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ACEC News / Coronavirus

May 18, 2020

ACEC Seeks Clarification on Potential Impact of PPP Loan Forgiveness on Firm Rates

The Council is seeking clarification from the federal government on the treatment of loan forgiveness received by an engineering firm 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 contends 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  “A contractor who performs primarily government contracts could see almost all of the loan forgiveness rescinded through the application of the credit to their direct costs or indirect cost rate, resulting in a lower reimbursement on government contracts performed in the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 Council requested that DOD clarify that firms with forgiven PPP loans not be required to provide a credit to direct or indirect costs in contracts with the government.  ACEC is also collaborating with other industry groups on additional advocacy actions.
 
 


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