NAICS Code Appeals: No New Challenges To SBA OHA Decisions

A NAICS code appeal cannot validly be filed against a NAICS code designated by the SBA Office of Hearings and Appeals.

In a recent decision, SBA OHA held that when SBA OHA determines the appropriate NAICS code as the result of a NAICS code appeal, that NAICS code cannot itself be attacked in a new NAICS code appeal.  The message to prospective offerors: participate in the initial NAICS code appeal, or hold your peace.

SBA OHA’s decision in NAICS Appeal of Palladian Partners, Inc., SBA No. NAICS-5554 (2014) involved a Health and Human Services solicitation to establish a coordination center, to be operated by the contractor, that would facilitate communication and coordination between two HHS components.  The solicitation was issued as a small business set-aside under NAICS code 541712 (Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)), with a corresponding 500-employee size standard.

In March 2014, Information Ventures, Inc. filed a NAICS code appeal with SBA OHA.  IVI argued that NAICS code 541712 was incorrect and that the appropriate NAICS code was 541611 (Administrative Management and General Management Consulting Services).  After the NAICS code appeal was filed, the Contracting Officer issued an amendment notifying prospective offerors of the appeal.  No potential offerors intervened.

SBA OHA ruled in IVI’s favor.  SBA OHA held that the Contracting Officer’s designation of NAICS code 541712 was erroneous and that NAICS code 541611 was the appropriate code.  Shortly after SBA OHA issued its decision, the Contracting Officer issued an amendment switching the NAICS code to 541611.

Palladian Partners Inc. then filed a new NAICS code appeal challenging the designation of NAICS code 541611.  Palladian did not dispute SBA OHA’s contention that NAICS code 541712 was incorrect.  However, Palladian asserted that NAICS code 541611 was also inappropriate.  Palladian argued that the proper NAICS code for the solicitation was NAICS code 519130 (Internet Publishing and Broadcasting and Web Search Portals), with a corresponding 500-employee size standard.

SBA OHA wrote that the legal doctrine of issue preclusion “prevents re-litigation of the same issues that were decided in a prior case involving the same parties.”  OHA held that this doctrine prevented Palladian from re-litigating issues previously decided in IVI’s NAICS code appeal.  OHA pointed out that prospective offerors were made aware of IVI’s NAICS code appeal and that if Palladian “wished to litigate the issue of what NAICS code should apply to this RFP,” Palladian “could, and should have,” intervened in IVI’s NAICS code appeal.  SBA OHA continued:

Because the issue OHA decided in that case is dispositive here, the instant appeal is barred.  Indeed, to hold otherwise would potentially create endless cycles of NAICS code litigation, whereby any concern disappointed by an OHA decision could file a new NAICS code appeal, and thereby re-litigate the matter.

SBA OHA dismissed Palladian’s NAICS code appeal.

SBA OHA’s decision in the Palladian Partners case demonstrates that if a NAICS code appeal is filed by a prospective offeror, other prospective offerors who wish to be heard on the question of which NAICS code is appropriate must intervene in that NAICS code appeal.  If they do not intervene, they cannot later challenge SBA OHA’s decision by way of a new NAICS code appeal.

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