Broker Dealers are Ineligible for 8(a) Certification
SBA Definition: FAR 124.08
“Brokers are ineligible to participate in the 8(a) BD program. A broker is a concern that adds no material value to an item being supplied to a procuring activity or which does not take ownership or possession of or handle the item being procured with its own equipment or facilities.”
Exception: Real estate Brokers are permitted to obtain the 8(a) certification.
What the SBA will look at to determine if a firm is a broker:
1. Invoices to the firm’s customers, do they contain a straight markup.
2. Does the firm own warehouse space where it stores inventory.
3. Does the applicant own delivery equipment for the product.
4. The sba will review the financial statements for things like an inventory asset and cost of goods sold amounts.
Logistics Company A Provides transportation and warehousing services, but does not own a warehouse or the vehicles used in moving goods or services. Logistics Company A subcontracts all moving services. Its invoices only include the final cost of the product to the customer. FAIL – This company is considered a broker dealer by the SBA
Logistics Company B
Provides transportation and warehousing services, and owns its own warehouse or vehicles used in moving goods or services. Logistics Company B subcontracts part of its moving services when the client requests service outside of their service area. Its invoices only include the final cost of the product to the customer.
PASS – This company is not considered a broker dealer by the SBA
Logistics Company C
Provides transportation and warehousing consulting services, but does not own a warehouse or the vehicles used in moving goods or services. Logistics Company C subcontracts all moving services. Its invoices are broken out to show what it pays its subcontractors and a fee is charged for helping the customer determine the best transportation method listed as a separate line item as Consulting Services.
PASS – If the company maintains consistent invoice practices and is only earning money on value the firm is adding through consulting the firm would not be classified as a broker dealer by the SBA.
If you are considering an 8(a) application and have questions about potentially being a broker dealer or anything else you can call us at 513 843 4288 for a free consultation.