Bibi Hidalgo, the Associate Administrator for SBA’s Office of Government Contracting and Business Development, just announced during her keynote address at the National 8(a) Association Alaska Regional Conference that SBA will be suspending the bona fide place of business requirement for 8(a) construction contracts, effective immediately. Ms. Hidalgo stated that SBA has been looking for ways to empower small businesses and lessen their burden. She accounted, “I am excited to announce today, for the first time, a new SBA policy, that will help to bolster small businesses against the adverse effects of the pandemic.” She continued, “SBA will temporarily suspend the bona fide place of business requirement for all 8(a) construction firms.” This policy will remain in place through at least September 2022. Hidalgo’s announcement comes one month after Representative Don Young introduced a House bill to eliminate the bona fide office rule. The bill, H.R. 4697, proposes to eliminate the “requirement relating to award of construction subcontracts within county or state of performance.”
As it currently reads, the Small Business Act requires that, to the “maximum extent practicable, construction subcontracts awarded by the Administration pursuant to this subsection shall be awarded within the county or State where the work is to be performed.” In order to implement this, SBA requires 8(a) participants seeking to perform on 8(a) set-aside construction contract to have an SBA-approved “bona fide place of business,” or a “location where a Participant regularly maintains an office which employs at least one full-time individual within the appropriate geographical boundary.” 13 C.F.R. § 124.3. While this requirement was historically applied to 8(a) competitive procurements, SBA clarified as part of its final rule that went into effect in November 2020 that it “believes that the requirement to have a bona fide place of business in a particular geographic area currently applies to both sole source and competitive 8(a) procurement.” 85 Fed. Reg. 66146, 66161 (Oct. 16, 2020).
This geographical requirement is unique to 8(a) construction contracts and is statutorily mandated by the Small Business Act. While SBA cannot remove this requirement from its regulations without direction from Congress, SBA is suspending this requirement in light of the pandemic and to make it “easier and less costly” for small disadvantaged businesses.
If you have any questions regarding the bona fide place of business requirement, please contact Meghan Leemon and Peter Ford, the authors of this client alert.
