Before a business can pursue federal government contracts it must register in SAM. Here are the basics on what that means and where founders and PE-backed businesses get tripped up.
Register in SAM.gov — It’s Free
SAM, the System for Award Management is the federal government’s vendor management database and every entity pursuing a prime contract must register in SAM. Registration is free — ignore offers to help with registration if the offer says SAM charges a fee. Entities registering must provide: a physical address, corporate structure, operational info, and certifications that the entity understands and complies with a bunch of regulatory requirements.
The Unique Entity Identifier – UEI
Upon registration, SAM automatically assigns the registering entity a UEI which the entity’s permanent federal ID and is used to track contractors. This often happens during initial validation, even before full registration is complete.
Subcontractors don’t need to register in SAM. But, if a prime contractor must report its subcontract dollars, then the subcontractor must get a UEI. A prime cannot obtain an UEI for a subcontractor.
CAGE Codes
Once SAM validates an entity to include verifying a physical address for the entity, the Defense Logistics Agency (DLA) automatically assigns a Commercial and Government Entity code, CAGE Code. No separate application needed.
Non-U.S. entities don’t get a CAGE code, instead they get a NATO Commercial and Government Entity Code, NCage Code which is used to identify entities in the NATO Codification System (NCS). NCAGE Codes are used in many countries in government registration systems, like SAM.
Corporate Family Disclosures
PE-backed businesses often get stuck here. SAM requires every registering entity to disclose if it has an Immediate Owner and Highest-Level Owner (HLO) and if so, requires the legal name and CAGE Code for these owners. Even if those entities never contract with the government, they still need CAGE Codes.
The FAR defines an Immediate Owner as an entity with direct control — but “control” is broad. Indicators include:
- Common ownership across the corporate family
- Interlocking or shared executive management
- Similar or identical business interests
- Shared offices, facilities, IP, or equipment
- Shared employees
The Highest-Level Owner is the top of the ownership chain — the entity that is owned or controlled by another entity.
Physical Address Are Required
SAM requires a verified physical address where principals (generally founders, owners, or the executive team) conduct business and maintain books and records which is a bit weird since books and records are kept virtually most of the time. PO boxes, virtual addresses, and short-term leases are not acceptable for SAM. If a business uses one of these, a principal’s home address or another authorized representative’s home address must be used instead.
This can be a vulnerability for both PE firms and small business because they may be sharing space with portfolio companies or other businesses without a lease or any proof that ties them to the physical address. Without a lease, mortgage, or utility bills in the registering entity’s name, the registration can stall or be rejected.
Tips to Get Registered Without Delays
- Use the Official SAM Checklist: SAM provides a handy checklist with the documents and information needed to get register. SAM Checklist
- Shared/Coworking Spaces: For entities that share space, work out of a coworking space or even entities in office buildings, SAM will require a written explanation about the location and supporting documentation such as a lease, mortgage, or utility bills proving that the entity registering is at that physical address, that it is a real place of business and not a mail drop. For PE portfolio companies using a holding company’s office or a small business squatting in another business’ office, a Board declaration stating the registering entity operates from that location may work if there is not a lease or shared service agreement.
- No PO Boxes: SAM will reject registrations for entities that only have a PO boxes or a virtual address. So, if in a co-working space be sure to get a lease for a physical desk or dedicated office.
- Consistency: All business records should have the same physical address: IRS records, state registration, bank records, and SAM registration.
- Expect Questions on Shared Addresses: Contracting officers and agencies like DCSA may scrutinize shared-address situations, especially for contracts requiring on-site performance or facility clearances.
- Update SAM on Ownership Changes: Changes in organizational structure or ownership must be evaluated to determine if the registered entity needs to update SAM update— M&A activity, new PE investment, restructuring all may require updates.
