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.

Tina D. Reynolds

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.

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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.

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Kickstarting AI in the Federal Government: OMB’s Policy to Implement Executive Order 14179

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On November 1, 2021, the Safer Federal Workforce Task Force (the “Task Force”) added new FAQs to its guidance on Executive Order 14042 (“EO 14042”), signaling that contractors have some flexibility to go beyond the rapidly-approaching December 8, 2021 deadline for covered employees to be fully vaccinated against COVID-19. The Task Force also encouraged federal agencies to work with contractors facing compliance challenges with EO 14042, as long as those contractors are working in “good faith” to comply with the Task Force guidance. Contractors that fail to make such good faith efforts towards compliance, however, might face “termination” of their covered contracts or other “significant actions.”BackgroundAs we previously <a rel="noopener" target="_blank" href="https://elc.mofo.com/topics/what-to-do-now-covid-19-protocols.html">reported</a>, the Task Force’s September 24, 2021 guidance and FAQs mandate that all employees who work either on or in connection with covered contracts (even if working remotely) or in covered contractor locations must be vaccinated by December 8, 2021. Contractors must also implement strict masking and social distancing practices in their workplaces in accordance with CDC guidelines. These requirements are immediately binding on all contractors and subcontractors once the FAR Deviation Clause (FAR 52.223-99) or agency class deviation is inserted into their federal contract or subcontract. Contractors are also required to comply with any new guidance or FAQs issued by the Task Force, as FAR 52.223-99 and agency class deviations state that contractors must “comply with all guidance, including guidance conveyed through Frequently Asked Questions, as amended during the performance of this contract” (emphasis added).Since EO 14042 became effective on October 15, 2021, many federal agencies have begun broadly rolling out EO 14042 by including FAR 52.223-99 or the relevant class deviation in bilateral modifications for existing contracts, even before those contracts are up for renewal, extension, or a modification for another purpose. Agencies have also incorporated these implementing clauses into contracts that are not expressly covered by the four corners of EO 14042, such as contracts for commercial item products. In turn, many prime contractors have been broadly flowing the relevant implementing clauses down to their subcontractors and, in some cases, have incorporated the requirements of EO 14042 into their standard terms and conditions.The New FAQsThe Task Force released seven new FAQs on November 1, 2021 that address various compliance and enforcement issues.The December 8, 2021 Deadline Is Not a CliffIn apparent recognition of the significant challenges many contractors face to ensure all covered employees are fully vaccinated by December 8, the Task Force’s new FAQs signal that the December 8 deadline for vaccinations is flexible when a contractor is either processing requests for medical or religious accommodations or using its “usual processes for enforcement of workplace policies” for unvaccinated employees who have not requested or do not qualify for an accommodation. This new guidance follows statements on <a rel="noopener" target="_blank" href="https://www.whitehouse.gov/briefing-room/press-briefings/2021/10/27/press-briefing-by-white-house-covid-19-response-team-and-public-health-officials-64/">October 27, 2021</a> by the White House Coronavirus Response Coordinator that the December 8 vaccination deadline is not a “cliff” and that contractors can follow their “standard HR processes” that can “play out across weeks, not days.”Importantly, these new FAQs state that contractors must determine the “appropriate means for enforcement” for covered employees who refuse to be vaccinated and do not have a pending accommodation request. The Task Force provides the following example of how federal agencies are permitted to enforce the vaccination requirement:One model for enforcement among employees with respect to non-compliance with a vaccination requirement is that being followed by Federal agencies. Guidance for Federal agencies is to utilize an enforcement policy that encourages compliance, including through a limited period of counseling and education, followed by additional disciplinary measures if necessary. Removal occurs only after continued noncompliance. Guidance for Federal agencies is that employees should not be placed on administrative leave while the agency is pursuing an adverse action for refusal to be vaccinated but will be required to follow safety protocols for employees who are not fully vaccinated when reporting to agency worksites.The Task Force also states that covered contractor employees who have a pending request for a medical or religious accommodation can continue working on a covered contract or at a covered workplace while the contractor is reviewing the accommodation request.Although the Task Force signals some flexibility on the deadline for vaccinations, contractors are still required to ensure that covered employees at their workplaces are “following all workplace safety protocols for individuals who are not fully vaccinated” while accommodations or HR actions are being considered, which include masking and social distancing with limited exceptions. The Task Force also says that federal agencies can deny a contractor’s employee entry into federal facilities if that employee refuses to be vaccinated.These new FAQs offer welcome news for contractors struggling to meet the December 8 deadline, but still leave a number of unanswered questions. Chief among those lingering questions is how long after December 8 contractors can process HR actions or accommodations and still be in compliance. Contractors likely have two to three weeks for those processes to play out, but going much beyond that timeframe may make it harder to show good faith compliance absent extenuating circumstances. The Task Force also encourages contractors to notify their contracting officers when their employees who work onsite at federal facilities have received an “exception to the