The federal government is actively working to award contracts to businesses in historically underutilized areas, and your business location could be your competitive advantage. The HUBZone program represents approximately $23 billion in annual contracting opportunities, with agencies increasingly focused on meeting their 3% spending goals.
If you're wondering whether your business qualifies for HUBZone certification and what advantages it provides, here's everything you need to know.
What Is the HUBZone Program
HUBZone stands for: Historically Underutilized Business Zone. It's a Small Business Administration certification program designed to direct federal contracts to businesses operating in economically distressed communities: areas with low income, high poverty, or high unemployment.
The business reality: Unlike other set-aside programs that focus on business ownership characteristics, HUBZone certification depends primarily on where your business operates and where your employees live. Your geographic location becomes a competitive advantage in the federal marketplace.
Core HUBZone Requirements
To qualify for HUBZone certification, your business must meet four essential criteria:
Small business status: Your business must meet SBA size standards for your primary NAICS code, based on either employee count or annual receipts depending on your industry.
Ownership and control: At least 51% owned and controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative, or an Indian tribe (including Alaska Native Corporations and Native Hawaiian Organizations).
Principal office location: Your principal office (where the greatest number of employees work) must be physically located in a designated HUBZone with actual office space, furniture, and equipment. Virtual offices don't qualify.
Employee residency: At least 35% of your employees must reside in a HUBZone. As of January 2025, employees must work at least 10 hours per week and have resided in a HUBZone for at least 90 days before certification review.
Three Key Advantages of HUBZone Certification
Set-aside contracting: Federal agencies can limit competition on certain contracts exclusively to HUBZone-certified businesses, significantly reducing your competition.
10% price evaluation preference: Here's the unique advantage HUBZone businesses receive that other set-asides don't get. In full and open competition, your bid can be up to 10% higher than a non-HUBZone competitor and still be considered the lowest bidder.
Sole-source contracts: Contracting officers can award HUBZone contracts directly to your business without competition if the contract value doesn't exceed $7 million for manufacturing or $4.5 million for other requirements.
Determining Your HUBZone Eligibility
Check your location first: The SBA maintains an interactive HUBZone map at maps.certify.sba.gov/hubzone/map. Enter your principal office address to see if you're in a designated HUBZone.
Six types of HUBZone designations exist:
- Qualified Census Tracts: Areas where the median household income is at or below 80% of area median income, or poverty rate is at least 25%.
- Qualified Nonmetropolitan Counties: Counties not in a metro area where median household income is below 80% of the state median, or unemployment is at least 140% of U.S. or state average.
- Qualified Indian Lands: Lands within external boundaries of Indian reservations and other designated Indian territories.
- Governor-Designated Covered Areas: Areas designated by state governors that meet specific economic criteria.
- Qualified Disaster Areas: Nonmetropolitan counties affected by presidentially declared disasters, eligible for up to five years after the disaster.
- Redesignated Areas: Former HUBZones where businesses with 10+ year leases or property ownership can maintain eligibility.
The HUBZone map was last updated July 1, 2023, with the next major update scheduled for July 2028.
Understanding the 3% Federal Goal
The federal government has established a goal of awarding 3% of total federal contract dollars to HUBZone-certified businesses each year. Based on FY2024 federal contracting spending of approximately $755 billion, this represents roughly $23 billion in annual opportunities.
The reality: The government hasn't consistently met this 3% goal, though HUBZone awards have increased each fiscal year since 2018. This creates genuine opportunity: agencies actively seeking HUBZone contractors to meet their targets have real motivation to work with certified businesses.
Top contracting agencies: The Army, Department of Veterans Affairs, Defense Logistics Agency, Department of Homeland Security, and Navy consistently rank among the highest HUBZone contract awarders. Construction, IT services, and professional services represent the largest industry sectors.
Recent Program Changes Effective January 2025
- Triennial recertification: HUBZone businesses now recertify every three years instead of annually, significantly reducing administrative burden.
- Employee definition clarification: Working hours requirement decreased from 40 hours per four-week period to 10 hours per week, making it easier for businesses with part-time employees to meet the 35% residency requirement.
- Residency period reduced: Employee residency requirement decreased from 180 days to 90 days before certification review.
- Principal office documentation: Businesses must provide photos or virtual walk-throughs of their office space, and leases must be active for at least 30 days before SBA review and extend at least 60 days after.
- Eligibility at offer date: HUBZone businesses must be eligible on the date they submit their offer for a HUBZone contract, not just at certification.
The Certification Process
The SBA must process complete HUBZone applications within 60 calendar days. Incomplete applications aren't processed: SBA waits until you provide all required information before the 60-day clock starts.
