Labor Surplus Area

A Labor Surplus Area is a civil jurisdiction designated annually by the Department of Labor where the unemployment rate is at least 20 percent above the national average for two consecutive years, entitling businesses operating there to preferences in federal contract awards.

What is a Labor Surplus Area (LSA)?

The Department of Labor's Employment and Training Administration designates Labor Surplus Areas (LSAs) annually based on civilian labor force unemployment statistics. A jurisdiction qualifies as an LSA when its unemployment rate is at least 20 percent above the national average for the two most recently completed calendar years.

Federal procurement policy (FAR Subpart 26.2) encourages agencies to place contracts in LSAs when doing so is consistent with price, quality, and delivery requirements. The preference operates as a "tiebreaker" in certain acquisitions: when two offers are otherwise equal, the contracting officer should prefer the offer from a firm whose principal place of business is in an LSA, or which agrees to perform a significant portion of the contract using LSA-based workers.

Key points about LSA preferences:

• The preference is not a set-aside; it does not exclude non-LSA firms from competing.
• FAR 52.226-1 (Utilization of Indian Organizations and Indian-Owned Economic Enterprises) and FAR 52.226-2 (Historically Black College or University and Minority Institution) are sometimes confused with LSA preferences but are distinct programs.
• The LSA designation is updated each April. Contractors should verify current LSA status for their jurisdiction each fiscal year.
• The preference applies to the contractor's principal place of business or, for large contracts, the location where a specified percentage of contract work will be performed.

Why Labor Surplus Area status matters for government contractors

For companies located in LSA-designated communities, this status can provide a tie-breaking advantage in competitions and signals to agencies pursuing economic development missions that an award will contribute to community employment. For large contractors building subcontracting plans, LSA-based subcontractors can support community benefit goals that some agencies track in their evaluation criteria.

Example

Two IT services firms submit equivalent proposals responding to a civilian agency's request for proposals. Firm A is based in a suburb of Washington, D.C. with a healthy local economy. Firm B operates from a former manufacturing hub in the Midwest that is currently designated as an LSA. The contracting officer, following FAR 26.2 guidance, awards the contract to Firm B, all other factors being equal, to direct federal spending to the economically distressed area.

Frequently Asked Questions

Where can a contractor find the current LSA list?

The Department of Labor's Employment and Training Administration publishes the current LSA list annually at doleta.gov. Contractors should check the list each April when it is updated and re-verify before submitting proposals that claim LSA preference.

Is LSA preference the same as HUBZone certification?

No. HUBZone (Historically Underutilized Business Zone) is an SBA certification program that designates specific areas and requires formal certification through SAM.gov. LSA designation is made by the Department of Labor based on unemployment statistics, and no separate certification process is required - a contractor simply represents that its principal place of business is in a currently designated LSA. The two programs use different geographic criteria and have different preference mechanisms.

Does an LSA preference affect the competitive range determination?

No. LSA preference operates after technical evaluation and price comparison have been completed. It does not affect whether an offer is included in the competitive range or how technical proposals are scored.

How long does an area retain LSA status?

An area retains LSA designation as long as it meets the eligibility criteria (20 percent above the national average for two consecutive years) in the most recent annual update. Areas can lose LSA status if local unemployment improves. Contractors should not assume that an area will retain its status year to year without checking the current DOL list.