SBA Doesn’t Fix Incorrect NAICS Code Regulation; Protester Pays The Price

A contractor’s NAICS code appeal was dismissed as untimely, even though it was filed within the time frame expressly established in an SBA regulation.

In a recent decision, the SBA Office of Hearings and Appeals confirmed its earlier ruling that a NAICS code appeal must be filed within ten calendar days, despite an SBA regulation establishing a filing deadline of ten business days.

SBA OHA’s decision isn’t surprising in light of its prior ruling.  However, in my mind, the decision raises a question of fundamental fairness: should protesters continue to be penalized for the SBA’s failure to fix its conflicting timeliness regulations?

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SBA OHA: Increased Competition Not Part of NAICS Code Decision

When designating the NAICS code for a solicitation, the procuring agency should not consider which NAICS code will help increase competition and decrease the risks of unsuccessful performance.

According to a recent decision of the SBA Office of Hearings and Appeals, these factors should play no bearing on an agency’s NAICS code designation.  Instead, in most cases, the agency must select the NAICS code that best describes the principal purpose of the product or service being acquired.

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NAICS Codes and GSA Schedule Orders: An Important Exception

A Contracting Officer must designate the NAICS code which best describes the principal purpose of the product or service being acquired, right?

Not always.  As demonstrated in a recent SBA Office of Hearings and Appeals decision, when it comes to picking a NAICS code for a GSA Schedule task order, a Contracting Officer’s choices can be quite limited–and the “best” NAICS code might not be chosen.

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SBA OHA: Agencies Cannot Delay NAICS Code Selection

Perhaps the Department of Education took a cue from Congress, which has a reputation for kicking the can down the road, delaying major decisions until after elections (or month-long recesses).  In a recent SBA Office of Hearings and Appeals NAICS code appeal decision, ED decided to forego picking a NAICS code until after contract award.

SBA OHA was having none of it, and ED’s own lawyers even agreed–an agency’s NAICS code designation cannot be delayed until contract award.

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NAICS Code Appeals: Deadline Is Ten Calendar Days, Not Ten Business Days

A federal regulation states that NAICS code appeals are timely if filed within ten business days.  So why was one small business’s NAICS code appeal dismissed even though it filed the appeal within the time period called for by the regulation?

According to SBA OHA, the regulation was erroneous, and the actual NAICS code appeal deadline is ten calendar days.  I don’t know about you, but to me, the result doesn’t seem particularly fair to the contractor.

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NAICS Code Appeals: Sometimes, Filing Is All It Takes

NAICS code appeals can be powerful competitive weapons–either shrinking or expanding the competitive playing field if they are successful.  Sometimes, simply filing a NAICS code appeal can convince the procuring agency that the wrong NAICS code was assigned, leading to a successful outcome before the SBA Office of Hearings and Appeals even has the opportunity to rule on the merits.

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Successful NAICS Code Appeal Turns Large Company Into Small Business

A little more than a week ago, I blogged about the SBA Office of Hearings and Appeals decision in NAICS Appeal of Delphi Research Inc., SBA No. NAICS-5377 (2012), in which a small business used the NAICS code appeal process to change the relevant size standard from 1,500 employees to $25.5 million.  The Delphi NAICS code appeal decision effectively lowered the solicitation’s size standard, increasing the ability of smaller companies like the protester to compete.

However, it is important to remember that the NAICS code appeal process works both ways.  If a company is too large for the size standard the procuring agency assigns to a solicitation, it may be able to use the NAICS code appeal process to replace the agency’s preferred NAICS code with a NAICS code carrying a higher size standard.  This is precisely what happened in a recently-decided SBA OHA case, NAICS Appeal of CHP International, Inc., SBA No. NAICS-5367 (2012).

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