Of all the many “protest” tools available to small government contractors, NAICS code appeals can be one of the most powerful.  Unfortunately, many contractors don’t fully understand the NAICS appeal process, or how it can help them reach their procurement goals.  The decision of the SBA Office of Hearings and Appeals in NAICS Appeal of 1^st American Systems & Services, LLC, SBA No. NAICS-5119 (2010) provides a compelling example of how a savvy small business contractor can use the NAICS appeal process to vastly narrow the competitive playing field.

The 1^st American Systems case involved a Navy solicitation for medical coding, auditing and training services.  The Navy designated the solicitation with NAICS code 518210 (Data Processing, Hosting, and Related Services), which carried a size standard of $25 million in annual receipts.  1^st American filed a NAICS appeal, contending that the appropriate NAICS code was 541611 (Administrative Management and General Management Consulting Services), with a corresponding $7 million size standard.

SBA OHA sustained 1^st American’s NAICS appeal, holding that the Navy erred in designating NAICS code 518210.  As 1^st American requested, SBA OHA designated NAICS code 541611 for the solicitation.

With one NAICS appeal, 1^st American wiped away more than two-thirds of its potential competitors for the contract work.  Instead of being forced to bid against contractors several times larger than itself, 1^st American’s successful NAICS appeal allowed it to bid against a narrower playing field of similarly-sized competitors.  As a result, 1^st American’s chances of winning the contract work likely increased exponentially.  1^st American’s story shows how powerful the NAICS code appeal process can be in the hands of a savvy small contractor.