requirement to be fully vaccinated,” so the agency can “assess appropriate safety measures” for those workers.Agencies Are Encouraged to Work With Contractors Trying to Comply in Good FaithBefore the latest FAQs, the Task Force guidance and FAQs did not address enforcement or remedies for EO 14042, leaving those issues entirely to the discretion of federal agencies. According to a new FAQ, federal agencies are encouraged to “work with” contractors facing challenges with complying with EO 14042, as long as those contractors are “working in good faith” to comply with EO 14042. Although not binding on federal agencies or prime contractors, this FAQ could provide some helpful talking points for contractors and subcontractors to address their compliance challenges with their contracting officers or prime contractors.Contractors must still be able to show that they are working in good faith to comply with EO 14042. Contractors who cannot show those good-faith efforts might face harsh consequences. In fact, a new FAQ directs federal agencies to take “significant actions” with regard to contractors who are not working in good faith to comply, including “termination” of the covered contract.EO 14042 Can Apply to Affiliated Entities Without Covered ContractsMany contractors have been wondering whether EO 14042 applies to employees or work locations of their parents, subsidiaries, or other affiliated entities that do not have federal contracts or subcontracts. Those affiliated entities can be covered according to new FAQs. The Task Force states that employees and work locations of “corporate affiliates” of a covered contractor that are not otherwise covered by EO 14042 can be subject to the COVID-19 safety protocols in the Task Force’s guidance and FAQs if the covered contractor and affiliate either “directly or indirectly . . . controls or has the power to control the other,” or when “a third party controls or has the power to control both.” “Indicia of control” can include, but are not limited to, the following: “interlocking management or ownership, identity of interests among family members, shared facilities and equipment, or common use of employees.” It is important to note that this standard is much broader than the typical tests for determining whether government contractor requirements can spread to affiliated entities, such as the standards under the single-entity test used to apply the affirmative action and discrimination laws enforced by the Office of Federal Contract Compliance Programs to affiliated entities.Under this new guidance, assuming the indicia of control noted above is present, employees of a corporate affiliate will be subject to the COVID-19 safety protocols in EO 14042 if those employees perform any work at a covered workplace of an affiliated covered contractor. In addition, if a single covered contractor employee performs work at a corporate affiliate’s work location, then that covered employee spreads the COVID-19 safety requirements of EO 14042 to all employees at the affiliate’s work location, even if the affiliate’s employees do not work on or in connection with a covered federal contract.Contractors May Have Other Means of Obtaining Vaccination DocumentationThe Task Force says that covered contractors do not need to require employees to show or provide documentation of their COVID-19 vaccination status if the contractor can access that documentation directly through a state’s immunization database or has previously received documentation from the employee through the contractor’s vaccination program.Next StepsAlthough the new FAQs offer some needed breathing room for contractors struggling to comply with EO 14042, contractors should not relax their compliance efforts given the instruction to federal agencies to take “significant actions” for contractors not working in “good faith” to comply.  Contractors facing challenges meeting the December 8 vaccination deadline or other requirements of EO 14042 should implement processes for documenting their good-faith compliance efforts, including documenting accommodation or HR enforcement processes for unvaccinated employees who are allowed to continue work after December 8. That documentation could prove valuable for contractors that need to request flexibility from their customers on compliance challenges or to defend enforcement actions or audits of their compliance with EO 14042. Contractors should also be mindful that the Task Force FAQs still give agencies discretion to assist contractors with their compliance challenges. Not all agencies may be receptive to those challenges, and some may be more flexible than others.The new FAQs also serve as a reminder that the Task Force guidance is a moving target.  Since covered contractors must comply with all new Task Force guidance and FAQs, as amended, it is important for contractors to continue to regularly monitor and review new Task Force guidance and be prepared to adapt their policies and practices accordingly. Contractors with 100 or more employees should also be mindful of the OSHA emergency rule for COVID-19 that is expected to be issued this week. Although contractors cannot substitute compliance with EO 14042 for compliance with the OSHA emergency rule, the OSHA emergency rule may have components that could place additional compliance obligations on contractors.The updated Task Force guidance also comes on the heels of a slate of new lawsuits seeking to enjoin and overturn EO 14042. The lawsuits include claims filed on October 28, 2021 by the State of Florida; a suit filed in Missouri federal court on October 29, 2021 by ten state attorney generals (Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, and Wyoming); and a suit filed on October 29, 2021 in Texas federal court by the state of Texas. The lawsuits assert various constitutional and other claims against EO 14042, including violation of the Tenth Amendment, procedural and substantive issues under the Administrative Procedure Act, and exceeding Congress’s authorization under the Federal Property and Administrative Services Act. It remains to be seen whether any of the cases will result in temporary injunctive relief or if they will succeed on the merits.  Contractors may be acting at their own peril if they hold off compliance with the EO 14042 to see how the cases play out.Stay tuned as we continue to monitor these developments closely. We also will be publishing guidance on some of the frequently asked questions received from contractors regarding EO 14042.

