The trend toward increasing disclosure obligations as a condition of doing business with the federal government continues, as a new rule that goes into effect on April 6, 2016, will require contractors to publicly disclose even more information about certain affiliated corporate entities. In particular, the rule will require disclosure of any immediate owner or subsidiary as well as any predecessors that held a federal contract or grant within the past three years. Government contractors should take note of this new requirement, and consider its potential impact on the scope of entities whose past performance history may become squarely in the sights of agency source selection officials in the course of their evaluating offerors’ eligibility for new contract awards.
What Corporate Information Will Be Made Publicly Available?
Under the existing Federal Acquisition Regulation (“FAR”) clause at FAR 52.204-17, Ownership or Control of Offeror (NOV 2014), prospective contractors are currently subject to the requirement to disclose any “immediate owner,” meaning any entity that has direct control of the offeror. Those who identify an immediate owner must also disclose the “highest-level owner” that owns or controls the immediate owner. A new clause at FAR 52.204-20, Predecessor of Offeror (APR 2016), will add to those disclosure obligations and require offerors to additionally identify any “predecessor” companies that held a federal contract or grant within the past three years.
Contractors will be required to make these disclosures when responding to new solicitations and as part of their annual System for Award Management (“SAM”) representations and certifications. Updated disclosures are required when a merger, acquisition, or other change in corporate structure occurs. Notably, however, an updated disclosure will not be necessary when a successor entity is merely a new office or division of the same company, or when there is only a change in name.
Who Is Subject to the Disclosure Obligations?
The corporate disclosure requirements apply to all solicitations and resulting contracts, regardless of dollar value. The requirements also apply to commercial item contracts, as well as acquisitions for commercially available off the shelf (“COTS”) items. There is no exception for small businesses, or for publicly traded companies subject to various other public disclosure obligations. The breadth of contractors and contract types subject to the disclosure obligations reflects agencies’ interest in capturing as much data as possible that is of potential relevance to assessing offerors’ integrity and performance record before contract award.
What Will Be the Impact of Making These Disclosures?
The pattern of requiring increasing transparency regarding contractors’ corporate structure, now with a three-year look back for any predecessor companies, reflects a trend of more and more information being considered by agency source selection officials when making their award decisions. The corporate information identified through these disclosures concerning the offeror and any immediate owner, subsidiary, or predecessor will be posted in the Federal Awardee Performance and Integrity Information System (“FAPIIS”), and agencies will thus have access to any available past performance information about each of these entities and be required to review it as part of their responsibility determinations.
As the disclosures regarding any immediate owner, subsidiary, or predecessor will be publicly available through SAM and FAPIIS, it may also give fodder to competitors looking to protest an award decision that may have neglected to consider negative past performance information known about these entities. By the same token, offerors with a blemish on the past performance record of their immediate owner, subsidiary, or predecessor should keep that in mind when competing for new awards and consider offering an explanation as to why that adverse information should not be considered relevant to any current award decisions and the work to be performed by the offeror itself. Above all else, contractors must be aware of these disclosure obligations and update their internal policies for reporting the necessary information and keeping track of the relevant past performance of each affiliated entity.