Eligibility to bid for construction contracts in the 8(a) program can be a maze to navigate for small businesses. The lifeblood for these companies is identifying and becoming eligible to bid for these prized solicitations. As a new 8(a) entity, or one looking to branch out, you may be wondering how to establish a bona fide place of business.
In order to qualify for construction contracts in the 8(a) program, offerors are required to have a bona fide place of business (or BFPOB) within the established geographic area. This post will walk you through when and how to request a determination from the SBA, and when to expect a decision.
Before we get to the five things, one important resource for the 8(a) Program to review when questions arise is the SBA standard operating procedure. But, if you don’t have time to read all 300 pages, and the corresponding regulations, we will walk you through the process.
- The bona fide place of business must meet certain requirements.
First, what are the major regulations and corresponding definitions for establishing an 8(a) bona fide place of business? 13 C.F.R. § 124.3 defines bona fide place of business as “a location where a Participant regularly maintains an office which employs at least one full-time individual within the appropriate geographical boundary.” Hold on to your questions about what this means in real world terms, I will address it later. 13 C.F.R. § 124.501 states, “an 8(a) business must have a bona fide place of business in the applicable geographic area if the procurement is for construction.” This sends off alarm bells that any 8(a) entity wanting to submit an offer for an 8(a) construction set-aside needs to establish a bona fide place of business in the geographic area. Looking at these two regulations, along with the SBA standard operating procedure, lays out in detail the major definitions and regulations you need to know to set yourself up for success.
2. A business has to request approval of its bona fide place of business.
As always, look at the regulations and the standard operating procedure first. 13 C.F.R. § 124.501(k) establishes the procedure for submitting a request to establish a bona fide place of business. The request must be sent to the SBA office servicing the 8(a) participant. We get a lot of question about what this means: the home office for the 8(a) company, or where the new BFPOB will be? The answer, is to file the request with the home SBA district office for the 8(a) entity. The SBA office will then forward the request to the SBA office servicing the area where the BFPOB is located, if it is different than the 8(a) participant’s location.
When the request to establish a BFPOB is solicitation-specific, it must be received at least 20 working days prior to the date proposals are due. But the request does not have to be in connection with a specific solicitation and, in that case, the request can be submitted at any time.
3. The SBA district office needs proof that the BFPOB is established.
The SBA district office will look for whether the 8(a) entity regularly maintains an office within the appropriate geographic boundary. Construction trailers and temporary structure will not suffice in establishing an office. Regularly maintaining an office means conducting business activities as an ongoing business concern from a fixed location on a daily basis. In order to show this is occurring, the SBA wants to see that this is a location where third-parties conduct business with the 8(a) entity. Including lease agreements, bills, correspondence, licenses, and filings from the office location will boost the chances of the SBA approving the BFPOB.
A primary place of business can qualify as a BFPOB; it does not have to be a new location. Also, an entity can have multiple BFPOBs. But each BFPOB must be approved before it can be utilized to qualify for a procurement.
Not only must an entity have the office space, but it must have at least one full-time individual employed at the location. How a person is considered full-time seems intuitive, but the SBA has a few rules to follow. The person must conduct the activities of the 8(a) entity during normal business hours. The person cannot be an independent contractor, and must not work for any other business during normal business hours. The SBA will look for employment agreement(s), payroll records, tax documents, and benefits. The rule of thumb is to have a full-time employee, exclusively employed by the 8(a) entity, working in the BFPOB. Trying to skirt the rules on these requirements can land your business in hot water with the SBA.
4. BFPOB approval has short deadlines.
If the 8(a) entity does not have a current approved BFPOB in the geographic area of the solicitation, a request to establish a BFPOB must be submitted at least 20 working days before initial offers that include price are due. If it is not for a specific contract, the SBA will issue its decision within 30 days of receiving the request.
The SBA is supposed to conduct a site visit to the BFPOB site within 10 working days of receiving the request. But SBA can push back the deadline. The SBA will then issue a formal determination within 5 working days of the site visit. However, the SBA may not respond at all, which can leave 8(a) companies feeling left out in the cold. The regulations, when this happens, tell the 8(a) company it can assume the SBA has accepted the request. However, this only allows the 8(a) company to submit an offer for a procurement. The SBA still must formally accept the request prior to award of a contract. If the SBA determines late in the process to deny the BFPOB request, this could be a bitter pill to swallow.
Assuming the SBA approves the request, the effective date is established when the SBA determines the BFPOB met the requirements at the location. The BFPOB can be changed without prior SBA approval, but the 8(a) entity must notify SBA and provide documentation within 30 days of the move demonstrating the new BFPOB meets requirements.
5. What are the takeaways, and are there exceptions?
The SBA has made clear that, for 8(a) construction requirements, an entity must have a BFPOB in the geographical area. This applies to both sole source, and competitive procurements. The SBA standard operating procedure seems to leave the door open for an 8(a) sole source to not have a BFPOB when it is nominated by the SBA. However, given recent comments by the SBA, I think the standard operating procedure will eventually be updated to close this door.
13 C.F.R. § 124.501(g)(4) states that in order for an award to be made, the Participant must show it “[h]as a bona fide place of business in the applicable geographic area if the procurement is for construction.” In November 2020, the SBA commented on the location for a bona fide place of business. The SBA said, “[a]s such this final rule defines bona fide place of business to be the geographic area serviced by the SBA district office, a Metropolitan Statistical Area, or a contiguous county to (whether in the same or different state) where the work will be performed.” A good example for those of us in the Midwest is Kansas City (Kansas and Missouri), where the city stretches across state lines. In these instances, the SBA allows for a geographical area to include both sides of a state line, assuming it meets the criteria. Generally, the SBA will confine the geographical area to a single state or county. The geographical area will be determined on a solicitation by solicitation basis by each SBA area office.
The takeaway, if you are looking to apply for and receive 8(a) construction contracts, is to get your ducks in a row early. SBA understands this can be a chicken-or-egg consideration for small businesses. Establishing a BFPOB more than 20 working days ahead of a solicitation is a tall task, however, utilizing the roadmap above, you can speed up the process.
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