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Co-Chair, Global Employment and Labor Practice

Andrew co-chairs the firm’s Global Employment and Labor Group. He represents companies on a broad range of labor and employment litigation and counseling matters, successfully defending clients in number complex matters before federal and state courts and administrative agencies.

Andrew R. Turnbull

Andrew Turnbull represents companies on a broad range of labor and employment litigation and counseling matters. He has successfully defended clients in complex employment litigation before federal and state courts and administrative agencies. A primary focus of his practice involves helping companies navigate the unique employment issues that arise when doing business with the federal government, including advising on all aspects of OFCCP compliance, creating and implementing affirmative action plans, defending OFCCP audits and onsite investigations, conducting mock pay equity audits, drafting and developing business ethics policies and programs, and complying with the Service Contract Act, E-Verify, and the Drug Free Workplace Act.

Andrew Turnbull

IAP Worldwide Servs., Inc.

Flight Support, Inc.

DynCorp Int’l LLC

Raytheon Co.

DynCorp International, LLC v. United States

URS Federal Servs., Inc.

DynCorp International, LLC

Planned Sys. Int’l, Inc.

Threat Mgmt. Group, LLC

Vencore Servs. & Solutions, Inc.

Jacobs Tech., Inc.

Cubic, Inc.

American Institutes for Research v. State of New Mexico

CACI-WGI, Inc.

Fluor Intercontinental, Inc. v. IAP Worldwide Servs., Inc.

IAP World Servs., Inc.

Size Appeal of IAP World Servs., Inc.

Al-Ghanim v. IAP Worldwide Servs., Inc.

O’Gara Training & Servs., LLC

IAP Worldwide Servs., Inc. v. Johnson Controls, Inc.

AAR Mobility Sys.

