SAM.gov is something every federal government contractor has to deal with for actions like searching solicitations and registering to be a federal contractor. As every federal contractor wanting to do business with the federal government has to register on SAM, the questionnaires on SAM must cover a wide array of different possible businesses and business structures. As much as SAM tries to make sure to cover all the possibilities, inevitably, there are some questions that could have so many answers that contractors will often have their own questions about how to answer them properly. One of the most common questions that come up from contractors during SAM registration is “what do I put for Immediate Owner on SAM?” or “what does Highest-Level Owner mean?”
These questions seems to come up quite frequently, and we posted a blog about it back in 2014 when these questions on SAM first popped up. Despite the questions being present for quite some time, it still can trip up contractors when they register on SAM.
The questions as to who the immediate owner is and who the highest-level owner is comes from FAR Subpart 4.18, which discusses Commercial and Government Entity Codes (CAGE Codes), FAR 52.204-16 (Commercial and Government Entity Code Reporting), 52.204-17 (Ownership or Control of Offeror), and 52.204-18 (Commercial and Government Entity Code Maintenance). Basically, these FAR clauses justify the need for offerors to identify owners who are entities when they register on SAM and bid on federal contracts. Thankfully, these FAR clauses also provide definitions which can help contractors better understand what SAM is aiming to learn with its questions about immediate owners and highest-level owner.
For example, FAR 4.1801 and FAR 52.204-17 state:
- “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.”
- “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.”
SAM has an FAQ about what an “immediate owner” or “highest-level owner” is, and that FAQ focuses on control. SAM’s FAQ says in full:
“An immediate owner is another entity that has direct control of your entity (the one you are registering in SAM.gov). Control could include:
- Ownership or interlocking management
- Identity of interests among family members
- Shared facilities and equipment
- The common use of employees
The highest-level owner is another entity that controls the immediate owner, either directly or through another entity (or multiple entities). No entity controls the highest-level owner.”
These definitions and guidance provide great context to what is expected whenever contractors are asked to identify their immediate owner or highest-level owner. Of note from these are the focus on the owner being an “entity” not an individual, and that “control” of the contractor is a determinative factor. Under the common legal definition of entity, it typically means a business organization, not an individual.
Avid readers of SmallGovCon may note that many of these control concepts seem to align with some of SBA’s small business affiliation concepts, as small business affiliation focuses on control (check our blogs on SBA’s size affiliation concepts here and here). While we certainly encourage federal contractors learn about SBA’s size affiliation concepts, SAM does not explicitly indicate that it relies on SBA’s findings related to control to determine if one entity controls another enough to meet these definitions. Utilizing SBA’s size affiliation concepts may still be a great tool to help you to determine if there is possibly control from one entity over another.
Another wrinkle to this is what to do with a joint venture registering on SAM or an entity with multiple owners. SAM has an FAQ on that as well. SAM explains: “Currently, only one Immediate Owner and one Highest-Level Owner may be identified in SAM.gov by a CAGE Code. If the offeror has more than one owner (such as a joint venture) at either level of ownership, they must select only one to report. This note is included at the bottom of FAR 52.204-17 Ownership or Control of Offeror displayed in your entity’s Representations and Certifications.” Typically contractors will choose the majority owner of a joint venture to be listed, but it varies upon each set of facts and circumstances.
With all that in mind, let’s try a couple examples.
Example 1: SmallGovCon Farms LLC , which is owned 100% by Farmer Greg, creates a new entity called GWeb LLC. GWeb is owned entirely by SmallGovCon Farms and has the same management teams. GWeb registers on SAM. GWeb will list its immediate owner as SmallGovCon Farms because it is an entity which owns and controls GWeb.
Example 2: Using the same companies, GWeb creates a new entity called LawBlog. GWeb is still owned by SmallGovCon Farms. LawBlog registers on SAM. LawBlog will list GWeb as its immediate owner. LawBlog will also list SmallGovCon Farms as its highest-level owner because GWeb is owned and ultimately controlled by the entity SmallGovCon Farms.
Contractors who run into the question of listing immediate owner or highest-level owner on SAM can now remember to ask themselves a few things in order to determine their immediate owner and highest-level owner: 1.) Is there an entity which has ownership in my company?; 2.) Does an entity with ownership in my company have any sort of control?; 3.) Does any other entity ultimately control my company’s immediate owner?; and 4.) If my company has multiple immediate owners, which one would be best to list on SAM as immediate owner and who is that listed entity’s highest-level owner?
Of course these questions, and how to apply the definition of immediate owner and highest-level owner really depends on each contractor’s own circumstances, making them quite nuanced. Therefore, if you find yourself asking these questions, or these questions create even more questions for you while registering on SAM, make sure to reach out to a federal government contracting attorney, such as ourselves, for assistance.
Questions about this post? Email us. Need legal assistance? Give us a call at 785-200-8919.
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