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NAICS Codes, Business Size and Schedule Orders

 

This blog post discusses the NAICS Codes on the Schedule contracts and their impact on your order in addition to the impact of that NAICS Code on contractor size determination both at the Schedules contract level and at the task order level.

Each Schedule's standing solicitation posted at FedBizOpps contains the NAICS Codes corresponding to the scope of that Schedule - - and sometimes even to a particular SIN on that Schedule.  

Here is a cross-reference from NAICS Code (handout C) to service Schedule SINs (handout B). (There is no GSA webpage where you can find the NAICS Codes corresponding to the Schedule/SINs. That information exists only at FedBizOpps on the standing solicitation for each Schedule. That is how I compiled the cross-reference: checking the NAICS Codes on each service Schedule standing solicitation.)

The reason the Schedule/SIN NAICS Code is important is that you want to know which single (and it can be only one) NAICS Code you are going to put on your Schedule task order.  

You'll notice that some Schedules (736 TAPS, 738 II Language Services, etc.) have just one NAICS Code for the entire Schedule.  This means that a task order against that Schedule can only have that NAICS Code.  It is that single NAICS Code that GSA has used to determine whether that contractor is a Small Business or is a Large Business. (Remember that every NAICS Code has a corresponding size standard that can be expressed in terms of average gross annual receipts over the past three years or in terms of number of employees.)

But what if a Schedule solicitation has more then one NAICS Code? Which one of those NAICS Codes do you put on your Schedule task order?  Here is what the Small Business Administration says at 71 Federal Register 220 (November 15, 2006), Page 66439:

"The FAR currently provides that 'For purposes of reporting an order placed with a small business schedule contractor, an ordering agency may only take credit if the awardee meets a size standard that corresponds to the the work performed.' FAR 8.405-5(a). The only way to determine whether an awardee meets a size standard that corresponds to the work performed is by assigning a specific size standard to the order.  As a result of the comments received, we have decided that a NAICS Code and corresponding size standard will be required for each and every order.  For contracts where there is only one NAICS code and size standard, the order will contain the same NAICS code and size standard.  For contracts with multiple NAICS codes and size standards, the order will contain the NAICS code and size standard from the underlying contract that best corresponds to the work to be performed, and only concerns that have certified they are small for that same or lower size standard will be deemed to be small for that particular order."

(emphasis added)

The answer can best be illustrated with an example.

Schedule 871 Professional Engineering Services (PES) includes four possible NAICS Codes on its current RFP:

PES 871 SIN(s)   NAICS Code Number/Title

871-7: 236220 Commercial & Institutional Building Construction (part)
871-1 to 871-6: 541330 Engineering Services
871-1 to 871-6: 541711 R & D in Biotechnology
871-1 to 871-6: 541712 R & D in Physical, Engineering, & Life Sciences (exc. Biotech)

The GSA Schedule CO is going to use only one of these NAICS Codes for the Schedule contract award.  In this Schedule 871 example, that single NAICS code will be the one of the four available NAICS Codes from the standing solicitation representing the preponderance of the expected work under that particular contract.  For contract size standard purposes, a service is classified with the NAICS Code whose definition best describes the principal nature of the service even though for other purposes it could be classified in more than one NAICS Code. FAR 19.102(c).

In order for the Schedule CO to determine business size, any size standard exceptions and applicable footnotes in the NAICS Code-to-size standard table are also consulted. Most NAICS Codes have just one size standard.  But, as those exceptions and footnotes illustrate, one NAICS Code can have more than one possible size standard.  In the example above, NAICS 541330 Engineering Services can currently (January 2009) have a size standard of $4.5M, $18.8M, or $27M, depending on what type of work the contractor is doing:

541330:Engineering Services ($4.5M)
except Military & Aerospace Equipment & Military Weapons ($27.0M)
except Awarded Under National Energy Policy Act of 1992($27.0M)
except Marine Engineering and Naval Architecture ($18.5M)

As a result, two Schedule 871 contractors with the same Schedule contract NAICS Code could have a different Schedule contract business size even with identical annual receipts.  Using the single appropriate NAICS Code and the single appropriate size standard, the GSA Schedule CO makes the determination of business size at the time the Schedule contract is awarded. That business size question is important to the Schedule CO because the answer will determine if a Small Business Subcontracting Plan needs to be evaluated.

So then what happens at the Ordering Officer level? In accordance with the SBA policy quoted above from the Federal Register, all orders against a single-NAICS Code Schedule (like 874 MOBIS or 738 II Language) should have that same NAICS code on every order.  In the case of multiple-NAICS Code Schedules (like 871 PES or 899 Environmental Services), the Ordering Officer needs to select the NAICS Code from the standing Schedule solicitation - - one of the four listed NAICS Codes in our 871 PES example - - that best describes the principal nature of the service being acquired. However, that order's single NAICS Code may or may not be the same single NAICS Code used by the GSA Schedule CO to determine the contractor's business size.  For example, the PES 871 PCO may have used NAICS Code 541330 Engineering Services because the principal nature of the offered services (SINs) was best described by that NAICS Code. But maybe the task order is for construction management tasks using SIN 871-7 and best represented by a different NAICS Code (236220, from the standing solicitation) with a different size standard. Because the preponderance of the nature of the work (various SINs) evaluated for award of the Schedules contract may differ from the scope of work on a particular order, the NAICS Code used by the Schedule PCO may differ from the NAICS Code appearing on some orders against that (multi-NAICS Code) Schedule contract.

There is a persistent Schedules ordering myth that agencies are free to select any NAICS Code, including a NAICS Code not found in that Schedule's standing solicitation.  There is no such authority, as addressed in the SBA policy found in the Federal Register makes clear.  The NAICS Codes shown in GSA's standing solicitation are material conditions of Schedule contract scope. If an Ordering Officer is convinced that some other [non-listed] NAICS Code best represents the principal nature of the service required, I suggest contacting the GSA CO for that contract.  It may be that particular Schedule is not the best fit and there may be another GSA Schedule more appropriate.

Since the NAICS Code found on an awarded Schedule contract can (in the case of the multi-NAICS Code Schedules) differ from the NAICS Code found on a particular order against one of that Schedule's contracts, is it possible for a contractor to be of one size at the Schedule contract level but a different business size for a particular task order?  Yes, if the Ordering Officer does a size recertification at the task order level as discussed here.

 

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