A recent bid protest decision by the United States Court of Federal Claims is a reminder that HUBZone small business concerns must monitor their compliance with SBA rules. In Mission Critical Solutions v. United States, No. 10-810C (Fed. Cl. Feb 18, 2011) [pdf], the court held that a contractor was properly decertified as a HUBZone small business concern and ineligible for a contract set aside for HUBZone small businesses because fewer than 35 percent of its employees resided in HUBZones at the time of award.

Obtaining SBA certification as a HUBZone small business concern requires “at least 35%” of a small business concern’s employees to reside in a HUBZone. The plaintiff met this requirement in 2000 and was later awarded several contracts set aside for HUBZone small businesses. The contractor fell below the 35% threshold in 2009. SBA decertified the contractor in 2010, making it ineligible to bid on HUBZone contracts.

In challenging SBA’s action, the contractor argued that it retained HUBZone status because it met the “safe harbor” requirement, which allows contractors to retain HUBZone status if they  “attempt to maintain” the 35-percent requirement. See 13 C.F.R. § 126.103. The court rejected the argument and dismissed the protest. Accorrding to the court’s decision, SBA regulations require 35% employee residency in a HUBZone “at the time of initial offer and at the time of award” of a new HUBZone contract.