Washington area wins more awards targeting needy areas than West Virginia

February 10, 2013

The U.S. government fell further behind meeting its goal of boosting awards to small businesses in some of the nation’s neediest areas.

Those awards sank 17 percent, to $8.2 billion of eligible contract dollars, for the fiscal year ended Sept. 30, the lowest level in at least five years, according to preliminary data posted online by the Small Business Administration.

Since 2003, the government has had a goal of awarding at least 3 percent of eligible contracts to small firms in historically underutilized business areas, or Hubzones, with high unemployment and low income. It has never met that target.

“If the Hubzone program were used the way it was supposed to be used, I think it would help stimulate the economy,” said Sheila Coe, vice president of Heeter Construction, a Hubzone firm in Spencer, W.Va.

The contracts to Hubzone firms shrank to 2.04 percent of eligible dollars in fiscal 2012 from 2.34 percent in fiscal 2011.

“This is the second year in a row that we’ll have a pretty big drop,’’ said Mark Crowley, executive director of the Hubzone Contractors National Council, an advocacy group based in Falls Church.

Companies cut

About 2,400 firms lost access to the program in fiscal 2012 after U.S. census data showed that the companies no longer met the qualifications. There are about 4,900 Hubzone small businesses, according to SBA data from the end of 2012.

That reduction has made it tougher for agencies to meet their Hubzone spending goals, said Mariana Pardo, director of the SBA’s Hubzone program. “The portfolio shrank significantly,’’ Pardo said in a phone interview. “It’s part of the reason that we are doing more aggressive outreach, marketing and training.’’

The formula used to calculate a region’s eligibility for the program relies on unemployment and income data.

Hubzone areas include American Indian reservations, shuttered military bases and impoverished regions of the country such as parts of Detroit and Las Vegas. They also include slices of wealthier metropolitan areas.

In the suburban Washington districts of U.S. Reps. James P. Moran (D-Va.), Frank R. Wolf (R-Va.) and Chris Van Hollen (D-Md.), companies received more Hubzone work than their counterparts in West Virginia.

The three lawmakers represent swaths of counties that are among the 10 richest in the nation, according to 2011 median income data from the U.S. census.

Spokeswomen from the three congressmen’s offices declined to comment on the Hubzones in their districts.

Small firms with operations based in West Virginia, the state with the second-lowest median income, got about $64 million in Hubzone work last year, according to a federal procurement Web site.

Van Hollen’s district covers large portions of Maryland’s Montgomery County, which ranked No. 10 among the counties in income. Firms in his territory attracted about $103 million in Hubzone work.

The disparities may be due to “anomalies” in the program, the Hubzone Council’s Crowley said.

One possible quirk is that a high-end commercial area might also include only a few homes with predominately low-income residents, he said.

Contracting hub

In the Washington area, Hubzone firms benefit because of their proximity to the federal government and some of its top suppliers, Crowley said. They include Bethesda-based Lockheed Martin, the No. 1 contractor with $42.9 billion in U.S. awards in fiscal 2011.

The region has “pretty sophisticated’’ Hubzone contractors, Crowley said. “They go after a lot of federal business. They get that business.’’

As for the few pockets of economically distressed neighborhoods in suburban Washington, “it’s a head-scratcher sometimes, but it’s how the numbers work,’’ he said.

About one-third of students in Montgomery County public schools, for example, receive free and reduced-cost meals, said County Council President Nancy Navarro. “There are areas of concentrated need,’’ she said in a phone interview.

The SBA uses a set formula to determine which areas are eligible and can’t speculate on why “slivers’’ of wealthier areas may be deemed qualified, Pardo said.

The designation is set by law and uses data from agencies including the Census Bureau, Bureau of Labor Statistics, Bureau of Indian Affairs and departments of Housing and Urban Development, Defense and Interior, she said.

Some West Virginia coal towns were stripped from the program last year because they were booming when the coal market did well a few years ago, Heeter Construction’s Coe said in a phone interview. That’s no longer the case, she said.

“I would think the whole state of West Virginia is the definition of a Hubzone, especially since coal is going out,’’ Coe said.

—Bloomberg Government

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