Matt Martin Real Estate Mgm’t, LLC v. United States

Pyramid Real Estate Servs., LLC v. United States

Harrington, Moran, Barksdale, Inc.

Homesource Real Estate Asset Servs., Inc. v. United States

Ocean Ships, Inc.

Keystone Sealift Servs., Inc.

ITT Corp., Sys. Div.

IAP Worldwide Servs., Inc. v. Fluor Intercontinental, Inc.

FedSys, Inc.

Academy Facilities Mgm’t v. United States

Academy Facilities Management -- Advisory Opinion

Evans Security Solutions, Inc.

Contingency Mgm’t Group, LLC and IAP Worldwide Servs., Inc.

Kellogg Brown & Root Services, Inc.

Liberty Power Corp.

J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. 

J. Ward

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New Task Force Guidance Signals Some Flexibility for Contractors

Another Ticking Clock: Additional District Court Preliminarily Enjoins EO 14042 | Increasing Need for OMB Update on GA Court Clarification Order

On November 1, 2021, the Safer Federal Workforce Task Force (the “Task Force”) added new FAQs to its guidance on Executive Order 14042 (“EO 14042”), signaling t

New Task Force Guidance Signals Some Flexibility for Contractors

The Paycheck Protection Program (“PPP”) began with rushed legislation and a race for financial support in the middle of a pandemic. This race was hardly a straight line as the Small Business Administration (“SBA”) and the U.S. Department of the Treasury scrambled to build the program in flight, issuing a series of evolving FAQs and guidance. Banks then tried to internalize that guidance and build systems that could withstand the onslaught of applications. After many months and multiple waves of funding, businesses completed their initial applications, banks completed their eligibility determinations, and thousands of loans were successfully issued. With the initial scramble behind us, SBA and Treasury guidance became more concrete just in time for thousands of forgiveness applications.Although the seeming chaos of the initial application process is over and PPP funding has been fully expended, the true test for the applications submitted since April 2020 is yet to come. Borrowers are now entering into a new phase consisting of forgiveness appeals, audits, fraud reviews, and enforcement. Given the distinct possibility for calm 20/20 hindsight and the shaky ground of guidance developed by agencies under extreme pressure, this phase may be the most difficult yet.In short, not every conclusion made in the rush for PPP funds was correct, and not every borrower truly understood the nuances of the small business rules as they raced against the clock for funding. The confluence of speed, dynamic guidance, and challenging rules will lead to forgiveness denials and hard conversations with banks and regulators.Anticipating a rush of forgiveness denials, the SBA recently unveiled its <a rel="noopener" target="_blank" href="https://govcon.mofo.com/small-business/sba-issues-final-rule-on-appeals-process-for-ppp-loan-review-decisions/">new procedures for appeals</a> of unfavorable forgiveness decisions. The SBA has also been auditing larger and/or suspicious loans, making clear that this review can proceed even after a forgiveness determination has been made. This means that even firms that received forgiveness are not necessarily in the clear. Simultaneously, the U.S. Department of Justice (“DOJ”) has been busy <a rel="noopener" target="_blank" href="https://www.mofo.com/resources/insights/210310-doj-enforcement-actions-covid-19-relief-fraud-update.html">prosecuting PPP loan fraud</a>.Companies that are disappointed by the SBA’s forgiveness determinations, that have received pointed questions during an audit, or that find themselves embroiled in an enforcement action should review our prior advice with respect to the details of the PPP Loan Program. Below, we’ve included the highlights:·        Affiliation. This is easily the trickiest part of PPP analysis and the one most likely to be unfamiliar to commercial borrowers. The affiliation rules that apply to PPP borrowers are those in 13 C.F.R. 121.301. In general, if a company, together with its affiliates, has fewer than 500 employees, it has met one of the basic criteria for PPP eligibility. However, some clients benefit from application of the alternative size rule, which is based on annual revenues and net worth of the borrower and its affiliates. Others, such as restaurants and hotels, are subject to industry-specific affiliation rules. The key to all of this, however, is whether or not borrowers considered other entities owned and controlled by their affiliates when assessing eligibility. We described the size and affiliation rules <a rel="noopener" target="_blank" href="https://govcon.mofo.com/small-business/cares-sba-loan-eligibility-and-process/">here</a>.