By Carol L. O’Riordan
This is the sixth blog post in our series about new federal regulatory initiatives that are on tap for the first half of 2014.
The Department of Defense recently amended the Defense Federal Acquisition Regulation Supplement (DFARS) to add a provision that requires companies offering to perform contracts for DOD to identify their highest-level owner, immediate owner, and the entity with a controlling interest in the offeror.
What this means is that now, any company offering to perform or bid on a DOD contract must represent that if it is owned or controlled by another business, it has provided the Commercial and Government Entity (CAGE) code and legal name of that business entity. The CAGE code is a five-character identification number used extensively within the federal government to uniquely identify a provider of goods or services.
The department says it is important to have these CAGE codes in order to support the implementation of business tools that can provide insight into the spending patterns of entire corporations.
DOD said, at the time that it set forth the new rule, that it did not anticipate that the rule will have a significant impact on small business, and this does appear to be the case. However, in its required statement under the Regulatory Flexibility Act, DOD said that it estimated that out of 41,000 small businesses that had received new contract awards in fiscal 2011, about 5 percent were actually owned by another business entity. Thus, although it is true that there is no significant burden on small business, about 2,000 small businesses will be affected by the rule in that they will need to make a new disclosure.