GAO Reports on How Contracting Officers Select NAICS Codes

A newly released Government Accountability Office report provides a rare peek behind the curtain of how contracting officers assign North American Industry Classification System codes.

Contracting officers are required by 13 C.F.R. § 121.402(b) to designate the NAICS code that “best describes” the work to be performed. It sounds simple enough, but the report reveals that it can be tricky.

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NAICS Code Appeals: Infrequent, but Often Successful

Because the NAICS code governs the size standard used to determine whether a company qualifies as a small business, the choice of a NAICS code can dramatically affect the competitive landscape for a set-aside acquisition.

The only legal procedure for challenging the NAICS code assigned by the contracting officer is to appeal the assignment to the SBA’s Office of Hearings and Appeals. A NAICS code appeal can be an extraordinarily powerful tool for a business to challenge whether a contracting officer assigned the correct NAICS code in setting aside a procurement.

So how often are NAICS code appeals filed, and how often do these NAICS code appeals succeed? A recent GAO report has some answers.

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“Similarly Situated Entities” Exempt From Ostensible Subcontractor Affiliation, SBA OHA Confirms

A “similarly situated entity” cannot be an ostensible subcontractor under the SBA’s affiliation rules.

In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that changes made to the SBA’s size regulations in 2016 exempt similarly situated entities from ostensible subcontractor affiliation.

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NAICS Codes & Task Orders: Underlying Contract Controls

When an agency competes a task order under a multiple-award contract, the agency must assign the task solicitation a NAICS code set forth in the underlying MAC.

As demonstrated in a recent SBA Office of Hearings and Appeals decision, when the MAC is assigned a single NAICS code, all task orders competed under that MAC will also be assigned that NAICS code–even if a prospective offeror believes that a different NAICS code will best describe the principal purpose of the task order acquisition.

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No NAICS Code Appeals Of Presolicitations, SBA OHA Confirms

A NAICS code appeal can be a powerful vehicle for influencing the competitive landscape of an acquisition.  A successful NAICS code appeal can dramatically alter a solicitation’s size standard, causing major changes in the number (and sizes) of potential competitors.

But a NAICS code appeal cannot be filed until the solicitation is issued.  As the SBA Office of Hearings and Appeals recently confirmed, a NAICS code appeal cannot be filed with respect to a presolicitation.

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Proposed SBA Rule Adopts 2017 NAICS Codes

It is out with the old, in with the new at the U.S. Small Business Administration.

A proposed SBA rule change published Tuesday, April 18, would incorporate the 2017 NAICS code revision into the SBA’s size standards table. If the proposed rule is made final, it will replace SBA’s current size standards table, which SBA has relied on for making size determinations since 2012. The revised size standards table will add 21 new NAICS industries. The revised NAICS code table also will feature larger standards for six industries, smaller standards for two industries, and will switch one size standard from revenue-based to employee-based.

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SmallGovCon Week In Review: January 23-27, 2017

It has been a busy week across the country as we get close to wrapping up the first month of 2017. Here in Lawrence, we’re gearing up for Saturday’s blue blood match-up between Kansas and Kentucky. Both teams are coming off losses and Kentucky is looking to avenge its loss to KU last year. It should be a great game.

Before we get to Saturday basketball, it’s time for our weekly Friday look at government contracting news. In this week’s SmallGovCon Week In Review, articles about what contractors can expect from the new Secretary of the Army and SBA Administrator, the number of new government contractors dropped sharply in 2016, the Washington Post wonders whether President Obama’s executive orders pertaining to contractor employees are on the new Administration’ s”chopping block,” and much more.

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