I’m a big fan of NAICS code appeals.
As John Mattox wrote recently, a NAICS code appeal might fundamentally change the competitive landscape of a federal procurement. A successful appeal might make your company eligible for the opportunity—or prevent a competitor from being eligible.
A recent SBA Office of Hearings and Appeals decision confirms, however, that a contractor must do more than simply voice concern with the chosen NAICS code. A contractor must instead show that the chosen NAICS code is clearly erroneous.
By way of background, a contracting officer is responsible for assigning a NAICS code that best describes the solicitation’s primary purpose. For small business set-asides, this code is key: to qualify as an eligible offeror, a business’s size must fall below the size standard that corresponds to the solicitation’s NAICS code. Successfully appealing the NAICS code, therefore, can have dramatic consequences on the procurement.
In Taurean General Services, Inc., SBA No. NAICS-6092 (2021), SBA’s Office of Hearings and Appeals considered the sufficiency of a NAICS code challenge. In that case, the protester believed the Army erred in assigning NAICS code 561210 (Facilities Support Services) to a solicitation seeking security service support for the U.S. Southern Command. Instead, Taurean argued that NAICS code 541690 (Other Scientific and Technical Consulting Services) should have been assigned.
If granted, this appeal would have reduced the applicable size standard from $41.5 million to $16.5 million—greatly reducing the size of Taurean’s competitors.
The OHA, however, denied the appeal. Doing so, it considered the description of NAICS code 56120 found in the NAICS Manual, noting that the code applies when a contractor performance “a combination of support services.” The OHA then considered the scope of work solicited and concluded that, given the combination of support sought, NAICS code 561210 was appropriate.
The OHA further explained that the appeal itself did not analyze the solicitation to explain why NAICS code 561210 was incorrect. It is not enough, the OHA noted, to simply assert that the solicited work doesn’t fall within the assigned NAICS code; rather, an appellant must specifically reference the scope of work and analyze the chosen NAICS code under it to establish clear error.
Taurean failed to demonstrate that NAICS code 561210 was clearly erroneous, so its appeal was denied.
The OHA’s decision is a helpful reminder that NAICS code challenges must do more than simply assert the chosen NAICS code is wrong. An appellant must persuade the OHA—with analysis pertaining to the specific solicitation at issue—that the contracting officer erred in assigning the NAICS code.
If you have any questions about NAICS code appeals, please give me a call. And remember to act fast: in most cases, a NAICS code appeal must be submitted within 10 days after the solicitation is issued.