Morrison Foerster’s Government Contracts Insights provides our in-depth analysis of developments and trends impacting government contracting. Through Insights, our attorneys offer a real-time assessment of the statutory, regulatory, legal, and business-related developments and trends that are shaping the industry. We also examine a full array of non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Morrison Foerster’s nationally recognized Government Contracts and Public Procurement practice represents the world’s leading companies in the aerospace and defense, intelligence, cybersecurity, information technology, financial and professional services, education, healthcare, infrastructure, and logistics support sectors. We are enlisted to address our clients’ most complex and important legal issues. Our work includes contract and subcontract negotiation and other transactional matters, business and regulatory compliance counseling, internal investigations, bid protests, and a wide array of enforcement and litigation matters. Our clients range from Fortune 50 companies to small and medium-sized companies just entering the public sector. We advise both U.S. and non-U.S. companies involved in municipal, state, federal, and non-U.S. procurement matters.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Tina is Co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmaceutical companies, with a focus on general contract counseling and compliance, particularly concerning intellectual property, and cybersecurity matters and federal grant funding.Tina counsels contractors on compliance with federal, state and local acquisition and ethics regulations and with the evolving myriad of requirements pertaining to data security and cybersecurity. She has been involved with numerous internal investigations and compliance reviews, and with mandatory and voluntary disclosures to agencies, and litigation of False Claims Act matters.Tina routinely advises clients concerning:<ul><li>Prime-subcontractor relationships</li><li>Sources of supply and country of origin requirements</li><li>Price reductions and price reporting issues</li><li>Organizational conflicts of interest</li><li>Safeguarding of intellectual property and other proprietary interests</li><li>Licensing and data rights issues</li><li>Handling of classified materials and controlled unclassified information</li><li>Agency suspension and debarment proceedings</li></ul>She also assists clients with due diligence and other activities related to the acquisition of government contracting concerns, and with the drafting and negotiation of teaming agreements, subcontracts, licensing agreements, and cooperative research and development agreements. She also assists clients applying for federal grants (including SBIR and STTR agreements), and those who seek to obtain other transactional authority agreements, as well as those competing for state and local government work.Tina’s litigation experience includes government contracts claims litigation in federal courts and before boards of contract appeals, bid protests before the Government Accountability Office and the Court of Federal Claims, and complex disputes in federal courts, including civil fraud and False Claims Act litigation and reverse Freedom of Information Act litigation.Prior to joining Morrison Foerster, Tina worked at another large national firm and as a trial attorney in the Office of the General Counsel of the Navy, Navy Litigation Office.<h4>Representative Experience</h4><ul><li>Negotiation of largest CHIPS Act federal funding agreement between multinational semiconductor corporation and U.S. Department of Commerce.</li><li>Negotiated prime contract and major subcontracts related to the Department of Energy’s next generation supercomputer program, including extensive IP rights negotiations and negotiation of associated patent rights waivers.</li><li>Negotiated series of other transaction authority agreements with DARPA and associated subcontracts with more than a dozen research universities on behalf of a firm biotech client, including complex IP rights allocations and material transfer agreements.</li><li>Assist clients with FedRAMP authorization process and with development of license agreements for software products sold to federal, state and local government agencies.</li><li>Cyber incident response counseling to some of the largest companies and organizations impacted by security incidents.</li><li>Advises clients on Bayh-Dole reporting of inventions and IP strategies for contracts and grants.</li><li>Conducts due diligence for major government contract mergers and acquisitions.</li></ul>

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Tina is co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She counsels a wide variety of government contractors on compliance with federal acquisition and ethics regulations. She drafts and negotiates contracts on their behalf and has been involved with numerous internal investigations and compliance reviews, and with bid protest, contract claims, and False Claims Act litigation. She also advises on M&A transactions involving government contractors.

