In two recent United States Court of Federal Claims cases, Historically Underutilized Business Zone (HUBZone) small business concerns protested the Small Business Administration’s (SBA) decertification of these firms. As a result of the SBA’s decision to decertify the firms, the firms lost contract awards under competitions that were limited to HUBZone small business concerns.
In according a “highly deferential” standard to the SBA’s decertification decisions, the Court found in one case that the SBA’s decision to decertify a firm from the HUBZone program was reasonable based on the firm’s failure to establish that the firm met the requirement that “at least 35% of the concern’s employees must reside in a HUBZone” in order to receive certification as a qualified HUBZone small business concerns. Mission Critical Solutions v. The United States, United States Court of Federal Claims, No. 10-810C, Mar. 8, 2011.
In the second case, the Court upheld SBA’s decision to decertify a firm as a HUBZone because the SBA could not determine that that the firm’s principal office was located in a HUBZone which is another condition for participation in the HUBZone program. RCD Cleaning Service, Inc. v. The United States, United States Court of Federal Claims, No. 11-13C, April 13, 2011.
These decisions establish the Court’s willingness to review these challenges under its “ bid protest” jurisdiction, but highlight the high standard a decertified HUBZone firm has in challenging the SBA’s action.
The decisions stand as notice to a HUBZone certified firm that it has a continuous obligation to establish its bona fides with adequate records in the event the firm’s status is challenged. In that event, the firm risks losing its eligibility to compete for solicitations under the HUBZone program.
In light of the increasing spotlight on fraud in the SBA socioeconomic programs, decertification could also lead to other sanctions for the firm if it is subsequently determined that the firm misrepresented its status as a HUBZone. See a previous article written by Michael R. Golden, Partner, Pepper Hamilton, LLP, discussing HUBZones and other socioeconomic subsets of small business.