NAICS Codes – What Do They Mean for Your Business?
Government Business Development | 3 Min Read
As a government contractor, you’ve probably run into NAICS codes more than a few times, and you likely know which ones are applicable to your products or services. But like many, questions still linger about their true meaning and function.
- “What does the acronym even mean in the first place?”
- “How do they affect your business and how you work with the government?”
- “What is a size standard?”
These often come up in the world of GSA and government contracting at large. Let’s take a deeper dive into the true meaning of NAICS codes and how they impact you as a government contractor.
NAICS: North American Industry Classification System
The acronym NAICS is an abbreviation of the North American Industry Classification System. This system is the standard used by federal statistical agencies for classifying businesses for the purpose of collecting, analyzing, and publishing data related to the U.S. economy.
Created and distributed by the Executive branch’s Office of Management and Budget (OMB), the current manual for the NAICS system can be found online on the US Census Bureau’s website, www.census.gov. The most recent manual for this system was published in 2017 and contains all current NAICS codes and their size standards.
Each industry has its own distinct title and description, and contractors should pay attention to the grouping of codes to ensure that they fall within the correct sector. Some examples of these include Forestry and Logging, Construction, Food Manufacturing, Credit Intermediation and Related Activities, Social Assistance, Administration of HR Programs, IT Consulting, and many more. If you’re in business, there’s an industry classification for you.
Selecting NAICS Codes
A major benefit of NAICS codes is that you are allowed to select more than one. It is suggested that your company select a few NAICS codes that match the type of services or products that you provide in order to line up with the most applicable contracting opportunities.
Each opportunity that is issued by a federal agency is assigned at least one NAICS code. This designation allows these opportunities and contracts to be tracked for research and reportable data in the future. Often, solicitation descriptions or requests for proposals (RFPs) can be vague, so the NAICS designation can further help companies decipher whether or not they are a good fit for the opportunity.
NAICS Codes and Size Standards
In addition to designating an industry classification for your business, NAICS codes are also attached to NAICS code size standards. Based on each NAICS code size standard, procuring agencies are able to easily determine whether or not your company will be considered a “Small” business or an “Other than Small” business under each opportunity that is issued. Many contracts are set aside for small businesses in order to meet agency-wide small business spending goals for the fiscal year, so it is important to know whether or not your company will qualify for specific opportunities based on that size status.
Each NAICS code’s size standard is determined either by annual revenue or number of employees for each company. For example, NAICS code 541611, Administrative Management and General Management Consulting Services has a size standard of $15M in annual revenue. This means that businesses earning less than $15M in the previous fiscal year will be considered “Small” under this particular NAICS code.
Another example is NAICS code 517110, Wired Telecommunication Carriers, which has a number of employees size standard which is 1,500. The full list of NAICS code size standards is distributed by the Small Business Administration (SBA) and can be found online at www.sba.gov. It is important to track the size standard associated with each NAICS code you’ve selected for your business, because in some cases, you may be considered large under one code and small under another.
NAICS codes are essential for both government contractors and the agencies that procure through vehicles such as GSA Schedule contracts. Every GSA Schedule Special Item Number (SIN) has at least one specific NAICS code assigned to it, so in order to utilize the GSA Multiple Award Schedule (MAS) program, your business must first designate the appropriate NAICS codes.
Understanding and utilizing the appropriate NAICS codes can help lead your business to appropriate opportunities in the public sector in terms of GSA Schedule opportunities, as well as procurement vehicles outside of the GSA Schedule.
For more information on NAICS codes and how they play an important role in your federal marketplace presence, contact Winvale today.