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Noteworthy Changes in Socio-Economic Regulations

1. HUBZone Small Business Contracting

On December 18, 1998, the U.S. Government adopted an Interim Rule, effective January 4, 1999, that implements a new Historically Underutilized Business Zone ("HUBZone") Program. 65 Fed. Reg. 70,265. The HUBZone Program provides federal contracting assistance for qualified small businesses located in distressed communities. A HUBZone small business is one which: (a) is owned and controlled by a U.S. citizen; (b) has its principal office located in a HUBZone; and (c) certifies that not less than 35% of its employees are residents of a HUBZone. As with other small business programs, the SBA will determine whether individual firms qualify as HUBZone small businesses. An SBA website,, lists specific HUBZone areas and answers other questions about the program.

Among the contracting opportunities offered by the HUBZone program are:

  • Mandatory set asides of acquisitions over $100,000 where it is reasonably expected that (a) offers will be received from at least two HUBZone small business concerns and (b) award will be made at a fair market price;
  • A price evaluation preference of ten percent in most competitive acquisitions over $100,000; and
  • A subcontracting program that requires prime contractors to include HUBZone small business concerns in their subcontracting plans.

The set-aside and price evaluation regulations apply only to ten federal agencies > including GSA, DoD, DoE, DOT and NASA > until September 30, 2000. After September 30, 2000, the HUBZone program will apply to all federal agencies.

2. VETS 100 >New Importance

Since January 1988, Government contractors have been required to submit annually the "Federal Contractor Veterans' Employment Report VETS 100" to the Department of Labor. The Report identifies the number of disabled veterans and veterans of the Vietnam era employed by the contractor. Recent Government studies, however, have revealed that a high number of Government contractors have not submitted the VETS 100 Report.

As a result, Congress passed a law that prohibits agencies from entering into contracts with firms that have not submitted their VETS 100 Report for the preceding fiscal year. Pub. L. No. 105-339, ' 1354. The Report must be submitted no later than September 30 each year. See FAR 52.222-37, "Employment Reports on Special Disabled Veterans and Veterans of the Vietnam Era (Jan. 1999)." A contractor's failure to submit the VETS 100 Report may be subject to protest before the GAO or in federal court, or to sanctions from the Office of Federal Contract Compliance Programs.

This memorandum is for general informational purposes only and should not be considered our legal advice as to any particular set of facts, nor does this memorandum represent any undertaking to keep recipients advised as to all relevant legal developments. This memorandum maybe considered advertising under the rules regulating the legal profession.

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