WASHINGTON – The federal government has failed to live up to its commitment to devote more of its contracting dollars to poor areas nationwide, a Rockville businessman told a congressional panel Wednesday.
Ronald Newlan, chairman of the HUBZone Contractors National Council, urged the House Small Business Committee to ensure the government makes giving contracts to firms located in Historically Underutilized Business Zones, or HUBZones, a priority.
The government is required to set aside contracts for HUBZone businesses when at least two firms in the program are qualified to compete for the contract with a reasonable price, Newlan said.
“Unfortunately, the government often doesn’t follow the HUBZone statute because they would rather have 10 firms compete,” he said. “Every time the government ignores this statute, they contract outside of the HUBZone program and the community is not awarded procurements it should receive.”
The state of Maryland has four counties qualifying as HUBZones, and areas of 12 other counties also meet the requirements based on unemployment rates or low household incomes.
For a firm to qualify, its largest office must be in a HUBZone and at least 35 percent of its employees must live a HUBZone, ensuring that people who live in those areas benefit from the program.
Rep. Roscoe Barlett, R-Frederick, a member of the committee said, “I think HUBZones provide more benefit to the community than any other set-aside programs. All of Garrett County is a HUBZone and there are businesses out there that are really building up the salaries there.”
Newlan’s testimony was met with sharp questioning from Rep. Nydia Velazquez, D-N.Y., chairwoman of the committee.
Velazquez called the program “flawed” and said too many areas that qualify as HUBZones also contain million-dollar homes.
“I think in any rural area in the country you would find million-dollar homes,” but that does not mean the residents of the area all have high incomes, Newlan said.
Members of the committee suggested that the Small Business Administration complete on-site reviews of all businesses in the program because HUBZone is now peer monitored.
All certified HUBZone firms need to be investigated “to make sure they are lawful and viable companies and not just a shed with a person and a telephone,” Velazquez said.
“Clearly, it’s just a fact of life that if you don’t monitor a program, people will take advantage of it. This program is very tightly peer monitored,” Bartlett said.
Newlan said he would be open to on-site reviews of HUBZone firms, provided the reviews are federally funded.
“I don’t believe any government program is perfect, and HUBZone is not perfect,” Newlan said.
A committee review of a sampling of 2005 HUBZone contracts found that 40 percent of companies surveyed were not qualified, Velazquez said.
The analysis raises questions about whether agencies verify that companies are properly certified, said Erin Donar, press assistant for the committee, in an e-mail.
Still, Newlan said he believes the program is beneficial.
“It’s a great program that gives people in impoverished areas jobs,” he said.
The four counties in Maryland that qualify as HUBZones – Dorchester, Garrett, Worcester and Somerset counties – are primarily rural. Small Business Administration statistics show their unemployment rates fall between 4.8 percent and 6.9 percent. Maryland’s unemployment rate is 4.1 percent.
There are more than 300 HUBZone-certified companies in Maryland, according to Small Business Administration records.
“If we can take these jobs outside of the city we can reduce traffic,” Newlan said, referring to a recent report that Washington, D.C., has the second-longest commute in the country. “Then people can live in rural areas and raise their families and live the American dream.”