The bona fide place of business requirement provides that for 8(a) construction contracts, the contractor must have an SBA-approved bona fide place of business in the applicable geographical area. Since August 25, 2021, and as PilieroMazza reported, SBA placed a moratorium on the bona fide place of business requirements for 8(a) construction contracts. The moratorium was extended through September 30, 2023. This client alert reviews certain proposed changes that government contractors operating in the construction sector and participating in the 8(a) program should monitor in order to prepare their company and avoid costly missteps.
Now, and during the moratorium, SBA proposes certain revisions to this rule. Notably, SBA does not have the authority to eliminate this requirement altogether, as the Small Business Act requires that—to the maximum extent practicable—8(a) construction contracts shall be awarded within the county or state where the work is to be performed. Given the language in the Small Business Act and absent removal of this requirement from the Small Business Act, the requirement will continue to apply to both sole-source and competitive 8(a) construction procurements, unless SBA determines that it is not practicable to do so. However, SBA is proposing changes to how this requirement is implemented in its regulations.
Certain proposed changes include:
- Where an 8(a) participant is currently performing a contract in a specific state, it would qualify as having a bona fide place of business in that state for additional contracts. However, an 8(a) participant cannot use contract performance in one state to allow it to be eligible for an 8(a) contract in a contiguous state unless it officially establishes a bona fide place of business in the location in which it is currently performing a contract.
- Contractors can establish a bona fide place of business through a full-time employee in a home office. In addition, this full-time employee does not need to be a resident of the state where he/she is conducting business.
- The rule clarifies that for a single award 8(a) construction contract that requires work in multiple locations, the 8(a) participant would be eligible if it has a bona fide place of business where a majority of the work is to be performed. For a multiple award 8(a) construction contract, the 8(a) participant must have a bona fide place of business in any location where work is to be performed.
Keep in mind that once the moratorium expires, the bona fide place of business requirement will again be implemented, and SBA’s regulations require that the request for a bona fide business determination must be submitted to the appropriate SBA district office at least 20 working days before initial offers are due.
If you have any questions about the bona fide place of business requirement or SBA’s proposed changes, please contact the author, Meghan Leemon, or another member of PilieroMazza’s Government Contracts Group. Visit this link to access additional coverage on this major new SBA rulemaking.
If your firm is affected by these proposed changes and would like to submit public comments to SBA, please make sure to do so before the deadline on November 8, 2022.