All Is Not Forgiven: PPP Forgiveness And Credits

On March 23, 2021, The House Small Business, Subcommittee on Contracting and Infrastructure held a remote hearing titled: "The Interaction Between the Paycheck Protection Program and Federal Acquisition Regulations: What It Means for Government Contractors." The hearing focused specifically on the interplay between Paycheck Protection Program (PPP) loan forgiveness and Federal Acquisition Regulation (FAR) 31.201-5 "Credits," and how that interplay impacts federal contractors that perform cost-type contracts. This meeting highlights an area where contractors have, at best, incomplete guidance. We will continue tracking these issues as new guidance is issued.

FAR 31.201-5 states that: "The applicable portion of any income, rebate, allowance, or other credit relating to any allowable cost and received by or accruing to the contractor shall be credited to the Government either as a cost reduction or by cash refund." This provision applies to: (1) the pricing