The U.S. Small Business Administration (SBA) announced on Aug. 21, 2023, that it was extending its moratorium on the application of the "bona fide office" requirements for construction contracts under its 8(a) Business Development Program. The moratorium will now remain in effect until Sept. 30, 2024.
Background
The Small Business Act requires that to the "maximum extent practicable" 8(a) construction projects "shall be awarded within the county or State where the work is to be performed." To implement this statutory requirement, SBA has adopted in its regulations requirements that 8(a) concerns maintain a "bona fide office" in the state where the construction work is to be performed or in a contiguous state.
SBA suspended this requirement during the COVID-19 pandemic on the grounds that it was not "practicable" to require a physical presence at a particular location because certain locales had imposed restrictions on in-person business activities and thus employees would be expected to telework on a significant basis. Accordingly, in 2021, SBA suspended the requirement for an 8(a) construction contractor to have a physical presence in a specified geographic area and at least one employee located at that site. SBA extended this moratorium in 2022 through September 2023. SBA's latest announcement continues the moratorium for another year, citing "pandemic-related economic trends" that present "challenges to sustained physical office operations."
Looking Forward
While this moratorium extends the relief from the bona fide office requirements, SBA has consistently noted that these requirements are imposed by statute and that its relief will be only temporary. SBA 8(a) construction contractors should not expect these requirements to be suspended forever, absent statutory changes. In the intervening time, SBA has updated its regulations regarding the bona fide office requirements. When they ultimately become applicable again, prudent contractors should be sure to review and understand these updated requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
