Protesting the SBA NAICs Codes size standard for a government contract can be tricky. This is especially true when there are differences between the amount of labor required and the overall cost of the contract.
Both the SBA and Agency Do Make Mistakes with the Business NAICS Codes Listing
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 NAICS code 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 NAICS codes, disastrous problems can occur either when contractors believe that the contracting officer has chosen the wrong code or the company is challenged on their ability to perform as a small business under the chosen NAICS Code.
- The wrong NAICS code listing and impact your associated size standard and your ability to bid on the project
- Beware that your competition can file a size protest if you let an incorrect Code 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 code 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).
Standard of Review for SBA NAICS Size Codes Appeal to SBA OHA
As the contractor appealing the contracting officer’s NAICS Codes selection, you have the burden of proving, by a preponderance of the evidence, all elements of your appeal. You must show that the CO’s NAICS code 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 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).
SBA NAICs Codes and business size 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 contract value.” 48 CFR 19.303(a)(2) (2014).
What is a Small Business Size Classification? As a government contractor, your small business size classification is based on the stated in number of employees or average annual receipts (depending on the specific SBA NAICS codes), 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 SBA NAICs code 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 code would be that for plumbing.
SBA NAICS Codes Size Standard Protest Based Upon Other Contracts?
Don’ts: As compared to the old rules, you should not file an SBA NAICs code size standard 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 NAICs code 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 NAIC according to “the component which accounts for the greatest percentage of 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 Code Size Standard Protest? Don’ts: Many government contractors often make the costly mistake of filing an SBA NAICs business size code 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 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 NAICs size standard protest, call a government protest lawyer at 1-866-601=5518.