Thomas & Skinner proudly holds the Historically Underutilized Business Zone (HUBZone) certification as a small business that manufactures DFARS-compliant Tungsten Heavy Alloys (WHAs) in the United States. But what does this certification mean for our company? In today’s competitive landscape, small businesses are continually seeking innovative ways to grow and sustain their operations. The HUBZone designation not only enhances credibility but also provides unique opportunities to distinguish ourselves from competitors. Ultimately, this enables us to better serve our community and clients.

HUBZone Program History

The HUBZone program was established in 1997 as part of the Small Business Reauthorization Act to stimulate economic growth in historically underutilized business zones across the United States. This initiative was championed by US Senator Christopher ‘Kit’ Bond, who recognized the potential for small businesses in economically distressed areas to thrive with the proper support. Senator Bond believed that creating more jobs in underserved areas was a more significant indicator of long-term economic viability.

The program, managed by the U.S. Small Business Administration (SBA), provides preferred access to federal contracting opportunities for certain businesses. This initiative promotes entrepreneurship and job creation in underserved areas, with the annual goal of allocating 3% of federal contract dollars to these businesses. By becoming HUBZone certified, companies can access greater opportunities and growth potential within their industry. Furthermore, HUBZone-certified enterprises have a positive impact on their local economies by creating job opportunities in regions with limited employment options.

Qualifications

The process of becoming HUBZone certified involves meeting specific eligibility requirements and completing a detailed application process with the SBA. Here’s a breakdown of the key criteria required to meet the standards of this program:

Small Business Size

Businesses must meet the SBA size standards for their specific industry. These standards define the maximum size a business can be to still qualify as a small business for federal government programs and contracts. In determining size standards, the SBA reviews economic factors in industries, including competition, average business size, start-up costs, and the distribution of businesses by size. They also consider technological changes, competition from other sectors, growth trends, and the unique aspects that distinguish small firms from larger ones.

When reviewing size standards, the SBA determines if any business below a specific size might dominate the industry. They assess market share and other factors to ensure no business has excessive control in the market. The SBA’s Office of Size Standards also examines how inflation affects monetary size standards (like receipts and income) at least every five years. They will report their findings and suggest increasing these standards if inflation has significantly reduced their value.

Once determined, companies can qualify by meeting the size standards listed, which include average annual receipts or the average number of employees for a company. The size standard varies depending on the industry. For example, powder metallurgy part manufacturers, like Thomas & Skinner’s Tungsten Heavy Alloy business, have a maximum of 550 employees to meet the SBA size requirements.

Location

A company’s principal office must be located within a designated HUBZone. The SBA identifies these zones as areas that have been deemed historically underutilized. There are several types of HUBZone designations, including:

1. Qualified Census Tracts: The Department of Housing and Urban Development (HUD) designates areas based on poverty and income levels. A census tract typically encompasses neighborhoods in cities or rural areas, with populations ranging from 1,200 to 8,000. For HUBZone qualification, a tract must either have a poverty rate of at least 25% or over 50% of households earning less than 60% of the area’s median income. Additionally, HUD’s Low-Income Housing Tax Credit program limits qualified tracts in a metropolitan area to no more than 20% of the total population, meaning some eligible tracts may not receive Qualified Census Tract status if they exceed this limit.

2. Qualified Non-Metropolitan Counties: This designation focuses on areas outside metropolitan regions that meet at least one key criterion. Eligible counties must have a median household income below 80% of the state median or an unemployment rate over 140% of the national or state rate. Additionally, counties designated as Difficult Development Areas by HUD, as well as those in Alaska, Hawaii, or U.S. territories, are also eligible for this program. These criteria aim to identify regions needing targeted economic support and development.

3. Redesignated Areas: Qualified Census Tracts and Non-Metropolitan Counties can lose their HUBZone status due to changes in income, unemployment, or poverty rates, becoming Redesignated Areas. They will retain their HUBZone designation for three more years, providing small businesses with time to adapt. This support helps companies thrive despite changing economic conditions.

4. Qualified Indian Land: This includes land within an Indian reservation or Indian country, as defined by the State of Oklahoma.

