Supporters say nonprofit identification system would increase transparency and make government more efficient in several areas, including procurement practices.
A new report has found that the U.S. government, as well as state and local agencies, should adopt a universal identifier system for the companies and nonprofits it does business with, citing tangible benefits that range from increased transparency on spending to quicker identification of corrupt or low-performing contractors.
The report was released Sept. 13 by the Data Foundation, which is an open data research organization aimed at encouraging better government, and LexisNexis Risk Solutions, a private company that provides data analytics to customers in the insurance industry and the financial sector, among others. The report, dubbed Who is Who and What is What? The Need for Universal Entity Identification in the United States, compiles interviews from more than 15 government, private sector and tech industry experts.
The report found that the U.S. federal government currently uses disparate and varied systems for classifying the entities it interacts with. If the federal government were to establish a single unique identifier system — essentially a number to encompass all business holdings for one entity that is used across the board — there would be vast benefits.
The report recommends deploying the global Legal Entity Identifier (LEI) system, which is currently in use by 90 government agencies internationally, as well as an increasing number of entities in the U.S., specifically in the financial sector. LEI is a federated system maintained by constituents, and supported and implemented by the Global Legal Entity Identifier Foundation, a nonprofit group out of Switzerland created in 2014 by fiduciary agencies interested in preventing another global financial crisis.
“It is available to be used by any government reporting regime where companies or entities have to be identified, and once it’s adopted, it makes company identification completely interoperable, so you can track all the different places where companies interact with government,” said Hudson Hollister, founder and executive director of the Data Coalition and current interim president of the Data Foundation. “There is a crying need for the United States to junk its current hodge-podge of different noncompatible identification codes that are separately used by every different agency, and instead adopt a single common one that makes all of the information instantly aggregable. The LEI is the best option to do that.”
The report cites several reasons why the LEI is a good choice. One is that the Commodities and Futures Trading Commission has already begun to mandate use, making it the first U.S. regulator to do so. Others include the inability of disparate identifiers to allow for easy access to information. For example, it has long been possible for a company to be indebted to one government agency while borrowing money from another, doing so through several identifiers tied to the same corporate address.
A centralized and clear location for such info would save government both money and time, also making it easier during the procurement process to get a picture of a company’s history with governmental contracts and past jobs in which bidders had misled or underperformed.
Another major benefit to such a system cited in the report is transparency. The LEI is a nonproprietary system, not owned by one entity. Some industries, including procurement again, use a proprietary system in which one must pay to access information. LEI would shift that cost, requiring identifiers to pay a one-time licensing fee, rather than allowing a company to charge for access to data over and over.
“Inconsistent and various proprietary entity identifiers continue to lock up mountains of government data,” said Scott Straub, co-author of the report and director of federal market strategy for LexisNexis Risk Solutions. “If the LEI was universally adopted in the U.S., it would give the government greater flexibility to be adaptable to a range of uses, some of which haven’t even been fully conceived. Ultimately, government agencies, taxpayers, business and watchdogs would have greater access to data and at reduced costs.”
All that said, supporters of the report and its findings acknowledge there are challenges inherent to widespread LEI use in government. Public agencies are notoriously tied to systems they already use and know, making adoption of anything new a common challenge in public work. LEI would be no different. Although, supporters say agencies need only add the identifier to current systems, giving them time to phase the old ways out.
Dun and Bradstreet, a private company that provides a proprietary business identifier related to government procurement, has also argued against moving away from its product to LEI. That company’s Chief Data Scientist Anthony Scriffignano wrote a column in The Hill this year that asserts open systems like LEI don’t give government enough information and also overtax small businesses by requiring one-time registration fees.
LEI certainly appears to be under consideration for wider use within federal government, if not yet at state or local levels, which is common because as the federal government goes in tech, so go localized agencies.
The General Services Administration (GSA) put out a request for information in February related to “government-wide entity identification and validation services.” In May, GSA issued a release saying it had received “an impressive number and variety of responses to the RFI” and officials are “methodically reviewing the responses to determine the viability of proposed alternatives across the government award communities” before releasing information about what comes next.