AGC of America Takes Victory Lap Over Actions on Loan Necessity Questionnaire

Officials for the Associated General Contractors of America (AGC) claimed responsibility recently for actions taken by the U.S. Small Business Administration (SBA), suggesting that a lawsuit filed against SBA “quickly yielded results.” The association filed a legal complaint in December against SBA and the U.S. Office of Management and Budget (OMB), alleging that the means by which SBA developed and deployed a Loan Necessity Questionnaire (form 3509 for for-profit businesses) violated the Administrative Procedure Act, the Paperwork Reduction Act of 1995 and the Fifth Amendment of the U.S. Constitution. The suit followed “several weeks of quiet but frank (and ultimately unproductive) communication with federal decision makers,” AGC officials said.

Deployment of the questionnaire followed an announcement by SBA that it will review all loans of $2 million or more administered through the Paycheck Protection Program (PPP) for eligibility, fraud or abuse, and compliance with loan forgiveness requirements. SBA officials say the administration has so far received nearly 1.4 million applications for loan forgiveness, totaling approximately $170.5 billion.

“AGC recognizes that SBA has every right and even an obligation to ensure that companies were eligible for the PPP loans they are now asking SBA to forgive,” AGC officials said, at the same time objecting to the use of SBA’s form and any other effort to change standards for loan eligibility. Through legal proceedings, the association is asking for restricted use of the information gathered by the questionnaire, along with a declaration that it was developed and deployed unlawfully.

While SBA required applicants to certify in good faith that funds requested through PPP were necessary to support ongoing operations, AGC officials allege that through the use of its new questionnaire, the administration seeks to probe circumstances post-dating original applications. The association further alleged that SBA was “hiding the questionnaire from public view.” When USGNN™’s editors requested a copy of the form, a representative of SBA confirmed that it was unavailable. The form has since been released through SBA’s website, along with new guidance from the Treasury Department for SBA’s questionnaire. Updates clarify that “‘the statutorily required certification’ of economic uncertainty and necessity did not have to meet any objective standard,” AGC officials said, adding, “Companies merely had to make that certification ‘in good faith at the time of [the] loan application.’”

In December, AGC announced that it would press the agency to reopen and extend the period for public comment regarding its questionnaire. SBA has since provided an additional 60 days for review and public comment, after which officials said they “will submit any resulting amendments to the information collection to the Office of Management and Budget (OMB) for approval.”

Regarding its questionnaire, SBA officials said the information that companies provide will aid in assessing borrowers’ certification and that economic uncertainty made the loan requested necessary to support ongoing operations, “as required by the CARES Act.”

Following SBA’s recent actions, AGC officials said they will “be deciding whether, and if so, how to proceed” with the lawsuit. So far SBA has provided most of the legal relief the association seeks, they added.

SBA reports that it has so far forgiven more than 1.1 million PPP loans totaling more than $100 billion.

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