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GAO Issues Scathing Report of HUBZone Program

Posted by: Jeremy Quittner on March 26, 2009

For anyone who wants to know where underfunding and under-staffing of the Small Business Administration leads, check out this report from the U.S. Government Accountability Office.

The GAO writes of rampant abuse of the SBA’s HUB(Historically Underutilized Business)Zone program, which awarded $8 billion in federal contracts to some 4,200 certified small businesses in 2007. Specifically, the report details misrepresentation by 19 companies that falsely claimed HUB status to qualify for nearly $30 million in prime contracts and $187 million in federal contracts between 2006 and 2007.

According to the report:

“One Alabama firm listed its principal office as ‘Suite 19,’ but when GAO investigators performed a site visit, they found the office was in fact trailer 19 in a residential trailer park. The individual living in the trailer had no relationship to the HUBZone firm.”

The same company, which performs ground maintenance, received nearly $1 million in HUB contracts between 2006 and 2007, the GAO says.

Small businesses that participate in the HUBZone program must meet various criteria, including having a main office and at least 35% of their employees living in the zone. The report blames lack of SBA internal and fraud controls, including failure to make site visits to a majority of the companies applying for HUB status.

Congresswoman Nydia Velazquez (D-N.Y.), chairman of the House Small Business Committee, has called for the program to be shuttered in this Associated Press story, which ran in the Washington Post:

“Dishonest companies see skirting the rules as ‘business as usual,’” said Rep. Nydia Velazquez, D-N.Y., who chairs the House Small Business Committee. “This is a program that needs to be shut down.”

Reader Comments

Sean Murphy

March 27, 2009 5:24 PM

Even amidst SBA's lax oversight, small businesses hurt by the economy still are well advised to prospect the federal governemnt for business opportuntiies. Companies such as The Gadsden Group ( assist businesses interested in selling their products and services to the federal government.


March 28, 2009 8:09 AM

This is but a glimpse of the fraud and corruption yet to come, as a result of the trillions being made available under the various bailout and "stimulus" plans...

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