NAICS codes and small business size standards

After this lesson you should be able to look up a NAICS code at the U.S. Census Bureau, look up the matching small business size standard at SBA, include affiliates in that size calculation, and compare the code on a solicitation with the work you actually sell. You should not memorize informal dollar or employee shortcuts, and you should not treat a small-business representation as an award.

Confirm the code and size standard on the solicitation and in the current SBA table or Size Standards Tool.

The North American Industry Classification System is the standard federal statistical agencies use to classify business establishments. SBA says you match your products and services to NAICS codes at the U.S. Census Bureau. A business generally has a primary code and can have more than one code if it sells more than one product or service.

For a solicitation, the contracting officer assigns the NAICS code. FAR 19.102 says the contracting officer classifies the supply or service in the one industry that best describes the principal purpose of what is being acquired. A procurement is usually classified according to the component that accounts for the greatest percentage of contract value. New Census NAICS codes are not available for federal contracting until SBA publishes corresponding size standards.

The contracting officer’s designation is final unless it is appealed. FAR 19.103 says an appeal of the NAICS code and applicable size standard must be served and filed within 10 calendar days after issuance of the initial solicitation or any amendment affecting the NAICS code or size standard. SBA may file a NAICS appeal at any time before offers are due. Any person adversely affected may appeal to SBA’s Office of Hearings and Appeals, except that for a particular sole-source 8(a) contract only the SBA Associate Administrator for Business Development may appeal the NAICS designation. Untimely appeals are dismissed. If OHA’s decision arrives after the due date for initial offers, it does not apply to that pending solicitation. AsherGate does not file that appeal.

SBA establishes small business size standards industry by industry. FAR 19.102 points to 13 CFR 121.201 and to SBA’s table of size standards. Size standards are usually stated in number of employees or average annual receipts, and they include subsidiaries and affiliates. Informal summaries such as “most service firms under one dollar figure” go stale. Do not memorize a blog number. Use SBA’s Size Standards Tool or the current table for the NAICS code on that solicitation.

SBA’s size-standards page, reviewed for this lesson, says federal-contracting annual receipts are averaged over a business’s latest five complete fiscal years, and that employees are the average number of people on the payroll for each pay period over the latest 24 calendar months, counting each person as one employee regardless of hours or temporary status. Affiliation is based on the power to control, whether or not that power is exercised. SBA says that power exists when an external party has 50 percent or more ownership, and that it may also exist with considerably less than 50 percent. When you calculate size, include the receipts and employees of affiliates.

FAR 19.102 says SBA determines size status, including affiliates, as of the date the concern represents that it is small to the contracting officer as part of its initial offer, which includes price. For a multiple-award contract solicitation that does not require the offer to include price, size is determined as of the date of the initial offer whether or not the offer includes price. The contracting officer applies the size standard in effect on the date the solicitation is issued, and may amend the solicitation to use a new SBA size standard that becomes effective before the due date for initial offers. Being under a size standard can make you eligible to compete for work reserved for small businesses. It does not score your proposal or guarantee an award.

FAR 52.204-8 also states a different size standard in some cases for a concern that proposes to furnish an end item it did not itself manufacture, process, or produce. Read that provision on the solicitation rather than assuming the manufacturer size standard applies to a reseller. SBA warns that there are severe criminal penalties for knowingly misrepresenting size. Do not guess in SAM.gov.

Using the Tallowridge story below, the facts copied from the files are NAICS 339950 on fictional notice AG-SIZE-26-0312 and a Census 2022 title of Sign Manufacturing. The team also listed a commonly owned affiliate, Tallowridge Display Rentals LLC, so size is not calculated from the bidding shop alone.

The official step is to confirm 339950 at Census, open SBA’s table or Size Standards Tool for that code, add affiliate receipts or employees using the current SBA method, and compare the result with the size standard the contracting officer assigned. If the team thought a graphic-design code would “sound smaller,” they do not recode the notice in AsherGate. The product step is only to store the notice files and a note of the code they copied. AsherGate does not look up size or certify that the company is small.