Column: Are NAICS Codes a Nemesis?

      A "nemesis" is defined as an "inescapable agent of downfall" and "a formidable and usually victorious enemy."

      As it functions within the government contracting arena, the NAICS code system occasionally meets those definitions when it denies a federal contractor critical opportunities that the contractor actually was entitled to pursue.

      That happens partly because NAICS codes – the North American Industry Classification Standard--were not designed for procurements, but rather were created for business, census and trade purposes.

      Nonetheless, this joint US-Canada-Mexico industry classification system has been used to categorize procurements in the public sector for at least 20 years.

      Because it was not tailored to contracting needs, the NAICS system in federal procurement has some shortcomings that may end up denying you a significant contract. If you rely strictly on NAICS to search for opportunities in beta.SAM or in agency forecasts, you may be missing many opportunities for which you are fully qualified.

      Your primary NAICS code, identified in your capability statement and SAM (System for Award Management) listing, can also impact whether and when you are qualified as a small business and thereby eligible for certain set-asides.

NAICS concerns

      Federal contractors have to live with the shortcomings of this misfit system in the federal market, so consider the following pointers at these times:

• When updating your SAM and DSBS (Dynamic Small Business Search) listings;
• When searching beta.SAM or Schedule Sales Query Plus;
• When reviewing agency long-range acquisition plans/forecasts;
• When checking FPDS (Federal Procurement Data System) and USASpending.gov for expiring set-asides; and
• When updating your capability statements.

     Matthew Lewis, a consultant in Winvale’s Government Contract Services Department, recently wrote in their blog that "NAICS codes are self-assigned. This means a firm can select the NAICS codes that best apply to the core of their business in SAM…"

      It is up to you to select the codes that apply to your business, and then make sure that you are alert to all other NAICS codes that may relate to the supplies and services you supply that may provide you even just a sliver of additional potential business.

Tips for managing NAICS

      Consider these situations:

• Opportunities posted in beta.SAM can be listed under only one NAICS code, even if they cover multiple types of products and services. The contract specialist is supposed to select the one code that covers the majority of the spend. How would the specialist know that if the offer is not posted yet and priced yet?
• Federal policies now allow use of the 42xxxx, 44xxxx and 45xxxx series of NAICS codes, covering wholesale and retail industries, which were not implemented previously. If you are an agent, wholesaler, reseller or retailer, you should use the NAICS codes for manufacture of those items, along with the NAICS codes for wholesale/retail of those items. In other words, if you sell computers and peripherals, you should list 334111, 334112 and 334118 (and maybe others) in your capability statement and your beta.SAM searches, in addition to 423430.
• You need to keep your eyes out for any opportunity that might even remotely require your product or service. For example, an opportunity for Locksmiths also may include acquisition of a full electronic security system with barriers, cameras, gates and necessary installation and maintenance.

        This necessitates adding multiple NAICS codes to your opportunities searches, but NOT to your SAM or DSBS profile.

        This is important. If you have a vast number of NAICS codes listed in your profile, you risk looking like a do-anything-for-anybody-for-money firm. That doesn’t improve your company reputation in the eyes of small business specialists, procurement center representatives, OSDBU officials, prime contractors seeking team members or small businesses looking to partner. Be judicious in your SAM and DSBS listings and wide-open in beta.SAM.

• Under the new GSA paradigm of a “Consolidated Schedule,” Special Item Numbers (SINs) that previously were related to individual schedules and their NAICS codes will now be reconstituted in a single GSA schedule under NAICS code-relatable SIN numbers.

Exceptions to the Rules

      With anything federal, there are always exceptions, including waivers, contracting officer discretion, exceptions to the rules, and so forth. Here are some we can anticipate:

• Five-digit NAICS have appeared on beta.SAM versus the required 6-digit NAICS. Agency contract-writing systems apparently are not properly configured and allow these anomalies to be posted.
• More than one NAICS code may be assigned to a contract after Oct. 1, 2022. On or about that date, we understand that beta.SAM will be redesigned and updated to accommodate multiple NAICS code designations at the time of posting and release to the community.

      As Lewis notes in his blog, "Don't let your NAICS code be just another number you have to memorize – use it to identify business opportunities, to see if you qualify as a small business, and to conduct research on government contractors to learn more about their spending habits." And I will add that NAICS codes are a key tool for research on government agencies and prime contractors to learn about their spending habits, priorities and small business focuses.

Tom Johnson is the publisher of Set-Aside Alert and an experienced federal market researcher. You may contact him at tjohnson@SetAsideAlert.com or call 301-229-5561.

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Column: Are NAICS Codes a Nemesis?

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