You select your NAICS Code to help potential customers understand your business capabilities, but it has a larger impact on small businesses registering to become government contractors.

How to choose NAICS Codes?

What are the best NAICS codes for government contracting?

The North American Industry Classification System (known as NAICS Codes) is a classification system to group businesses into similar industries for the primary purpose of having standardized data to analyze and track economic activity.

Each business is classified into a six-digit numeric NAICS Code based on your major business activity. The Census Bureau tabulates the data of all businesses into summary totals at the two-digit down to six-digit NAICS Code levels.

Selecting your primary NAICS Code is an initial decision you make as a small business registering in the System for Award Management (“SAM”) system to become a government contractor.

You must select a primary NAICS Code that best reflects your specific business, but you should also include at least 3 – 5 secondary NAICS Codes to reflect other broader areas of your business. Now we are on the path to choosing the best NAICS code for your business.

NAICS Codes are a two-digit through six-digit hierarchical classification system, offering five levels of detail. Each digit in the code is part of a series of progressively narrower categories, and the more digits in the code signify greater classification detail up to the sixth digit.

Did you pick the right NAICS code?

Two-Digit – 20 primary Economic Sector Codes
Three-Digit – 96 Subsector Codes
Four-Digit – 308 Industry Group Codes
Five-Digit – 689 Industry Codes
Six-Digit – 1012 total specific National Codes

The U.S. Small Business Administration (“SBA”) has adopted the primary NAICS Code designation as a way of establishing the definition of ‘small business’ based on your industry.

The SBA uses NAICS Codes to assign different standards to industries based on your five-year average annual revenue and/or 12-month average employee count.

When selecting your primary NAICS Code, the decision can impact your SBA designation since some relatively similar-sounding codes can have different size standards. You will want to stay under the size standards as a small business to maintain your small business status and qualify for the SBA’s socioeconomic programs, including SDVOSB, WOSB/EDWOSB, HUBZone, and 8(a).

Under the Federal Acquisition Regulations (“FAR”) Simplified Acquisition Procedures for soliciting and evaluating bids up to $250,000, contracting officials must first reserve awards for businesses classified as ‘small businesses.’ These procedures require fewer administrative details, fewer approvals, and less documentation, but first, the government contracting official must try to obtain offers from two or more small businesses that are competitive in price, quality, and delivery. Based on this, the award must go to a small business.

The SBA typically takes your word for it on which NAICS Code you select for your primary NAICS Code. However, they do reserve the right to challenge it, so make sure you can justify it. In addition, make sure that your tax return also reflects the same primary NAICS Code as your SAM registration.

A good NAICS Code is one that is broad but accurately describes your business. So, be sure to check the size standards and pick the code that is right for you.

FedBiz Access works with small businesses to help them establish their foundation with the federal government from their initial SAM registration to setting strategy to help find the right buyers. We can help you pick your best primary NAICS Code, as well as your secondary NAICS and PSC Codes.

FedBiz Access has over 21 years of experience working with companies to help them win business by ensuring their registrations, research, engagement strategy, set-aside certifications, and GSA Multiple Award Schedules are current, complete, and compliant.