Although it is relatively easy to qualify, small businesses often find themselves in adverse situations when a competitor challenges their SBA size standards for certain NAICS. The following cases also show that the contracting agency sometimes make huge mistakes when selecting appropriate NAICS Code for a procurement.
NAICS Appeal of Hendall, Inc., SBA No. NAICS-5762 (2016) (Contracting Officer chose the incorrect NAICS Code 511199 instead of NAICS Code 561422.
NAICS Appeal of Noble Supply & Logistics, SBA No. NAICS-5748 (2016) (Contracting Officer improperly assigned a Retail Trade sector NAICS code to a government procurement for supplies, instead of a manufacturing or supply NAICS code)
The SBA size determination and applicable NAICS Size standards regulations, 13 CFR 121, involve oversight to make sure that contractors bidding on federal government contracts continue to abide by the legal requirements. Small businesses get some level of preferential treatment when it comes to government contracts. Therefore, the Small Business Administration (“SBA”) is in charge of maintaining equal footing and compliance with the SBA size standards regulation.
13 CFR 121 SBA NAICS Code Size Standards Determination Basics
SBA NAICS Code size standard determinations under 13 CFR 121 are defined by the average number of employees employed over the past 12 months and the average annual receipts earned over the past three years. Additional considerations are taken into account when defining small business concerns include:
- Is it organized for profit
- If it has a place of business within the United States
- Operates primarily in the US or makes significant contribution to the US economy through payment of taxes, or use of American products, materials, or labor
- Is independently owned and operated
- Is not dominant in its field on a national basis
How Many SBA NAICS Code Size Standards Elections?
When bidding on government contracts, each procurement is characterized by particular NAICS Code. There is no particular rule about the amount of NAICS size standards codes that you can claim.
It is up to companies to certify in their proposals and represent that they can perform under the regulations and that they meet the SBA size determination requirements. Failure to comply can have dangerous consequences. See information about nonmanufacturer rule issues for small businesses.
What Happens Next? When an SBA size protest or some other adverse action occurs, the SBA is required to perform a size determination. This also triggers an investigation where companies have to provide financials, business documents, and other information to the SBA as requested.
If there is an adverse SBA size determination, your business may be precluded from bidding on future contracts for that specific NAICS size standards code.
You do have the right to initiate a small business size appeal. However, until the court reverses the SBA size determination decision, your company is barred from getting future contracts under that particular code.
For help with an adverse SBA size determination or help with NAICS Code Size Standards compliance with 13 CFR 121, call our experienced SBA Size Standard protest lawyers at 1-866-601-5518.