5. Qualified Disaster Areas: These are the census tracts and counties that the President has designated as significant or catastrophic disaster areas. To qualify for this designation, they must have been reclassified as census tracts or counties within five years before the disaster declaration. This designation takes effect on the date of the disaster declaration and remains in place until the next five-year map update is implemented. This status is crucial in aiding the recovery of local businesses and communities affected by the disaster.

6. Governor-Designated Areas: State governors have designated specific rural regions as HUBZone areas. To be eligible, these areas must be situated outside urbanized zones, have a population of no more than 50,000 residents, and exhibit an average unemployment rate that is at least 120% of the lower of the national and state averages. This designation is intended to foster economic growth in these underserved rural communities.

Residency

When applying for certification, a business must ensure that at least 35% of its employees live in a designated HUBZone. Additionally, companies need to commit to maintaining this percentage during each recertification and whenever they bid for a HUBZone contract. This pledge is crucial for promoting economic growth and stability in HUBZone communities, ensuring that they reap the benefits of the opportunities generated through these contracts.

Ownership

The Small Business Administration (SBA) defines an owner as anyone with a legal or equitable interest in a business. This includes trustees and beneficiaries in an Employee Stock Ownership Plan (ESOP), all stockholders in a corporation (both voting and non-voting), partners in a partnership, the sole owner in a sole proprietorship, and all members of a limited liability company (LLC). This broad definition allows various stakeholders to qualify for HUBZone certification.

To qualify for HUBZone certification, a small business must meet specific ownership criteria. At least 51% of the company must be owned and controlled by U.S. citizens, an Alaska Native Corporation (ANC), one or more Indian Tribal Governments, or a corporation they control. Businesses owned by Community Development Corporations (CDCs), small agricultural cooperatives, or Native Hawaiian Organizations (NHOs) may also qualify. These criteria ensure that HUBZone benefits support businesses embedded in their local communities.

The Process to Become HUBZone Certified

The application process for HUBZone certification involves several key steps. First, a business must create an account on the SBA website and complete the online application form. This includes providing information about the company, such as its structure, ownership, and location. Once the application is completed, applicants must gather and submit the necessary documentation to support their claims, including financial statements and proof of their business location. After submission, the SBA reviews the application and may request additional information or clarification to assess the application further.

Once the review process is complete, the Small Business Administration (SBA) will inform the applicant about their certification status. Successful businesses will be able to access federal contracting opportunities at this stage.

HUBZone-certified small businesses must recertify every three years; however, they can participate in the program indefinitely as long as they continue to meet the eligibility requirements. Additionally, companies are required to report any changes to their eligibility status. This includes changes in business structure, changes in the principal office location, or if they fall below the 35% threshold for employees living in a HUBZone-designated area.

Why HUBZone Certification Matters

Obtaining HUBZone certification offers numerous advantages for small businesses, including:

• Competitive Advantage: HUBZone-certified businesses receive advantages in federal contracting, giving them a significant edge when competing for government projects. This preference can be crucial in securing profitable contracts. Furthermore, HUBZone certification allows small businesses to bid on set-aside agreements and offers a 10% price evaluation preference in open contract competitions.
• Economic Growth: The program is designed to support and stimulate economic development in underserved communities. By hiring residents from HUBZones, businesses are directly contributing to the revitalization of these areas.
• Business Expansion: HUBZone certification unlocks new opportunities and markets. It can expand a company’s client base, increase revenue streams, and enhance the overall growth potential.

Why HUBZone Certification Sets Thomas & Skinner Apart

Thomas & Skinner’s HUBZone certification goes beyond simply being a designation; it demonstrates a commitment to creating opportunities within the local community. The company takes pride in positively influencing its employee-owners and boosting the local economy as a result of this certification. Here are a few ways HUBZone certification makes an impact:

Thomas & Skinner is committed to sustaining our DFARS-compliant Tungsten Heavy Alloy (WHA) operations as a HUBZone-certified small business. We prioritize the growth of our employee-owners and remain actively engaged with the Indianapolis community. We take pride in maintaining this certification, which enhances our standing as a leader in the high-performance metals industry.