The Financial Benefits of Being a HUB Business

Historically Underutilized Businesses (HUBs) are businesses that are certified by state and local governments. For most jurisdictions, to be a historically underutilized business means the business is primarily owned by a minority or woman. Each state, city and other certifying organization’s HUB rules can be a little different but there are some common characteristics:

• Business must be over 51% owned by a minority - Asian Pacific American, Hispanic American, Native American, African American an/or American woman;
• The 51% owner must be a U.S. citizen;
• For state HUB certifications, the 51% owner must usually be a resident of the state being applied in;
• For state HUB certifications, the business owned by the 51% shareholder must be located in the state being applied in.

Cities and each state can have enhanced or different requirements depending on their regulations and laws.

As a public policy, states, cities and other political subdivisions set a goal of purchasing a certain percentage of their goods and services from HUB vendors. From buying paper clips to providing building construction, purchasing the largest percentage of goods and services (measured in dollars) from HUB venders is desirable from a public policy perspective. If a state purchasing agent is buying ball point pens, they are most likely to buy them from HUB vendors when the price, quality and ability to service the state are equal.

I recently attended a seminar conducted by Mr. Hopeton Hay, the University of Texas System Manager – HUB Technical Assistance Program. Hay’s department is tasked with providing technical assistance and training to prospective and certified HUB vendors seeking business with the University of Texas System. The U.T. System is quite large as a state purchaser. The U.T. System is 130 years old and had nearly 200,000 students attending one of their 15 academic and health education centers in 2008-2009. The U.T. System budget was $11.9 billion for the same period. According to public data, the U.T. System purchased nearly $1 billion in products and services from HUB vendors. When you remove faculty/staff payroll and costs associated with academic research, it turns out the university system spent nearly 20% of its eligible funds with HUB vendors. Still Hay isn’t satisfied. He indicated that the U.T. System has a goal to spend over 29% its applicable funds on HUB purchases.

HUB certifications aren’t unique to Texas. Every state and many cities have HUB certification programs. If your company is selling a highly unique product to a state or local government, then HUB certification may not help you increase your sales to those states; however, if your company is selling commodities or services that are easily obtained, a HUB certification may be of great value. Since I could not find any centralized list of state departments and other organizations providing HUB certification, you should contact your local state representative who will be able to help you find all of the resources your state has to offer.