Starting your application: Submit your HUBZone certification application through the SBA's MySBA Certifications platform at certify.sba.gov. Before starting, ensure you have an active SAM registration and have gathered all required documentation.
Key documents you'll need:
- Lease or deed for principal office with utility bill
- Four weeks of payroll summary showing employee work hours
- Valid identification for all HUBZone-residing employees
- Map showing HUBZone employee residences
- Complete employee list
- Proof of U.S. citizenship for owners
- Entity formation documents (articles, bylaws, operating agreement)
- Certificate of good standing from the Secretary of State
- Recent state and federal unemployment tax filings
Compliance requirements: SBA may conduct unannounced visits to verify certification accuracy. Report any major changes affecting your HUBZone status immediately: ownership shifts, entity structure changes, principal office relocation, or falling below 35% employee residency.
Maintaining Your Certification
Contract performance requirement: During HUBZone contract performance, you must "attempt to maintain" the 35% employee residency requirement through documented efforts like job postings and recruitment activities. Falling below 20% employee residency indicates failure to maintain the requirement.
Monitor map changes: While major updates occur every five years, Governor-designated areas and disaster areas can change more frequently. Check your eligibility regularly, especially near recertification.
Strategic considerations: If planning expansion or relocation, factor in HUBZone status. The 10-year protection for long-term leases or property purchases provides stability even if an area loses HUBZone designation.
Federal Contracting Foundation: SAM Registration
System for Award Management (SAM) registration is mandatory for all federal contractors, whether HUBZone certified or not. You cannot submit bids or receive federal contracts without active SAM registration.
SAM serves as the vendor database for the federal government. With over $750 billion in annual contract spending, the government uses SAM to track spending, verify contractor eligibility, and ensure accountability. You must have active SAM registration before applying for HUBZone certification.
Combining HUBZone with Other Programs
HUBZone certification doesn't prevent you from competing for contracts under other socio-economic programs you qualify for. You can hold HUBZone certification alongside 8(a) Business Development, Women-Owned Small Business (WOSB), Service-Disabled Veteran-Owned Small Business (SDVOSB), or other certifications.
Holding multiple certifications expands your competitive opportunities, as some contracts may be set aside for multiple program types.
Common HUBZone Challenges
The 35% employee residency requirement: This is often the most challenging qualification to meet and maintain. Consider hiring locally from HUBZone areas, offering remote work options that allow employees to live in HUBZones, and strategic workforce planning during hiring cycles.
Principal office location changes: Moving your principal office outside a HUBZone terminates your certification unless you're moving to another HUBZone or have 10-year protection from a long-term lease or property purchase. Verify any new location's HUBZone status before relocating.
Map changes every five years: Areas can lose HUBZone designation when economic conditions improve. The redesignated area grace period and 10-year protection for property owners provide a transition time, but monitoring map updates is essential.
Based on information current as of October 2025 from official SBA sources at sba.gov, including regulatory updates. HUBZone program requirements and map designations can change. Verify current program details and your specific location's HUBZone status using the official SBA HUBZone map at: maps.certify.sba.gov/hubzone/map before pursuing certification.
If you're ready to pursue HUBZone certification or want to determine whether your business qualifies, speak to a USFCR Registration & Contracting Specialist. USFCR has helped over 300,000 businesses position for federal contracting success, with clients winning over $1.5 billion in federal contracts. Learn more about HUBZone or speak to a Registration and Contracting Specialist at: (877) 252-2700
FAQ
How long does HUBZone certification last?
HUBZone certification is valid for three years, after which you must recertify. You must also notify SBA immediately of any changes affecting your eligibility, including ownership changes, entity structure modifications, principal office relocation, or falling below 35% employee residency.
Can I maintain HUBZone certification if my area loses its designation?
Yes, through two mechanisms. If your area becomes a "redesignated area," you can maintain certification through your next recertification date. If you own property or have a 10+ year lease in the former HUBZone, you can maintain certification for up to 10 years from your investment date, as long as that location remains your principal office.
What happens if I fall below 35% employee residency during a contract?
You must "attempt to maintain" the 35% requirement during contract performance through documented recruitment efforts. Falling below 20% employee residency indicates failure to maintain the requirement. Report any sustained drops below 35% to SBA immediately.
Can my business have locations outside a HUBZone?
Yes. Only your principal office (where most employees work) must be in a HUBZone. You can have other locations anywhere. However, for the 35% employee residency calculation, you count all employees across all locations, excluding those at contract sites.
Do contract sites count toward the 35% employee residency requirement?
No. The 35% requirement applies to employees at your principal office and other permanent company locations, not employees temporarily assigned to client sites for contract performance.
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