SAM.gov Ownership Disclosures: What Government Contractors Need to Know

Bottom Line Up Front

Companies owned by private equity firms, venture capital firms, and trusts are increasingly entering the world of government contracting as the Trump administration seeks to engage more nontraditional private sector entities. However, such companies may find it challenging to comply with extensive ownership disclosure requirements during the System for Award Management (SAM.gov) registration process, which is mandatory. While these ownership disclosure requirements are not new, they can be daunting to companies that have not had to disclose such information in the past. Importantly, companies with complex ownership structures must remember that failing to comply with owner disclosure requirements may ultimately result in the loss of federal funding opportunities or even result in False Claims Act liability. In this alert, we provide an overview of the ownership disclosure requirements applicable to all current and prospective government contractors that are registering in SAM.gov for the first time, disclosing a change in ownership, or simply working through the required annual registration update.

Background

SAM.gov is the official website of the US government where entities such as companies, corporations, and organizations (including state, local, and municipal government agencies) applying for federal funding or seeking to do business with the government must sign up and register.¹ SAM.gov has existed for many years and has evolved over time. It went live on July 24, 2012, and replaced several legacy government-owned platforms such as the Central Contractor Registration website, the Federal Business Opportunities website, and the Online Representations and Certifications Application website. Today, SAM.gov is a comprehensive database that validates and stores entity information and provides data to federal government agencies as well as private sector stakeholders that do business with the federal government.

Federal agencies use SAM.gov to post contracting opportunities, manage vendor information, and process payments, while entities use the platform to search for procurement opportunities and manage their government contracting activities. As such, SAM.gov is the critical point of entry for and is at the center of the federal award life cycle. SAM.gov does not charge a fee for registration, access, or use.

SAM.gov registration is mandatory for any entity seeking to bid on federal contracts, subject to certain regulatory exclusions. Notably, entities are required to be registered in SAM.gov at the time an offer, bid, proposal, or quotation is submitted, except for in the following limited situations:

• When a purchase is under the micro-purchase threshold and a governmentwide commercial purchase card will be used as both the purchasing and payment mechanism
• When the company is seeking a classified contract but registration in SAM.gov or use of SAM.gov data could compromise the safeguarding of classified information or national security
• When the contract will be awarded by a deployed contracting officer during military operations or humanitarian or peacekeeping operations
• When the contract will be awarded without providing for full and open competition due to unusual or compelling urgency
• When the contract will be awarded at or below $40,000 to foreign vendors for work performed outside the United States and SAM.gov registration is impractical²

An entity’s SAM.gov registration will expire one year after it has been completed. For an entity to remain eligible to do business with the government, it must complete the annual renewal process before the registration’s expiration date. Additionally, an entity’s SAM.gov registration must be updated promptly whenever there are changes to the organization’s legal status, ownership, size (particularly if the entity is receiving federal funding in its capacity as a small business), or any other material information. An entity’s responsibility for keeping its registration accurate is not limited to the annual renewal; rather, it is an ongoing responsibility. Typically, an entity can register in SAM.gov or update its registration in 10 to 14 business days; however, registration timelines may be extended significantly during peak registration periods or when an entity fails to provide accurate and complete information during the registration process.

Ownership Disclosure Requirements

SAM.gov registration requires extensive ownership disclosures for all entities seeking initial registration and those looking to maintain an active registration status. These requirements are set forth in Federal Acquisition Regulation (FAR) Subpart 4.18, which mandates the identification of both immediate owners and highest-level owners in an entity’s ownership structure. In other words, when other entities own an entity, that entity must provide the legal names and Commercial and Government Entity (CAGE)³ codes for certain entities in its organizational hierarchy via SAM.gov. To comply with these ownership disclosure requirements, an entity must fully understand what is included in the definitions associated with these terms. To complicate matters slightly, when individuals directly own an entity, that entity does not have an immediate owner or a highest-level owner to disclose.

FAR defines an immediate owner as the entity, other than the offeror, that has direct control of the offeror. Indicators of control include, but are not limited to, ownership or interlocking management, identity of interests among family members, shared facilities and equipment, and the common use of employees. The immediate owner should be the majority owner if there are multiple entity owners in the organization.

FAR defines the highest-level owner as 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. Notably, no entity owns or exercises control over the highest-level owner. As such, the highest-level owner would be at the very top of an entity’s organizational chart. Again, if there are multiple entity owners in the organization, the highest-level owner should be the majority owner.

The requirement to provide this ownership information is designed to provide the government insight into federal spending patterns across affiliated entities, traceability in tracking performance issues across corporate families, the physical location of contractor leadership and personnel, and corporate-wide supply chain integrity efforts. When either a venture capital firm or a private equity firm has ownership, direct control, or indirect control of an entity that is registering in SAM.gov, information (legal business name, address, and CAGE code) associated with that firm must be disclosed.

The ownership disclosure requirements also apply to trusts, which are often present in the ownership chain of family-owned entities. Trusts are similar to other business entities such as corporations and limited liability companies because they can buy, sell, and own personal and real property; own equity in other business entities; and enter into contracts. Trusts can also protect named beneficiaries from the claims of creditors. Notably, the Defense Logistics Agency (DLA) considers trusts to be entities and will assign a CAGE code to a trust. As it will with other entities, including private equity firms and venture capital firms, the DLA will validate the legal business name of a trust and request submission of a copy of the trust agreement for review.

Takeaways

To ensure compliance with applicable regulations, entities should carefully review their SAM.gov registrations and confirm that their ownership is accurately reflected therein. When registering for the first time, an entity should have a deep understanding of its corporate organization and obtain the names, addresses, and CAGE codes of its immediate owner and higher-level owner as required. When changes occur in an entity’s ownership structure, the entity should update its registration in SAM.gov and make any necessary changes to reflect new ownership or control. Because such changes may occur because of a merger, acquisition, investment, designation of a trust, or changes in control via board appointments. Generally, the entity should update its registration within 30 days of the effective date of the change.

Goodwin’s Government Contracts and Grants Team has experience helping government contractors and grant fund recipients as they navigate SAM.gov registration. Please contact the authors of this alert if you have questions.

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1. ^[1] “Signing up” in SAM.gov involves obtaining a user account and setting up a profile. User account credentials are managed by Login.gov, a service that allows one to sign into many federal government websites with one set of credentials. Alternatively, “registering in SAM.gov” means registering an entity to do business with the government on SAM.gov. Being signed up allows one to access and use many features of SAM.gov, such as setting up and saving targeted searches, following agency postings or activities, and viewing published reports or information. Registration, on the other hand, allows an entity to bid on contracts or apply for federal funding. ↩

2. ^[2] For an exhaustive list of exceptions to the SAM.gov registration requirement, see Federal Acquisition Regulation (FAR) Subpart 4.11. ↩

3. ^[3] A CAGE code is a unique identifier assigned to suppliers to various government or defense agencies, as well as to government agencies themselves and also various organizations. CAGE codes provide a standardized method of identifying a given facility at a specific location. A CAGE code is a five-character alphanumeric identifier assigned to entities located in the United States and its territories. The Defense Logistics Agency CAGE Program Office is the only activity authorized to assign or update a CAGE code. ↩

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.