBZone Contractors National Council.

From that high, the program has dropped to about 2 percent, according to data from Centurion Research Solutions.

What changed was a major remapping of the program, Crowley said. This was due to 2010 Census, which is used to determine the historically underutilized business zones that designates where HUBZone companies can be located. 

Contracting numbers are down, but they could rise if HUBZone companies were understood to be what they are now, as opposed to what they were 10 years ago.

“In the early days of the program, construction companies, maintenance companies, janitorial services and landscaping services were the largest sectors represented within the HUBZone program, and so a lot of agencies historically have directed those kind of contracts to those kinds of companies; however, over the past five years or so, many other sectors have grown enormously, especially the IT sector,” Crowley said.

His message for government agencies is, “your IT needs can easily be serviced by HUBZone companies, too,” which have become increasingly sophisticated in terms of technology and the depths of services that they can provide.

This isn’t to say that all agencies misunderstand HUBZone companies, though. Two of the more well-known contract vehicles around today have significant HUBZone set asides, namely the DHS’s $22 billion EAGLE II and the NIH’s $20 billion CIO-SP3 contracts.

But there need to be more contracts with set asides, and particularly IT contracts, said Frank Hameed, CEO of Computer World Services. CWS has a spot on both the EAGLE II and the CIO-SP3 contracts, but still sees a need for more contracts going to the HUBZone IT sector.

If the government were able to award more long-term IT contracts, it would create more consistency for HUBZone companies, which is why it’s important that the government break away from the misconception of today’s HUBZone companies, Hameed said.

Until HUBZone becomes better understood, though, SHINE president Jeff Thomas offered some advice to other HUBZone companies who might be struggling.

“I think you should diversify your portfolio,” he said. His company is only around 75 to 80 people, and yet has five different business units that allow the company to grow. “We’re not putting all of our eggs into one place,” Thomas said.

He added that it’s not a bad strategy to look for other areas that are complimentary to what you’re offering in either products or services.

Reader Comments

Tue, Oct 8, 2013 Frank Virginia

Unfortunately, I believe it is less image than it is the impact of the recent change in HUBzone redistricting, due to that last census. Many companies, to include ours, lost our status to less impoverished districts. Makes no sense.

Tue, Oct 8, 2013

HubZone firms have an image problem because they DESERVE one! Let's look at the origin of this socio-economic category. It was designed to bring jobs back to areas of the country that were suffering economically due to manufacturing and other industrial jobs moving overseas. The idea was to take advantage of the skillsets of the workforce in these economically depressed areas to bring government contracting $ and jobs there. The HUBZONE program is IDEAL for those NAICS codes that support the intent of the program and work that is tailored to those skillsets. What do you have now though? Contracting Officers that have arbitrary 3% "quotas" and procurement shops awarding HUBZone contracts for "IT firms". This is inviting fraud. The difficult reality is that you cannot recruit 35% of your technologically savvy workforce to live in these economically depressed areas. Every single HUBZone contractor I have encountered uses shady practices and techniques (like hiring college students from Howard U that do nothing but sit around) to skirt this requirement. Construction companies do the same thing with the SBA not having the time or the resources to enforce it effectively. Any GovCon veteran out there KNOWS that the HUBZone IT firms are the shadiest in town with practices like the above built into the cost structure to skirt rules. Use the program for what it was intended. IT NAICS codes make zero sense for HubZone and simply encourage shenanigans from scheisters and charlatans.

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