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.

SBA OHA’s decision in NAICS Appeal of Global Dynamics, LLC, SBA No. NAICS-5470 (2013) involved a VA solicitation for a task under under Federal Supply Schedule 621-I (Professional and Allied Healthcare Staffing Services).  The successful offeror was to provide approximately 30 Certified Nurse Assistants at the Michael E. DeBakey VA Medical Center in Houston.

The VA set aside the task order procurement for small businesses, and initially designated the solicitation with NAICS code 621399 (Offices of All Other Miscellaneous Health Practitioners), with a corresponding $7 million size standard.  However, after noting that NAICS code 561320 (Temporary Help Services) is the only NAICS code available under FSS 621-I, the Contracting Officer switched the NAICS code to 561320.  That NAICS code carries a corresponding $13.5 million size standard.

Global Dynamics, LLC, filed a NAICS code appeal with SBA OHA.  Global Dynamics contended that the original NAICS code, 621399, was the correct NAICS code for the solicitation because it best described the services to be acquired.  Global Dynamics argued that NAICS code 561320 was inappropriate because it is used for “temporary” services of an extremely short duration.  Global Dynamics noted that the task order in question contemplated performance for up to three years.

SBA OHA wrote that a procuring agency “ordinarily must designate the NAICS code which best describes the principal purpose of the product or service being acquired . . ..”  SBA OHA’s use of the word “ordinarily” is critical,  because “SBA regulations recognize an exception to this general rule for orders placed under the FSS and other long-term contracts.”  For these orders, under 13 C.F.R. 121.404(g)(3)(iv), “[t]he NAICS code and size standard assigned to the order must correspond to a NAICS code and size standard assigned to the underlying long-term contract.”

In this case, “NAICS code 561320 is the only NAICS code available on the underlying Schedule 621-I.”  Accordingly, “the CO did not err in selecting NAICS code 561320.”  In fact, the Contracting Officer had no discretion, because no other NAICS codes were available under the underlying FSS contract.  SBA OHA denied the NAICS code appeal.

The Global Dynamics NAICS code appeal decision illustrates an important exception to the ordinary rule that the “best fit” NAICS code must be designated.  As the case demonstrates, when it comes to GSA Schedule orders, the NAICS code chosen must be one that has been designated for the underlying Schedule contract–even if that NAICS code is not necessarily the best fit for the particular goods or services to be procured under the task order solicitation.

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