Update: PPP Loans and Agency Credits

All – I wanted to share with you information we circulated to our Federal Agencies and Procurement Advocacy Committee, which addresses the issue we’ve discussed previously regarding federal agencies and potentially State DOTs demanding “credits” from firms that receive forgiven PPP loans.

Previously, we met with DOD and received clarification that in situations where a firm has a forgiven PPP loan there is no requirement to credit DOD unless the firm received assistance through a separate program (Sec. 3610), and then only for the amount of that reimbursement.

Section 3610 of the CARES Act was created to support federal contractors by allowing agencies to pay firms in situations where the firms are unable to meet contract terms due to stay at home orders and other restrictions stemming from the pandemic, with the core purpose of keeping critical industries intact and in a ready state for national security purposes. While the engineering industry has largely been able to operate remotely and perform work for federal clients, confusion arose in the context of FAQ guidance issued by the DOD Office of Defense Pricing and Contracting (DPC), which included the following language: "...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. Furthermore, any reimbursements, tax credits, etc. from whatever source that contractors receive for any COVID-19 Paid Leave costs should be treated in a similar manner and disclosed to the government."

As you may know, ACEC had organized an industry coalition letter expressing objections to this interpretation when it initially appeared, as it was worded in such a way as to apply to any federal contractor with a forgiven PPP loan. We met with Greg Snyder, Sr. Procurement Analyst and DPC's point person on Section 3610 and the FAQs in question, who clarified that the entire FAQ document applies only in situations where firms seek assistance through Section 3610.  In follow-up correspondence with Mr. Snyder, he stressed the following: "If a firm receives a PPP loan and it is forgiven, and the firm did not receive any Sec. 3610 reimbursement, then we would not expect a credit. Our guidance regarding credit and resulting clause to notify and credit is tied to Sec 3610 Act/reimbursement." 

We are obviously encouraged by this clarification, as this will be helpful to ACEC in working with FHWA and other agencies that will be influenced by DOD's approach. We did recommend that DPC add language to Q&A 23 in the FAQ document to make it abundantly clear that the references to credits and forgiven PPP loans are limited solely to Section 3610 payments.
This is a positive step forward, although we still have work to do in clarifying guidance released by the Office of Management and Budget (OMB) which would also direct agencies to pursue credits in the context of federal contracts from firms that have received PPP assistance. ACEC will continue to argue that programs such as PPP loans were created in response to an extraordinary event, where the clear intent of Congress has been to provide assistance to employers, not discounts to public agencies.
Feel free to circulate this information as needed, and please let me know if you or your members have follow-up questions.  Thanks, and I look forward to seeing on our call shortly!
Steve Hall
Senior Vice President for Advocacy
The American Council of Engineering Companies