NAICS Codes - Part 2

We're continuing our discussion on NAICS codes (National American Industry Classification System) from Friday. When the Government issues a solicitation, it specifies the NAICS code and size standard associated with the procurement. For example, a recent solicitation reads as follows:

The solicitation number is xxxxx and is issued as an invitation for bids ... The solicitation document and incorporated provisions and clauses are those in effect through Federal Acquisition Circular FAC 2005-60. The associated North American Industrial Classification System (NAICS) code for this procurement is 332312 with a small business size standard of 500 employees. This requirement is a small business set aside and only qualified offerors may submit bids.

So in this case, if your company has this particular NAICS code, 332312 and fewer than 500 employees, you are qualified to bid for the contract.

Businesses can have more than one NAICS code. The U.S. Census Bureau assigns and maintains only one NAICS code for each establishment based on its primary activity (generally the activity that generates the most revenue for the establishment). However, the Central Contractors Registration (CCR), where business register to become federal contractors, will accept up to 5 or 10 classification codes per establishment. The U.S. Census Bureau is not a central Government agency with the role of assigning, monitoring, or approving NAICS codes for establishments. Individual establishments are assigned NAICS codes by various agencies for various purposes using a variety of methods. There is no formal role for an arbitrator of NAICS classifications.

There is an appeal process for the contracting officer's NAICS code designation and applicable size standard. Appeals must be filed within 10 calendar days after the issuance of the initial solicitation. SBA's Office of Hearings and Appeals (OHA) will usually dismiss summarily an untimely NAICS code appeal. There is no proscribed format for an appeal but it must contain at least:

• The solicitation or contract number and the name, address, and telephone number of the contracting officer
• A full and specific statement as to why the size determination or NAICS code designation is allegedly erroneous and argument support the allegation 
• The name, address, telephone number and signature of the appellant or its attorney.

There are quite a few NAICS code appeals. For example, in August there were six, in July there were nine and in June there were two. Many are successful. Sometimes appeals attempt to change a NAICS code to one that has a higher size standard, allowing the appellant to bid on a contract. Other times an appellant wants to lower the size standard in order to reduce competition.