State Agency Deadlines for Overhead Rates

Over the past few weeks we have seen various deadlines such as the tax filing and payment deadline be extended due to the ongoing COVID-19 crisis. Many of our clients have reached out to see whether the DOT may be expected to extend its overhead submittal deadline of June 30. At this time, we are not aware of any state DOT agencies changing the deadline for submittal.

Some states are operating differently than others. Pennsylvania is currently the only state that has halted construction, and the Restart Construction Projects Work Group (consisting of PennDOT, PTC, FHWA, APC, and ACEC/PA) is strategizing to develop a plan to return to work that can be submitted to PA. The submission process is electronic and, like many other businesses, state DOT audit leaders are working remotely. We will keep you updated as we learn of any changes.

As this is an ongoing situation, we urge you to begin tracking costs associated with COVID-19, both labor and non-labor. Businesses are incurring additional costs such as paid leave, insurance costs, technology costs, and professional fees. These costs and their business purpose should be documented to provide for allowability under FAR part 31. There is a possibility that rates may increase, which will be explainable, as a result of these additional costs and potential decrease in utilization.

Federal Government Contractor Resources

The Federal government has established a coronavirus-related website.

We would especially encourage you to read the memo to executive department and agency heads dated March 20, 2020. Below are some key excerpts:

  • Telework is an important tool for enabling continued contract performance.
  • Agencies should be flexible in providing extensions to performance dates if telework or other flexible work solutions such as virtual work environments are not possible, or if a contractor is unable to perform in a timely manner due to quarantining, social distancing, or other COVID-19 related interruptions.
  • Contracts that possess capabilities for addressing impending requirements such as security, logistics, or other functions may be retooled for pandemic response consistent with the scope of the contract.
  • Leverage the special emergency procurement authorities authorized in connection with the President's emergency declaration, including:
    • Increases to the micro-purchase threshold from $10,000 to $20,000 for domestic purchases.
    • Changes to the simplified acquisition thresholds from $250,000 to $750,000.
    • Commercial item acquisitions can use the simplified acquisition procedures up to $13 million.
  • Federal contractors are responsible for managing their workforces. They do not need to follow the Federal Government’s telework policy. If a contract excludes telework, agencies should be flexible on delivery schedule completion dates.
  • Requests for equitable adjustment should be considered on a case-by-case basis.

Any contractual changes should be reviewed with the contracting officer and the results of the conversation should be followed up in writing. Written documentation will be important for future recovery of costs. Some of these costs may not be audited for some time and auditors are quick to forget the ‘reasonableness’ of such decisions years after they happened.

Disaster Assistance Business Loans and Other Assistance

Small Business Authority (SBA) Loans are currently being administered by the SBA; they are not using banks as an intermediary. Loans are available up to $2,000,000 with repayments terms up to 30 years. Business loans accrue interest at 3.75 percent and non-profits at 2.75 percent. A new lending program is being introduced that will be administered by local banks. We will be sending more information about this program shortly.

The Coronavirus Aid, Relief, and Economic Security Act (CARES) provides $1.5 billion for economic adjustment assistance to help revitalize local communities after the pandemic. EDA assistance can be used to help rebuild impacted industries such as tourism or manufacturing supply chains, capitalize local funds to provide low-interest loans to businesses of all sizes, and support other locally-identified priorities for economic recovery.

$50 million is provided for the Hollings Manufacturing Extension Partnership to help small- and medium-sized manufacturers recover by finding value within the supply chain and expanding markets.

$850 million is provided for the Byrne-Justice Assistance Grant Program (Byrne-JAG). Byrne-JAG is the most flexible federal law enforcement grant program and will allow state and local police departments and jails to meet local needs, including the purchase of personal protective equipment and other needed medical items and to support overtime for officers on the front lines.

$1 billion is provided for the Defense Production Act, which allows the Department of Defense to invest in manufacturing capabilities that are key to increasing the production rate of personal protective equipment and medical equipment to meet the demand of healthcare workers all across the nation.

$1.5 billion is allocated for expansion of military hospitals and expeditionary hospital packages to alleviate the anticipated strain on both the military and civilian healthcare systems. These funds will nearly triple the 4,300 beds currently available in military treatment facilities.

The Keeping American Workers Employed and Paid Act authorizes $350 billion of guaranteed SBA loans, a portion of which SBA will forgive based on allowable expenses for the borrower. This small business package also includes $10 billion in direct grants for businesses that do not qualify for the EIDL program, and $17 billion for SBA to step in and make six months of principle and interest payments for all SBA-backed business loans. All of these measures combined will relieve financial stress at struggling businesses and inject much needed capital into the economy.

PA Industrial Development Authority’s program will supply working capital to Pennsylvania businesses with 100 or fewer employees that were negatively impacted by COVID-19.

The Families First Coronavirus Response Act provides businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members. This alert on IRS procedures for payroll tax credits and rapid refunds for employers making Federally-mandated COVID-19 leave payments provides more information.

Federal Government Disruptions and Work Stoppages

Blank Rome published a helpful article on COVID-19 related disruptions and work stoppages. Remember, written documentation of the ‘reasonableness’ of such incremental costs will be important.

Pennsylvania Life-Sustaining Businesses

An updated list of businesses allowed to stay open can be found here. Please note that it is now entirely dependent on your NAICS code unless you have a business waiver (application form is available via the link). If you are integral to the Critical Infrastructure Workforce (CISA), you still need to apply for the waiver. Some are recommending that employees maintain a copy of the waiver if they are still commuting to/from work for critical positions that cannot telework. Access to DCED working capital loans is also available via the link. Information from the DoD about the Critical Infrastructure Industry can be found here.

We are continuing to monitor COVID-19 related developments that impact the government contracting, architecture, and engineering industries. If you have any questions in the meantime, please don’t hesitate to contact us.

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.