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Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters. He has represented both protesters and awardees in scores of protests before the Government Accountability Office, the Court of Federal Claims, and procuring agencies, in acquisitions ranging from small business procurements to multibillion-dollar contracts of global significance. His representative protest matters span the aerospace sector, the Intelligence Community, base operations and logistics, healthcare, nuclear and environmental work, and information technology and software acquisitions. His protests have included both classified and unclassified programs. In addition to prevailing in published decisions, Jim has also secured favorable corrective action on behalf of clients in a wide variety of protests that were resolved without a published decision.Jim’s work also focuses on disputes over cost allowability and compliance with the Cost Accounting Standards, and he has appeared before the Armed Services and Civilian Boards of Contract Appeals, in size and status protests before Small Business Administration (SBA) area offices, and appeals before the SBA Office of Hearings and Appeals. Jim regularly counsels clients on contract interpretation, organizational conflicts of interest, and small business compliance.Jim graduated with high honors from the George Washington University Law School, where he focused his studies on federal procurement law, was a member of the Law Review, and interned with the General Services Administration’s suspension and debarment office. Jim also holds a degree in theology magna cum laude from the Pontifical Gregorian University in Rome and a bachelor’s degree in classical languages and literature summa cum laude from the University of Kentucky, where he graduated Phi Beta Kappa.

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Jim maintains an active practice in bid protests before the Government Accountability Office and contracting agencies and counsels clients in contract disputes and compliance obligations.

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office. Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters.

James Tucker

<div style="margin-bottom: 15px;" class="videoWrapper"><iframe class="sticky-video" title="Meet Alex Ward, Government Contracts Practice Co-Chair" src="https://www.youtube-nocookie.com/embed/TkliwdSlTaQ?rel=0" frameborder="0" allow="autoplay; encrypted-media" allowfullscreen="1" title="iframe"></iframe></div>J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. His practice covers a full range of government contracts matters, including investigations, bid protests, claims, general litigation, corporate transactions, and counseling. Alex strives in all matters is to provide his clients the highest level of efficient and effective representation.Alex represents contractors in internal and external investigations, disclosures to the government, and qui tam litigation, with great success in reducing or eliminating his clients’ exposure through active engagement with the government. His work in this area includes obtaining numerous declinations and dismissals of False Claims Act cases in their earliest stages, sparing his clients the cost, risk, and exposure of litigation.He has also served as lead counsel in dozens of bid protests involving military and civilian agency procurements of a wide range of products and services, including all manner of pre- and post-award protests in the GAO, the U.S. Court of Federal Claims, and state tribunals, as well as appeals to the U.S. Court of Appeals for the Federal Circuit and size protest appeals before the SBA’s Office of Hearings and Appeals.Alex handles all aspects of the claims process, from the initial assessment and drafting of requests for equitable adjustment through litigation in the Boards of Contract Appeals and the Court of Federal Claims. Alex’s practice also covers the full gamut of other controversies confronting government contractors, including prime-sub, teaming partner, employer-employee, competitor, and indemnification disputes. His litigation work also includes a wide variety of pro bono engagements, in which he has represented both individual and institutional clients in matters ranging from immigration and criminal defense to sustainable procurement and protection of the environment.Prior to joining the firm, Alex served in the U.S. Army as a commissioned officer and an Assistant to the General Counsel of the Army responsible for civil works and international matters, and as a clerk for judges on the U.S. Courts of Appeals for the Armed Forces and the D.C. Circuit. He is a member of the Boards of the Morrison & Foerster Foundation and the Chesapeake Bay Foundation and of Law360’s Government Contracts Editorial Board.

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Alex is co-chair of Morrison Foerster’s Government Contracts and Public Procurement practice. His practice covers a full range of government contracts matters, including bid protests, claims, investigations, corporate transactions, and counseling.

J. Alex Ward

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Morrison Foerster’s Government Contracts Insights blog provides an in-depth analysis of news, developments, and trends impacting government contracting and procurement. Through Insights, attorneys from our nationally recognized Government Contracts and Public Procurement practice will offer a real-time assessment of the statutory, regulatory, legal, and business-related developments that are shaping the industry. This blog will also examine a full array of U.S. and non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Read about our <a href="http://govcon.mofo.com/editors/">Authors</a>.Never miss a post. Subscribe to get real-time updates.

