Government contractors who have recently registered or re-registered in the System for Award (SAM) database have come across a new disclosure requirement regarding their corporate structure. New questions inquiring about an “immediate owner” and a “higher-level owner” have sparked confusion as to what these requirements are and where they are coming from.
The requirements were prompted by a new FAR Subpart 4.18 – Commercial and Government Entity Code (CAGE) requiring all SAM registrants, if owned by another entity, to identify that entity by name, CAGE code and type of ownership. CAGE codes are a five-character identifier used extensively within the Federal Government and provide for standardization of identifying a legal entity across the Federal Government.
With this new rule, an offeror will be required, pre-award, to represent whether it is “owned or controlled” by an “Owner.” If yes, the offeror must identify that company’s legal name and CAGE code. If that company is not the “highest-level owner,” then the offeror must identify the legal name and CAGE code of the highest-level owner. The rule will result in a many “owners” who have never registered in SAM or had a need for a CAGE code to obtain one. CAGE Codes can be requested from the Defense Logistics Agency (DLA) Contractor and Government Entity (CAGE) Branch here.
The rule includes the following pertinent definitions:
- Immediate Owner means an entity, other than the offeror, that has direct control of the offeror. Indicators of control include, but are not limited to, one or more of the following: Ownership or interlocking management, identity of interests among family members, shared facilities and equipment, and the common use of employees.
- Highest-Level Owner means the entity that owns or controls an immediate owner of the offeror, or that owns or controls one or more entities that control an immediate owner of the offeror. No entity owns or exercises control of the highest-level owner.
FAR Supbart 4.18 also proscribes three new FAR clauses that must be inserted into relevant contracts. FAR 52.204-16 provides information on obtaining CAGE codes and the requirement that CAGE codes be included in an offeror’s proposal. FAR 52.204-17 requires the offeror to identify and provide the CAGE code for any entities that own it. Finally, FAR 52.204-18 involves guidance on maintaining CAGE codes.
According to the FAR Council these new FAR provisions were created to provide government insight into the following: 1) federal spending patterns across corporations; 2) traceability in tracking performance issues across corporations; 3) contractor personnel outside the United States; and 4) supply chain traceability and integrity efforts. As the final rule noted, “increased transparency and accuracy of procurement data broaden the Government’s ability to implement fraud detection technologies restricting opportunities for mitigating occurrences of fraud, waste, and abuse of taxpayer dollars.”
The rule went into effect November 1st, which means any contractor submitting an offer to the federal government must now either update its SAM profile to answer these questions or list the updated information in its offer.
For more information regarding this new requirement please see the General Services Administration’s (GSA) guidelines.