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ACEC News / Coronavirus

May 27, 2020

ACEC Leads Industry Effort to Seek OMB Intervention on Potential Impact of PPP Loan Forgiveness on Firm Rates

The Council led an industry effort of design, construction and engineering associations to write the Office of Federal Procurement Policy within the Office of Management and Budget (OMB) seeking clarification from the federal government on the treatment of loan forgiveness received by a small business for a Paycheck Protection Program (PPP) loan relative to direct and indirect costs allocable to government contracts in accordance with Federal Acquisition Regulation (FAR).
 
Current guidance from the Department of Defense indicates that firms may need to issue a credit on contracts with the government. In a FAQ page on the CARES Act, the Defense Pricing & Contracting office stated, “to the extent that PPP credits are allocable to costs allowed under a contract, the Government should receive a credit or a reduction in billing for any PPP loans or loan payments that are forgiven.”
 
ACEC and its allies contend that this interpretation is inconsistent with congressional intent and could actually harm, not help, firms that received PPP loans. “A contractor who performs primarily government contracts could see almost all of the loan forgiveness rescinded through the application of the credit to their direct costs or indirect cost rate, resulting in a lower reimbursement on government contracts performed in the current or future years,” ACEC explained in a position paper submitted to the agency.  “If any forgiveness of the proceeds of properly utilized PPP loans ultimately must get credited back to the government by contractors, then these loans are not truly forgivable.  Such treatment would be inconsistent with the stated provisions of the PPP loan program.”
 
The letter requests that OMB weigh in to clarify that firms with forgiven PPP loans not be required to provide a credit to direct or indirect costs in contracts with the government. 

Signers of the letter include: American Road and Transportation Builders Association, American Subcontractors Association, Associated General Contractors of America, Construction Management Association of America, Design-Build Institute of America, Independent Electrical Contractors, International Institute of Building Enclosure Consultants, National Association of Surety Bond Producers, National Electrical Contractors Association, National Society of Professional Surveyors, Sheet Metal and Air Conditioning Contractors National Association, Surety & Fidelity Association of America, and Women Construction Owners and Executives.

Click here to read the letter.

 


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