Brad is a partner in Morrison Foerster’s Litigation Department, Managing Partner of the Austin office, and Chair of the firm’s Israel practice. He is the former Co-Chair of the firm’s Global Litigation Practice and the Government Contracts + Public Procurement Practice.

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The Consolidated Appropriations Act of 2021, which became law on December 27, 2020, includes a second round of stimulus funding in the form of the Economic Aid 

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The Economic Aid Act and a Second Round of PPP Loans

The Economic Aid Act and a Second Round of PPP Loans | Government Contracts Insights

Damien C. Specht

The Consolidated Appropriations Act of 2021, which became law on December 27, 2020, includes a second round of stimulus funding in the form of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act(the “Economic Aid Act”). Among many other measures, the Economic Aid Act further extends and revises the Paycheck Protection Program (“PPP”), which provides loans guaranteed by the Small Business Administration (“SBA”) to certain businesses and organizations adversely affected by the COVID-19 crisis. Applications for the prior round of PPP funding closed on August 8, 2020.The SBA reopened the PPP on January 11, 2021, and will keep it open through March 31, 2021. As of January 11, 2021, eligible businesses and organizations can apply for an initial PPP loan (or “first draw loan”), and as of January 13, 2021, select eligible entities that previously received a PPP loan can apply for a “second draw” PPP loan. The revised PPP also permits certain borrowers to increase their initial loan amount. The SBA published two interim final rules (“IFRs”) on January 6, 2021, to implement the Economic Aid Act changes to the PPP program – one for <a href="https://www.sba.gov/sites/default/files/2021-01/PPP%20--%20IFR%20--%20Paycheck%20Protection%20Program%20as%20Amended%20by%20Economic%20Aid%20Act%20%281.6.2021%29-508.pdf" target="_blank" rel="noopener noreferrer">existing and first draw PPP loans</a> and another for <a href="https://www.sba.gov/sites/default/files/2021-01/PPP%20--%20IFR%20--%20Second%20Draw%20Loans%20%281.6.2021%29-508.pdf" target="_blank" rel="noopener noreferrer">second draw PPP loans</a>.Below, we summarize the key changes to the PPP created by the Economic Aid Act and key features of the second draw loan program. For further information, please refer to our <a href="/topics/small-business/">prior coverage</a> of the PPP and the <a href="https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program" target="_blank" rel="noopener noreferrer">SBA’s PPP website</a>.First Draw Loans and Changes to Existing PPP LoansEligibility: Businesses that, together with their applicable affiliates, have 500 or fewer U.S.-based employees or small businesses that meet the SBA alternative size standards or the small business size standard for their particular industries, and that otherwise meet the SBA’s eligibility criteria (which we more specifically discuss <a href="/coronavirus/newly-issued-interim-rules-update-paycheck-protection-program-loan-eligibility-considerations/">here</a> and <a href="https://www.mofo.com/resources/insights/200327-faq-coronavirus-economic-stabilization-act-cesa.html#_ftnref16" target="_blank" rel="noopener noreferrer">here</a>), are eligible to apply. Independent contractors, eligible self-employed individuals, and sole proprietors are also eligible, as are nonprofit organizations. The Economic Aid Act further expands the eligibility criteria to include housing cooperatives, section 501(c)(6) organizations, and certain destination marketing organizations that, in each case, employ no more than 300 employees. Certain news organizations are also eligible.Ineligibility: Certain businesses are expressly ineligible for PPP loans, including those that are engaged in activities illegal under federal law, that have previously defaulted on a government-backed loan, with a majority owner that has committed certain felonies or defaulted on government loans, and businesses ineligible under 13 C.F.R. § 120.110. In addition, the Economic Aid Act states that recipients of Shuttered Venue Operator Grants under Section 324 of the Economic Aid Act are not eligible for PPP loans. Additionally, the Economic Aid Act specifically prohibits any publicly traded entity from the PPP loan program.Maximum Loan Amounts: New borrowers can choose to use either their 2019 or 2020 financial information to calculate their maximum PPP loan amounts. In general, the limit is 2.5 times monthly payroll or $10 million, whichever is less.Affiliation Rules: The SBA financial assistance programs affiliation rules apply for purposes of determining eligibility, but they are waived for (a) any business with 500 employees or less that is assigned a NAICS code beginning with 72 (restaurants and hospitality), (b) any business operating as a franchise