To be awarded either a "sole source or competitive" 8(a) construction contract, the company must have a "bona fide place of business" within the "relevant geographical area" where the work will occur. While this requirement was suspended in 2021 in response to COVID, in June the Small Business Administration (SBA) announced that the moratorium will end on Oct. 1. After this date, companies are once again required to have a bona fide place of business in the relevant area to receive 8(a) construction contracts.
Meeting the Bona Fide Place of Business Requirement
13 C.F.R. § 124.501(k) clarifies what constitutes the "relevant geographical area" where the work will take place, and what qualifies as a "bona fide place of business."
A. Relevant Geographical Area
- General Rule (13 C.F.R. § 124.501(k), (k)(4))
The SBA determines what the relevant geographical area is for a given project. This area will usually be either: (1) the area served by an SBA district office, (2) a metropolitan statistical area, (3) a contiguous county, or (4) the geographical area served by a contiguous SBA district office to where the work will be performed. A company with a bona fide place of business in a given state will qualify for 8(a) construction contracts anywhere in that state, even if the state has more than one SBA district office. Additionally, a firm currently performing a contract in a state is eligible for one or more further contracts in that state.
- Multiple Locations (13 C.F.R. § 124.501(k)(9))
Special rules apply if the contract requires work at multiple locations. These rules vary depending on whether it is a single award or multiple award contract. For single award contracts, a company must have a bona fide place of business where the majority of the work will occur. The location where the "majority of the work" will occur is determined by calculating the dollar value associated with the work at each location. For multiple award contracts, a company only needs to have a bona fide place of business in one of the locations where work will occur.
B. Bona Fide Place of Business Qualification
- Application Process (13 C.F.R. § 124.501(k)(2))
To establish a bona fide place of business, a company must submit a request to the SBA district office in that location, and the SBA district office must determine that the company does in fact have a bona fide place of business in that location. When practical, the SBA may conduct a site visit to assist in its determination. If the SBA does not make a determination within 5 days of a site visit, or within 15 days after receiving the request (when a site visit did not occur), the company can presume its request has been approved, and it can then compete for 8(a) construction contracts. However, a company is still required to have the SBA determination finding it has a bona fide place of business in the location before it is awarded the contract.
- What Qualifies as a Bona Fide Place of Business? (13 C.F.R. § 124.501(k)(5), (k)(6) and (k)(8))
A company can establish a bona fide place of business in a given location simply by having a single, full-time employee, working in a home office. A company can designate an individual as the single full-time employee of a bona fide place of business even if the employee does not live in the state where that office is located. For example, a company can establish a bona fide place of business in Ohio even if the only person working in the company's Ohio office is a Michigan resident. Finally, after establishing a bona fide place of business, the company can change the office's address without prior SBA approval as long as it subsequently notifies the SBA of the change.
The end of the bona fide place of business moratorium will add greater complexity to the process for those 8(a) companies seeking to be awarded 8(a) construction contracts.
Taft Summer Associate Richard Roediger contributed to this article.
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