Good news for 8(a) firms considering federal construction projects over the next year! The U.S. Small Business Administration (SBA) recently announced a moratorium on the requirement that participants in SBA’s 8(a) Business Development Program must establish a bona fide place of business in a specific geographic area in order to be awarded any construction contract through the 8(a) Program due to the ongoing challenges of COVID-19. It is worth noting that no other SBA small business program has a similar requirement and no large business is held to that standard. Be advised that the new policy is only a temporary fix.
What is a bona fide place of business (BFPOB)? For purposes of 8(a) construction procurements, a bona fide place of business means a location where a participant regularly maintains an office that employs at least one full-time individual within the appropriate geographical boundary. The term does not include construction trailers or other temporary construction sites. In the recent SBA regulatory changes, the SBA did attempt to make to easier to obtain SBA’s administrative approval.
What is the rule? Typically, a firm is required to have this type of local office established to be eligible for certain federal construction contracts. The Small Business Act requires that “[t]o the maximum extent practicable, [8(a)] construction contracts] shall be awarded within the county or State where the work is to be performed.” 15 U.S.C. § 637(a)(11). The SBA implemented this statutory provision by requiring a Program Participant seeking an 8(a) construction contract to establish a BFPOB in a particular geographic location. SBA regulations state:
Construction competitions. Based on its knowledge of the 8(a) BD portfolio, SBA will determine whether a competitive 8(a) construction requirement should be competed among only those Participants having a bona fide place of business within the geographical boundaries of one or more SBA district offices, within a state, or within the state and nearby areas. Only those Participants with bona fide places of business within the appropriate geographical boundaries are eligible to submit offers.
13 CFR 124.507(c)(1). See also, 13 CFR 124.501(k) (describing BFPOB qualifications). Non-construction 8(a) contracts are not subject to any special geographic restrictions due to small business statutes or SBA regulations, but the solicitation itself could still impose geographic restrictions. Procuring agencies also seem to have some flexibility for modifying the geographic restrictions even after SBA’s recommendations.
One Year Moratorium on 8(a) BFPOB Rule. In a press release issued on August 26, 2021, SBA relied on the Biden Administration’s extension of certain COVID-19 emergency procedures and authority to offer a one-year moratorium on the 8(a) BFPOB rule. The SBA believes that this modification to the 8(a) Program will make it easier for small disadvantaged businesses to be eligible for 8(a) construction contracts. SBA’s press release states:
“During the moratorium, any 8(a) Program participant seeking an 8(a) construction contract (either on a sole source or competitive basis) will not be required to have or establish a bona fide place of business in any specific geographic location.”
SBA Press Release, Aug. 26, 2021. Seeking to streamline regulations and encourage small business contracting, SBA utilized its discretionary authority to rely on a practicality caveat in the rule to temporarily suspend the requirement.
“[W]ith employees expected to telework on a significant basis for the foreseeable future, the SBA has determined that it is no longer ‘practicable’ to require a physical presence at a particular location at this time.”
SBA Internal Policy Notice, Aug. 25, 2021.
SBA Issues Policy Guidance within SBA and to Procuring Agencies. The SBA also issued a corresponding internal SBA Policy Notice, addressed to the Office of Business Development (in charge of 8(a) Program) employees, District Directors, Deputy District Directors and 8(a) Business Opportunity Specialists (BOSs). To further implement the moratorium, SBA has directed its personnel to include language in any acceptance letters regarding competitive construction procurements into the 8(a) Program. This language requests that procuring agencies seeking to offer 8(a) competitive procurements do not include “FAR Clause 52.219-18, Alternate I, or any other provision restricting competition based on geographic territory,” in the solicitation, and the language asks the agency not to disqualify any offers based on non-compliance with BFPOB requirements in 13 CFR 124.501(k).
Applicability. SBA’s policy provides that the BFPOB rule suspension is applicable to all 8(a) construction contracts offered to the 8(a) Program between the effective date of August 25, 2021 and September 30, 2022. This temporary suspension could buy time for a more permanent solution—some may wish to extend the policy beyond the current expiration, or it could be made permanent by legislation. For now, this rule suspension expires next year.
- Small Business Administration, Press Release, “SBA Announces Moratorium on Bona Fide Place of Business Requirements for the 8(a) Business Development Program,” (Aug. 26, 2021), available at https://www.sba.gov/article/2021/aug/26/sba-announces-moratorium-bona-fide-place-business-requirements-8a-business-development-program.
- SBA Policy Notice, Control No. 6000-819056, “Modification for 8(a) Business Development Bona Fide Place of Business (BFPOB) Requirement due to COVID-19,” (effective Aug. 25, 2021).