Koprince HUBZone Compliance Presentation

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Government contracts attorney Steven Koprince's presentation from the 2012 National HUBZone Conference entitled "Best Practices for Ongoing HUBZone Compliance."

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Koprince HUBZone Compliance Presentation

  1. 1. Best Practices for Remaining HUBZone Compliant National HUBZone Conference Government Steven J. Koprince Partner ContractsPetefish, Immel, Heeb & Hird, LLP Solutions for Small Business
  2. 2. Overview• Importance of Ongoing HUBZone Compliance• “Principal Office” Compliance• “35% Employee Residency” Compliance• Other HUBZone Compliance Rules• SBA Reporting Requirements• Special Indian Tribal Exceptions• HUBZone Compliance Best Practices Summary• Questions
  3. 3. Importance of Compliance• HUBZone Program Examinations: Can occur at any time SBA may perform site visit Will review relevant documents Be prepared!• HUBZone Eligibility Protests: Competitor, SBA or CO may protest eligibility Must meet all requirements to win contract
  4. 4. Importance of Compliance• Decertifications SBA may initiate decertification if any ongoing compliance factor is not met• “Even Worse” penalties: Suspension & debarment False Claims Act & civil penalties Criminal penalties
  5. 5. “Principal Office” Compliance• The Rule: A HUBZone company’s principal office must be located in a HUBZone• What It Means: Office where greatest number of employees at any one location perform their work Except: Employees who perform majority of work at customers’ jobsites to fulfill specific contractual obligations (so long as primary industry is service or construction)
  6. 6. “Principal Office” Compliance• Who is an “Employee”? Works at least 40 hours per month • May include part-timers, leased employees, etc. Paid for services • Volunteers (e.g., unpaid interns) usually don’t count • But an unpaid owner counts, unless works less than 40 hours per month
  7. 7. “Principal Office” Compliance• “Just Doesn’t Matter” which office is: Designated as headquarters Where the CEO, President or top officers work Listed as primary office in CCR/SAM, DSBS, etc. Where most employees worked at time HUBZone application was submitted
  8. 8. Best Practices: “Principal Office”• Check locations of all offices against HUBZone maps• Keep written tally, on payroll-by-payroll basis, of location of each employee • As employees come and go, continuously verify that more employees work at a HUBZone office than any other • Be prepared to show documents to SBA
  9. 9. Best Practices: “Principal Office”• For employees who split time: • Track hours spent at HUBZone office and other locations • Adjust hours if need be to ensure majority of time spent at HUBZone office • If use written employment agreements, specify HUBZone office as employee’s primary location
  10. 10. Best Practices: “Principal Office”Exclude “jobsite” employees, but only if: • Primary industry is service or construction • Employee spends majority of his/her time on customer’s jobsite • Employee’s physical presence on customer’s jobsite is necessary to fulfill specific contractual obligationsBe prepared to cross-walk between specific contractual obligations and employee’s duties
  11. 11. “35% Residency” Compliance• The Rule: At least 35% of employees must reside in HUBZones• What It Means: “Employee” defined the same as for principal office Cannot exclude jobsite employees “Reside” means: • Lived in primary residence for at least 180 days and/or • Registered to vote at location • Intends to live there indefinitely
  12. 12. Best Practices: “35% Residency”• Keep Updated Residency File Containing: Current address of all employees Proof of residency HUBZone maps for all HUBZone employees Running calculation of 35% compliance • Must round up to determine # of employees necessary • Example: 35% of 9 employees = 3.15 employees – Firm needs 4 out of 9 (44%!) to qualify
  13. 13. Best Practices: “35% Residency”• Get employees involved: Inform you of pending address changes Voter registration at new HUBZone locations Consider incentives for relocating to and/or living in HUBZones Develop plan to recruit HUBZone residents as necessary
  14. 14. Best Practices: “35% Residency”• What about “attempt to maintain” rule?• The Rule: may continue to perform existing HUBZone contracts so long as attempting to maintain compliance with 35% residency rule• What it Means: • Cannot bid on new HUBZone contracts if “attempting” to maintain • May be decertified (though SBA may allow grace period)
  15. 15. Best Practices: “35% Residency”• If “attempting” to maintain: Do not bid on new HUBZone contracts Be able to demonstrate good faith, reasonable efforts to regain compliance • Have a prior HUBZone hiring plan in place! If unable to regain compliance, consider voluntarily decertifying
  16. 16. Other HUBZone Compliance Rules• Ownership: HUBZone company must, at all times, be at least 51% owned by U.S. citizens who are natural persons • Flesh-and-blood human beings—not other companies • Exceptions for Indian tribes, ANCs, CDCs and small agricultural cooperatives • SBA will apply “present effect” rule to determine ownership
  17. 17. Other HUBZone Compliance Rules• Size: Firm must continue to be small in its primary industry • Size calculation includes all affiliates under SBA affiliation rules • “Primary industry” determined based on most recently completed fiscal year
  18. 18. Other HUBZone Compliance Rules• Performance of Work: For all HUBZone contracts, at least 50% of cost of contract incurred for personnel must be spent on employees of HUBZone firms • Includes prime’s employees and employees of HUBZone subcontractors • Rule covers general and specialty trade construction, notwithstanding ordinary 15%/25% limits • CO may waive rule—but waiver rare
  19. 19. Other HUBZone Compliance Rules• HUBZone Contract Eligibility: Must be eligible both on date of offer and date of award Includes 35% requirement • Cannot “attempt to maintain” on date of award
  20. 20. SBA Reporting Requirements• The Rule: A HUBZone firm must “immediately notify SBA of any material change that could affect its eligibility.” • Includes changes in 35% employee residency • Notification must be in writing • SBA may impose penalties for failure to notify – In at least one case, SBA sought debarment
  21. 21. Special Indian Tribe Exceptions• Tribally-owned HUBZones: Need not be 51% owned by U.S. citizens • But must be at least majority-owned by tribal government or corporation wholly owned by tribal government Must either: • Meet standard principal office and 35% residency rules or • Certify that when performing a HUBZone contract, at least 35% of performing employees will reside on the reservation or an adjoining HUBZone
  22. 22. HUBZone Best Practices Summary• Principal Office: • Check all offices against HUBZone maps • Keep running tally of employees and primary work locations to avoid unforeseen shifts in primary office • For employees who split time, keep track of hours worked at HUBZone and non-HUBZone locations • Exclude jobsite employees from principal office calculation, but only if primary industry is service or construction and employee spends majority of time on jobsite fulfilling specific contractual requirements
  23. 23. HUBZone Best Practices Summary• 35% Employee Residency: • Keep updated residency file containing addresses, HUBZone maps, and evidence of residency • Encourage employee participation • Consider incentives for HUBZone employees • Maintain running compliance tally—and remember to round up • Develop HUBZone employee recruitment and retention plan • Do not bid on new HUBZone contracts if “attempting” to maintain
  24. 24. HUBZone Best Practices Summary• Other Key Rules: • Ensure continued ownership of at least 51% by U.S. citizens (except tribes, etc.) • Maintain “small” status in primary industry • For all HUBZone contracts, ensure at least 50% of cost of contract incurred for personnel expended on HUBZone employees • Ensure HUBZone eligibility both on date of offer and award • Inform SBA in writing of material eligibility changes
  25. 25. Questions?Thank you!Questions?

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