Despite lofty goals, government contracts awarded to small businesses in the nation’s poorest areas have fallen significantly for the second year in a row.
For the 2012 fiscal year, the number of contracts awarded by the U.S. government to small firms in areas known as "Hubzones" fell by 17 percent to just $8.2 billion--the lowest amount in the past five years, according to the Washington Post.
The government's annual goal has been to award at least 3 percent of eligible contracts to small businesses located in Hubzones. The government has yet to reach this target, but the 2012 fiscal year fell particularly short: 2.04 percent of eligible dollars, down from 2.34 percent in 2011.
Mark Crowley, executive director of the Hubzone Contractors National Council, cites the remapping of Hubzone regions in 2011 (many regions, based on 2010 census data, lost their Hubzone status) as the main reason behind 2012’s sharp decline in contracts.
“About 37 percent of companies that were in Hubzone regions back in 2010 are no longer certified today,” he told Inc.
Crowley views this dip as a natural development: “The Hubzone program is designed to put itself out of business. If a region improves significantly under the program, it will eventually no longer qualify as a Hubzone” he said.
But as companies re-adjust to the redrawn map (some regions that did not qualify before 2010 are now Hubzones), Crowley is convinced that “in the next year or two, we’ll see the number of contracts go back up.”
Hubzone regions are selected based on unemployment rate (which must be at least 140 percent of the national average) and median household income (which must be less than 80 percent of the national average). Every 10 years, Hubzone regions are redrawn based on census data.