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.
SBA OHA’s decision in NAICS Appeal of edCount, LLC, SBA No. NAICS-5396 (2012) involved an ED small business set-aside for support operations for the National Clearinghouse for English Language Acquisition and Language Instruction Educational Programs. The Request for Proposals initially designated NAICS code 611710 (Educational Support Services) but incorrectly identified NAICS code 611710 as carrying a $14 million size standard, instead of a $7 million size standard.
ED subsequently issued an amendment in which it responded to various questions from offerors. One of the questions noted that the synopsis had identified two possible NAICS codes, but the solicitation only used NAICS code 611710. The offeror asked, “[w]ould the Department consider the 541720 NAICS code for this procurement as indicated earlier in the [synopsis]? If not, can there be two NAICS codes assigned to one opportunity?” The CO responded, “The Department shall be considering both NAICS codes, but will only be awarded under one of the NAICS codes upon contract award. This shall not influence the award of this contract.”
After receiving the amendment, edCount, LLC filed a NAICS code appeal, arguing that ED was legally required to assign a single NAICS code to the solicitation and was not entitled to postpone the decision until contract award. Although edCount supported assigning NAICS code 611710 to the solicitation, another prospective offeror, Synergy Enterprises, Inc. intervened in the NAICS code appeal and argued that the correct NAICS code was 511199 (All Other Publishers), with a 500-employee size standard.
ED responded to the NAICS code appeal by agreeing that only one NAICS code should have been assigned to the procurement. It asked SBA OHA to allow it to amend the procurement and clearly designate NAICS code 611710 as the sole NAICS code.
SBA OHA agreed with edCount and ED that the contracting officer had erred by assigning two potential NAICS codes. “Such an approach is improper,” SBA OHA stated, because “the FAR requires that a procuring agency designate a single NAICS code and size standard to each solicitation, unless the procurement calls for multiple products or services and the agency specifies which NAICS code and size standard applies to each individual product or service.”
SBA OHA also wrote that ED should not have postponed the NAICS code decision until contract award because “it prevents prospective offerors from determining whether they may represent themselves as small businesses for that procurement.” SBA OHA ultimately agreed with ED and edCount that NAICS code 611710 was the appropriate NAICS code, and instructed the contracting officer to amend the solicitation to specify NAICS code 611710 as the sole NAICS code for the procurement.
SBA OHA’s decision in in the edCount NAICS code appeal makes good sense, both legally and practically. After all, as SBA OHA pointed out, if agencies were permitted to delay NAICS code designations until after contract award, prospective offerors might have no way to determine whether they actually qualified as “small” for purposes of a set-aside solicitation. Fortunately, everyone in the edCount case, including ED itself, agreed that its attempt to delay NAICS code designation was a mistake. No matter what example Congress sets, when it comes to NAICS code designations, kicking the can down the road is not allowed.