03/24/2021

Message from Beth -- March 24, 2021

The PPP Loan and FAR Credits Clause is still a priority for ACEC, yesterday the U.S. House Small Business Committee – and specifically the Subcommittee on Contracting and Infrastructure – held its hearing on the impact of the FAR credit’s clause on small engineering firms that have PPP loans and qualify for forgiveness.  Information on the hearing can be accessed here, the press statement released by Subcommittee Chairman Kweisi Mfume (D-MD) can be accessed here, and a recording of the hearing can be accessed here. 

ACEC Chair-Elect Robin Greenleaf of Architectural Engineers in Boston and ACEC Member Carlos Penin of CAP Engineers in Coral Gables, Florida both testified.  The hearing also featured testimony from an attorney/FAR expert and a CPA to provide lawmakers with technical guidance on the FAR and contracting issues, and while neither went as far as to support a waiver of the credits clause as it applies to PPP loans, both acknowledged – particularly the CPA – the need for better guidance from FHWA on implementation.  Click here for ENR article on the hearing.

Ironically, this morning ACEC received guidance from the US DOT. Click here to access the guidance. ACEC has requested a meeting with DOT/FHWA to discuss the guidance and working with a group of CPA's on the potential impact to the industry.  

The following elements remain the same as earlier draft guidance:

• If the PPP loan proceeds are applied to costs (direct or indirect) within the scope of a federally funded contract and the PPP loan is forgiven, appropriate adjustments are necessary to comply with 48 CFR part 31 (the cost principles).
• A&E consultants cannot use PPP loan proceeds to pay for the direct costs on a Federal-aid or Federal lands highway program funded contract. 
• A&E consultants cannot bill direct costs and use PPP loan proceeds to fund the compensation costs of direct labor and other direct costs dedicated to federally funded contracts. This practice results in an improper payment for billing the Federal government twice. 
• PPP loan proceeds cannot be used to pay the direct project costs even if those costs are not billed to the federally funded contract. This is essentially a donation to the project, which was not authorized and conflicts with the terms and conditions of the contract. A&E consultants should continue to allocate and invoice both direct and indirect costs in accordance with contract terms. 
• A&E consultants may use PPP loan proceeds to pay for indirect costs, but an adjustment to the indirect cost rate is required in accordance with 48 CFR § 31.201-5 (the credits clause).  A&E consultants must adjust their indirect cost rates for PPP funds forgiven to provide the corresponding credit to the Federal government. All credits to indirect costs should be reflected in the subsequent adjusted indirect cost rate. If an A&E consultant can apply the appropriate indirect cost credit on existing contracts, the contracting agency may allow the consultant to do so. 

The following provisions are new:

• “All applicable credits (or loan recoveries) are to be applied based on an equitable allocation to all benefiting costs objectives in accordance with 48 CFR § 31.201-4.”
• “The indirect cost rate credit should only be applied until the credit is recovered fully.”
• “If adjustments to an A&E consultant’s indirect cost rate has no bearing on the award or contract type (e.g., firm fixed price or lump sum contract), adjustment to that contract would not be required.”

The guidance is clearly directed at only federally funded contracts. But again, the key will be how states implement this. ACEC Ohio continues to work with ODOT's Executive Management and Audit teams to discuss this issue and their plan for implementation of the FAR credit's clause. We expect a follow up meeting in the next 2 weeks.

Tomorrow, ACEC will engage at 11am with the House Transportation & Infrastructure Committee featuring testimony from US DOT Secretary Pete Buttigieg, where the Chairman Peter DeFazio (D-OR) may raise our PPP issue with the Secretary.  The link for that hearing can be accessed here. 

As this issue continues to be reviewed and addressed, we will keep you informed.  If you have any questions, feel free to reach out to me.

~Beth