and assigned a franchise identifier code by the SBA, (c) any business that receives financial assistance from a company licensed under section 301 of the Small Business Investment Act of 1958, and (d) certain news organizations with NAICS code 511110 or 5151.Permitted Uses: In addition to existing permitted uses of PPP loans – payroll costs, rent, mortgage, utilities – the Economic Aid Act expands the permitted use of PPP loans to cover certain operations expenditures, as well as costs associated with property damage, supplier disruptions, and worker protection expenditures. Note that payroll expenses now also include group life, disability, vision, or dental insurance benefits. These changes apply to PPP loans made both before and after December 27, 2020.Operations expenditures include payments for business software or cloud computing services that facilitate business operations, product or service deliveries, processing, payment or tracking of payroll expenses, human resources, sales and billing, accounting or tracking of supplies / inventory / records, etc.Eligible property damage costs are those related to vandalism or looting from public disturbances in 2020 not covered by insurance or other compensation.Covered supplier costs are expenditures made for goods that were essential to the operations of the entity when the expenditure was made and made pursuant to a contract, order, or purchase order in effect at any time before the covered period for the applicable loan. For perishable goods, the relevant time period extends to any time before or during the covered period for the applicable loan.Eligible worker protection costs are those required to adapt business activities to comply with state and local government requirements or guidance (from March 1, 2020, until the national emergency declared with respect to COVID-19 expires) related to maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirements related to COVID-19. Such expenses include, for example, installation of drive-through windows, ventilation and filtration systems, or physical barriers, and such things as health screening for employees and costs associated with new work-from-home arrangements.Impermissible Uses: The Economic Aid Act also clarifies that PPP loan proceeds expressly cannot be used for lobbying or election activities of any nature, including lobbying expenditures related to state or local elections, or intended to influence enactment of legislation, appropriations, regulation, administrative actions, or executive orders proposed or pending before Congress or state or local legislative bodies.Forgiveness Procedures: The Economic Aid Act further revises the loan forgiveness procedures as follows, which revisions apply retroactively to prior PPP loans:(a)  Covered Period: A PPP borrower can now decide the length of its forgiveness covered period, which may be between eight and 24 weeks after the date of the loan disbursement.(b)  Simplified Forgiveness Application: For PPP loan amounts of $150,000 or below, the Economic Aid Act has provided for a simplified forgiveness application process under which the borrower signs and submits a certification to the lender meeting the following requirements: (i) the application cannot be more than one page in length; (ii) the borrower need only provide a description of the number of employees the borrower was able to retain because of the loan, estimated loan amount spent on payroll costs, and total loan value; and (iii) the borrower must attest that it has accurately provided the certification, complied with SBA requirements, and retained proper records, as more specifically set forth in the Economic Aid Act.(c)  Deduction of Economic Injury Disaster Loan (EIDL) Advance Amounts: The Economic Aid Act repealed the EIDL advance deduction under the CARES Act, which previously required borrowers to deduct the amount of EIDL advances from PPP loan forgiveness amounts. Borrowers that already took such a deduction in their forgiveness application will be notified by their PPP lender when the SBA has made a reconciliation payment for the deduction (together with interest) and will have their loans re-amortized or paid in full (as applicable), or if the amount remitted to the applicable lender by the SBA exceeds the remaining principal balance of the PPP loan, the PPP lender will remit the excess amount to the borrower.Audits: No later than February 10, 2021, the Economic Aid Act requires the SBA to establish an audit plan detailing its policies and procedures for conducting forgiveness reviews and PPP loan audits, as well as to release the metrics it will use to determine which covered loans will be audited.Changes to Interest Rates: Interest rates on PPP loans are now calculated on a non-compounding, non-adjustable basis. Thus, the interest rate will be 100 basis points or one percent, calculated on a non-compounding, non-adjustable basis. This new calculation is applicable after