·        Forgiveness process. Forgiveness calculations are not necessarily straightforward. We’ve previously provided a handy <a rel="noopener" target="_blank" href="https://govcon.mofo.com/small-business/ppp-loan-forgiveness-checklist/">checklist</a> and have noted the interplay between forgiveness and recovery under <a rel="noopener" target="_blank" href="https://govcon.mofo.com/small-business/all-is-not-forgiven-ppp-forgiveness-and-credits/">federal contracts</a>.·        Effect on M&A Transactions. In October 2020, the SBA issued specific guidance concerning how merger and acquisition activity, and other activity resulting in a change of control, could proceed when one of the parties involved was the recipient of a PPP loan. We explored these requirements <a rel="noopener" target="_blank" href="https://govcon.mofo.com/protests-litigation/sba-issues-additional-guidance-on-ppp-loans-and-change-of-ownership/">here</a> and further elaborated on other M&A considerations <a rel="noopener" target="_blank" href="https://www.mofo.com/resources/insights/200508-ma-considerations-cares-act.html">here</a>. These requirements remain an ongoing concern, as many borrowers entering into transactions do not yet have full forgiveness of their prior PPP loans.·        Economic Aid Act and Second Draw Loans. In late December 2020, the <a rel="noopener" target="_blank" href="https://govcon.mofo.com/small-business/the-economic-aid-act-and-a-second-round-of-ppp-loans/">Economic Aid Act</a> further extended the PPP program and allowed certain borrowers to take out a second PPP loan. The Act, and ensuing SBA implementing regulations, also implemented key changes to the PPP program, retroactive to the initial loans. Most significantly, this included new permitted uses of proceeds, including coverage of certain operations expenses, property damages, and supplier disruptions; the cost of personal protective equipment for employees; and employee benefits costs. The Act also modified the procedures for forgiveness and introduced a simplified application for borrowers of $150,000 or less.·        PPP Flexibility Act. In June 2020, Congress enacted changes to the PPP program in the form of the <a rel="noopener" target="_blank" href="https://govcon.mofo.com/small-business/sbas-implementation-of-the-paycheck-protection-program-flexibility-act-in-wave-of-new-rules-and-application-forms/">PPP Flexibility Act</a>. This Act, among other things, extended the time period for loan expenditures from eight weeks to 24, changed the percentage of forgivable costs attributable to payroll from 75% to 60%, and implemented additional forgiveness reduction safe harbors.·        Necessity. Beginning in January 2021, borrowers of $2 million or more began receiving <a rel="noopener" target="_blank" href="https://www.sba.gov/document/sba-form-3509-ppp-loan-necessity-questionnaire-profit-borrowers">Form 3509</a>, a “necessity questionnaire” from the SBA. This form is designed to probe whether the loan was “<a rel="noopener" target="_blank" href="https://govcon.mofo.com/small-business/is-my-companys-ppp-loan-necessary-to-support-ongoing-operations-what-if-im-wrong/">necessary to support ongoing operations</a>,” one of the criteria for loan eligibility. In July 2021, use of the form was discontinued, but necessity remains an issue ripe for audit.In short, we are not yet at the halfway point of the PPP story. Now is the time that regulators and enforcement agencies can, in the calm after the PPP storm, second guess, quibble, and challenge PPP borrowers. Given the nuances in this area and the many ways to get forgiveness right (or wrong), companies of all sizes would be wise to seek counsel when the questions start and not delay until they are the subject of an enforcement action.

Tina is a partner in Morrison & Foerster’s Government Contracts practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmace