Challenge NAICS codes! A NAICS challenge is NOT decided by the CO. It is decided by the SBA Office of Hearings and Appeals. NAICS code appeals can be a very powerful tool for small government contractors. Many contractors don’t fully understand the NAICS appeal process, or how an appeal can help them.
The decision of the SBA Office of Hearings and Appeals in NAICS Appeal of 1st American Systems & Services, LLC, SBA No. NAICS-5119 (2010) provides an interesting example of how a smart small business contractor can use the NAICS appeal process to narrow the playing field.
The 1st American Systems case involved a solicitation for medical coding, auditing and training services. The designated NAICS code was 518210 (Data Processing, Hosting, and Related Services), with a $25M size standard. 1st American filed a NAICS appeal, contending that the appropriate NAICS code was 541611 (Administrative Management and General Management Consulting Services), with a $7M size standard.
SBA OHA sustained 1st American’s NAICS appeal, holding that the agency erred in designating NAICS code 518210. As 1st American requested, SBA OHA designated NAICS code 541611 for the solicitation.
With one NAICS appeal, 1st American eliminated more than two-thirds of their potential competitors.
Instead of having to bid against large contractors, 1st American’s successful NAICS appeal allowed it to bid against a narrower field of similarly-sized companies. As a result, 1st American’s chances of winning the contract increased dramatically. 1st American’s story shows how powerful the NAICS code appeal process can be in the hands of a smart small contractor.
13 CFR 121.1103 states: Any interested party adversely affected by a NAICS code designation may appeal the designation to OHA. A NAICS code appeal may include an appeal involving the applicable size standard, such as where more than one size standard corresponds to the selected NAICS code or there is a question as to the size standard in effect at the time the solicitation was issued or amended. The only exception is that, for a sole source contract reserved under SBA’s 8(a) Business Development program, only SBA’s Associate Administrator for Business Development may appeal the NAICS code designation.
Appealing the assigned NAICS code can radically alter the competition. If a company wants to file a NAICS code appeal, it must file with the SBA Office of Hearings and Appeals. These should NOT be filed with the GAO, which lacks jurisdiction to hear challenges to NAICS code designations, or the contracting officer.