December 27, 2020, and may apply to prior PPP loans upon the agreement of the applicable lender and borrower.Reapplication for and Increases to Existing PPP loans: In limited circumstances, if a borrower did not apply for the full amount of PPP loan for which it is now eligible, or did not accept the full amount of the PPP loan for which it was approved, it now may apply for an increased loan amount. Any loan increases must be made by the “Lender of Record,” which is the current owner of the loan.Second Draw LoansA significant feature of the Economic Aid Act is the new program for “second draw” PPP loans. Borrowers that meet the eligibility requirements below, and that have used or will use the full amount of their initial PPP loan (including any increases) by the expected date of disbursement, may apply for a “second draw” PPP loan. Second draw PPP loans are generally guaranteed by the SBA under the same terms, conditions, and processes as first draw PPP loans. The eligibility criteria and certain key terms differ, however, as described below.Eligibility: A smaller subset of PPP borrowers are eligible for a second loan than were eligible for the first draw. First, such borrowers must have 300 employees or fewer, including all affiliates.<a id="_ftnref1" href="#_ftn1" name="_ftnref1">[1]</a> Second, the prospective borrower must have had at least a 25% reduction in revenue year-over-year from 2019 to 2020. Borrowers may demonstrate this revenue reduction by showing a more than 25% reduction in gross receipts for one quarter in 2020 as compared with the corresponding quarter in 2019 or an overall reduction of 25% or more. Annual tax forms will be used to substantiate revenue decline.Maximum Loan Amount: The maximum loan amount under a Second Draw Loan is calculated as the lesser of $2,000,000 or 2.5 times the average monthly payroll costs for 2019 or 2020 (as selected by the borrower). This formulation varies for seasonal employers, new entities, and NAICS code 72 entities. The latter can use a multiplier of 3.5 versus 2.5. Small businesses that are a part of a single corporate group (i.e., businesses that are majority owned, directly or indirectly, by a common parent) are capped at $4,000,000 of second draw PPP loans in the aggregate.Additional SBA Actions to Help Underserved and Special Businesses: To implement the Economic Aid Act, the SBA also issued <a href="https://www.sba.gov/sites/default/files/2021-01/Guidance%20on%20Accessing%20Capital%20for%20Underserved-508.pdf" target="_blank" rel="noopener noreferrer">guidance</a> addressing steps it is taking to better serve smaller businesses and underserved and disadvantaged communities, as well as to provide assistance to minority, underserved, veteran, and women-owned businesses that can encounter difficulties in obtaining PPP loans. To accomplish these goals, the SBA has set aside certain funds for specific types of community financial institutions, and will also only open the PPP program to those entities for an initial period before reopening to all lenders. The specifics of these set asides include:<ul><li>$15 billion across first and second draw PPP loans for lending by community financial institutions;</li><li>$15 billion across first and second draw PPP loans for lending by Insured Depository Institutions, Credit Unions, and Farm Credit System Institutions with consolidated assets of less than $10 billion;</li><li>$35 billion for new first draw PPP borrowers;</li><li>$15 billion and $25 billion for first draw and second draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans less than $250,000 to borrowers in low-or moderate-income neighborhoods. SBA has determined that at least 25% of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans less than $250,000 to borrowers in low- or moderate-income neighborhoods.</li></ul>In addition, the SBA will only accept applications from community lenders for at least the first two days when the PPP loan portal reopens, and will set aside dedicated hours to process loans from the smallest PPP lenders. The SBA has also expanded its community outreach programs, and has asked lenders to do the same, especially in underserved communities.Lender Liability: The Economic Aid Act codifies prior SBA guidance that permits PPP lenders to rely on the certifications of PPP loan applicants and the authenticity of documentation submitted by an applicant for a PPP loan, so long as the submission is made in accordance with applicable statutory requirements, rules, and guidance. Any lender that follows all applicable statutory and regulatory requirements and acts in good faith relating to the loan origination or forgiveness cannot be subject to any enforcement action or penalties.<a id="_ftn1" class="offset" href="#_ftnref1" name="_ftn1">[1]</a> Exceptions to this limitation apply to entities with the NAICS Code 72 and news organizations with multiple locations.

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