The Federal Acquisition Regulation has recently been revised to add a requirement that applies to US government prime contractors and their parent entities.
On a little-reported change to the FAR that became effective in November 2014, the US government expanded the use of Commercial and Government Entity (CAGE) codes to all US government procurements (with limited exceptions for contracts that (1) meet certain enumerated criteria, including a low dollar threshold, and (2) are funded by an agency other than the Department of Defense or NASA).
A CAGE code is a standardized registration system used by the US government to identify contractor facilities to track things such as a facility security clearance, a Pre-Award survey, automated bidders lists, pay processes and sources of supply. Foreign entities must use a NATO CAGE (NCAGE) code. As described in more detail below, the change to the FAR may require a contractor’s immediate and ultimate parents to obtain a CAGE/NCAGE code if any of their subsidiaries or portfolio companies intends to pursue US government contracts. This requirement applies to prime contractors—the response to public comments section accompanying the final rule states that the rule does not require subcontractors to have CAGE codes.
Part of the revised regulation includes a requirement to disclose the potential prime contractor’s “immediate owner” and “highest-level owner,” if any, when completing its System for Awards Management (SAM) registration and certifications or when submitting a proposal. As part of this reporting, the contractor must identify each relevant owner’s CAGE code (or NCAGE code for non-US entities). In responding to public comments to the proposed rule, the FAR Councils (the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council) suggested that a bidder’s immediate and highest-level owners need CAGE/NCAGE codes even if they are not performing or bidding on a US government contract. This is not explicitly stated in the FAR itself, however, and we received non-binding guidance from the Defense Logistics Agency that a CAGE/NCAGE code would not be required for the owner(s) under those circumstances.
Notwithstanding the ambiguity, we have been informed that contractors are not able to complete their SAM registrations without including a CAGE/NCAGE code for any disclosed immediate owner or highest-level owner. As a practical matter, the prudent course—based on an analysis of a company’s specific circumstances—may be for the immediate and highest-level owners of bidders to each obtain a CAGE/NCAGE code, which is a fairly simple process.
» For reference, here are the relevant FAR provisions. (See Sections 52.204-16 & 17.)