Filing Small Business SBA NAICS Codes Protests – Dos and Don’ts

Protesting the Small Business Administration SBA North American Industry Classification System (NAICs Codes) size standard for a government contract can be tricky when you try to qualify as small. This is especially true when there are differences between the amount of labor required and the overall cost of the contract.

How Does the CO Decide the Best NAICS Code for Government Contracting and Small Business Size Standards 

There are situations when contractors believe that the agency has assigned the wrong small business NAICS codes size standards to the procurement. What do you do? How does the North American Industry Classification System NAICS selection process work, and how can you challenge the contracting officer’s decision.

Contracting Officer’s Authority 

Government contracting officers (“CO”) have a substantial amount of discretion to choose what he or she thinks is the best NAICS size standards code for the upcoming contract. The Federal Acquisition Regulation mandates that the CO assign the SBA NAICS code that best describes the principal purpose of the acquisition. The CO assignment of NAICS code small business size standards is final unless you can show that you are adversely affected by the selection or the SBA files an appeal to OHA. When the contracting agency chooses the Federal NAICS code, contracting officers can consult the NAICS Manual.

Both the SBA and Agency Do Make Mistakes with the Small Business Standard Decisions

Small Business NAICS Code Size Standard Appeal t0 SBA OHA Showing that Both SBA and Contracting Officer Made a Serious Mistake (in solicitation for bulk laundry services, proper SBA NAICS size standards should have been 812320 ( Drycleaning and Laundry Services (except Coin-Operated)), with a corresponding size standard of $5.5 million average annual receipts, instead of 812331 (Linen Supply) with the size standard of $32.5 million average annual receipts (originally selected by the Contracting Officer) or  812332 (Industrial Launderers) recommended by the SBA).

Although companies are free to adjust the small business NAICS code size standard disastrous problems can occur either when contractors believe that the contracting officer has chosen the wrong designation or the company is challenged on its ability to perform as a small business under the chosen small business NAICS Code. See 13 CFR 125.6 Understanding Rules of Prime Contractor’s Limitations on Subcontracting FAR 52.219 14

• The wrong NAICS size standards listing can impact your associated small size business standard and your ability to bid on the project
• Beware that your competition can file a size protest if you let an incorrect designation be applied to the procurement

The SBA’s regulations instruct that, in making a size standard determination, the contracting officer must select “the single NAICS size standard  which best describes the principal purpose of the product or service being acquired.” See  13 CFR 121.402(b) (2014). If you choose to protest the NAICs codes, courts will give primary consideration  to:

• The industry descriptions in the small business size standard table the product or service description in the solicitation,
• The relative value and importance of the components of the procurement making up the end item procured, and
• The function of the goods or services being purchased.” Id. (b)(1).

Learn more about the CEO’s decision to file a size protest here.

Standard of Review for Small Business NAICS Code Size Standards Appeal to SBA OHA

Under applicable regulations, an Agency NAICS codes appeal must be filed within 10 calendar days after issuance of the solicitation, or
within 10 calendar days of an amendment affecting the establishing size standards NAICS code or size standard. 13 CFR 121.1103(b)(1) and 134.304(b). See Signs of Being Under Investigation.

As the contractor appealing the contracting officer’s NAICS size standards selection, you have the burden of proving, by a preponderance of the evidence, all elements of your small business standard appeal. You must show that the CO’s SBA NAICS codes small business size standard designation was based upon a clear error of fact or law. 13 CFR 134.314; NAICS Appeal of Durodyne, Inc., SBA No. NAICS-4536, at 4 (2003).

•  SBA OHA does not reconsider its NAICS code decisions
• If you fail to participate in the original appeals case, you will have no recourse when you later seek a reconsideration.

SBA NAICS code small business size standard regulations do not require the CO to select the perfect NAICS code. NAICS size Appeal of Evanhoe & Assocs., LLC, SBA No. NAICS-5505, at 14 (2013).

Federal NAICs Codes size standards regulations further clarify that “a  procurement  is usually classified according to the component which accounts for the greatest percentage of contract  value.” Id. (b)(2).

The Federal Acquisition Regulation (“FAR”)  gives the same guidance by clarifying that that classification is normally a product of the “component which accounts for the greatest percentage of the contract value.” 48 CFR 19.303(a)(2) (2014).

What is a Small Business Size Classification and Approach to SBA Size Standards?

 As a government contractor, your small business size classification is based on the stated in the number of employees or average annual receipts (depending on the specific SBA size business standard), represents the largest size that a business (including its subsidiaries and affiliates) may be to legal remain classified as a small business for SBA and federal contracting programs. The small business concern definition varies by industry.

Do’s: The key thought process for protesting the small business NAICs Code size standard is to first look at the largest component of the solicitation at issue. For example, if the contract entails plumbing electrical and carpentry, and 70% of the project is plumbing, then the NAICs listing would be that for plumbing.

Federal SBA NAICS Size Standards Protest Based Upon Other Contracts?

Don’ts: As compared to the old rules, you should not file a NAICs code size standards protest based upon what other contracts have called for. Instead, the new rules require the court to look at the specific challenged requirement. See.76 Fed. Reg. 5680, 5683 (February 2, 2011).

The Federal NAICS code small business size standard listing and relevant regulations require the contracting officer to perform an analysis of the relative weight of the components of the contract and decided the appropriate federal NAICs Codes size standards according to “the component which accounts for the greatest percentage of the contract value.” 13 CFR 121.402(b)(2); see Red River Serv. Corp. v. United States, 60 Fed. Cl. 532, 548-49 (2004).

How and Where Should You File an SBA NAICS Codes Size Standards Protest? 

Don’ts: Many government contractors often make the costly mistake of filing an SBA NAICs size standards bid protest with the Contracting Officer. However, this could be looked at as more of a request for reconsideration. If the Contracting Officer makes the official call, then the proper place to file the protest is at  SBAOHA.

• You have to be an interested party to file an SBA NAICs Codes size standards bid protest.
• You have to file and serve the protest to OHA within 10 calendar days after the issuance of the initial invitation for bids or initial request for proposals or quotations (see 13 CFR 134.304(a)(3)).
• With respect to an 8(a) sole source contract, only the Director for Business Development may appeal.

For immediate help filing SBA Small Business NAICs Code bid protests , call a government contract protest lawyer at 1-866-601=5518.