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8(a), HUBZone firms square off over parity: Proposed rule gives both programs equal priority.

Minority business advocates are choosing up sides over a proposed SBA rule guaranteeing HUBZone firms equal treatment with 8(a) businesses in procurement.

SEA published a proposed rule in the Federal Register Jan. 28 that would grant HUEZone firms "parity" with 8(a) companies in awarding contracts. The rule would direct contracting officers to choose between the two programs based on what will help the agency meet its socioeconomic goals.

"For example, if the contracting activity has met 0% of its HUBZone goals and has met its 8(a) goals. then the (contracting officer) should restrict the requirement for competition among HUEZone" businesses, the proposed rule states.

The rule is a "cynical attempt by conservatives to dismantle" the 8(a) program. charged Rep. Nydia Velazquez (D-N.Y.). ranking minority member of the House Small Business Committee.

But Ronald Newlan. chairman of the HUBZone Contractors National Council, said in an e-mail to other advocates, "If one program had priority over the other, the program with the lower priority would suffer; therefore, parity is appropriate compromise."

"The 8(a) program is in danger again." headlined an alert issued by the Minority Business Enterprise Legal Defense and Ed Education Fund. "MBELDEF is absolutely convinced that the minority entrepreneur will be the loser whenever contracting officers are forced to make a choice between the two programs."

SBA says 43% of HUBZone firms are minority owned, 17% are also 8(a) certified and 27% are women-owned businesses.

SBA first announced the parity rule in a letter from its general counsel in August and a memo distributed to procurement executives in October. The memo said. "Any interpretation that requires contracting officers (CO) to use the 8(a) Program before considering the HUBZone Program is beyond the statutory authority of the (Small Business) Act." (Read the memo at http://www.pec.gov/documents/sba procedure notice.pdf.)

At the time the Republican chief counsel of the Senate Small Business Committee. Paul Cooksey, said parity was what Congress intended when it created the HUBZone program in 1997. (SAA.8/31/01)

Before SBA issued its legal opinion, many contracting officers believed they could not set aside a contract for HUBZone firms as long as qualified 8(a) firms were available, Newlan said.

But Rep. Velazquez said, "Imposing parity will harm thousands of minority-owned firms who seek work from the government. The proposed rule would erase the distinction between the two programs. putting them into direct competition."

While 8(a) firms received less than 3% of federal contract dollars in fiscal 2000. HUBZone firms received just one-third of one percent of the dollars. HUBZone contracts were counted for the first time that year; the dollar value of 8(a) awards has been declining for several years.

The HUBZone procurement goal is set by law at 2.5% for 2002. rising to 3% next year. There is no legally mandated 8(a) goal, but SBA set most agencies' goals at 2.5%.

Regulations prohibit an agency from switching an 8(a) set-aside contract to a HUBZone set-aside without a waiver from SBA. When the HUBZone program was enacted in 1997, Congress also raised the government-wide goal for small-business contracting to 23% from 20% to accommodate the 3% HUBZone goal. SBA said.

Sen. Christopher Bond (R-Mo.), a leading champion of the HUBZone program, tried to attach a parity amendment to the SEA reauthorization bill in 2000. but dropped it after the Clinton administration threatened a veto.

"Section 8(a) has been under attack from conservatives for a decade. HUBZone is their Trojan Horse," Rep. Velazquez said in a statement. "The HUBZone program is represented as a means to help low-income, high-unemployment communities - certainly a laudable goal. But the reality is that conservatives are exploiting HUBZone to circumvent contracting opportunity programs for individual minorities and women, in the name of helping these low-income neighborhoods."

The Minority Business Enterprise Legal Defense and Education Fund was circulating drafts of letters to be sent to SBA opposing the rule. One letter states, "8(a) dollars and HUBZone dollars will be drawn from the same Shrinking pie' of funds. Such action could well prove to be the death knell or the 8(a) Program." The deadline for comment on the rule is Feb. 27.

SEA said it has certified more than 4,000 HUBZone comp anies, but believes as many as 30,000 might be eligible for the program. There are about 8,000 Designated HUEZone areas.

Comments should be addressed to Michael McHale, Associate Administrator for the HUBZone Program, 409 Third St. SW. Washington. DC 20416.
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Title Annotation:small business zoning law review
Comment:8(a), HUBZone firms square off over parity: Proposed rule gives both programs equal priority.(small business zoning law review)
Publication:Set-Aside Alert
Article Type:Brief Article
Geographic Code:1USA
Date:Feb 8, 2002
Words:761
Previous Article:Native American businesses. (Washington Insider).
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