FEDBIZ’5 | EPISODE 3: What are NAICS Codes, the North American Industry Classification System codes?
What are NAICS Codes, the North American Industry Classification System codes?
Welcome to our podcast FedBiz 5, where you get informed, get connected and get results. In our last episode we discussed, “What is SAM?” – The System for Award Management. Now we will learn more about NAICS Codes and their importance in your SAM registration.
NAICS Codes are the six-digit identification standard used by federal statistical agencies in classifying businesses for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. For federal contracting, these are the codes the government researches to find goods and services for award opportunities.
An important part of the SAM registration process is ensuring a business has properly categorized its industry codes in their SAM registration. (SAM is a business’ accounting and business profile record with the government required for all federal contractors.)
The six-digit NAICS Code can be broken down into specific levels by each digit of the code. The NAICS code has 20 primary two-digit Sectors. For example, all Accommodation and Food Services businesses are under the NAICS two-digit code of 72. The NAICS hierarchy includes 99 three-digit Subcategories, 311 four-digit Industry Groups, and 709 five-digit NAICS Industry Designations. There are 1,057 six-digit NAICS Codes.
These numbers were derived by the U.S. Census Bureau in 2017 and are updated every five years. You can find the link here which provides the details of the hierarchy structure – NAICS Codes. From this link you can research business classifications by industry category hierarchy or use a keyword search to match industries to NAICS Codes.
NAICS Code Structure by Sector:
SECTOR DESCRIPTION
| 11 | Agriculture, Forestry, Fishing and Hunting |
| 21 | Mining, Quarrying, and Oil and Gas Extraction |
| 22 | Utilities |
| 23 | Construction |
| 31-33 | Manufacturing |
| 42 | Wholesale Trade |
| 44-45 | Retail Trade |
| 48-49 | Transportation and Warehousing |
| 51 | Information |
| 52 | Finance and Insurance |
| 53 | Real Estate and Rental and Leasing |
| 54 | Professional, Scientific, and Technical Services |
| 55 | Management of Companies and Enterprises |
| 56 | Administrative and Support and Waste Management and Remediation Services |
| 61 | Educational Services |
| 62 | Health Care and Social Assistance |
| 71 | Arts, Entertainment, and Recreation |
| 72 | Accommodation and Food Services |
| 81 | Other Services (except Public Administration) |
| 92 | Public Administration |
In the SAM registration process, each NAICS code is compared to a business’ revenue size ‘Total Receipts’ and/or employee count ‘Average Number of Employees’ to learn if they qualify as a ‘Small Business’ under the SBA Size Metric Standards. Only U.S. Small Businesses can be found in the Dynamic Small Business Search (“DSBS”), which is a small businesses marketing profile with the SBA. (Large businesses, foreign businesses and non-profit businesses do not qualify as small businesses and therefore do not have a DSBS profile.)
NAICS Codes describe in general “HOW” purchased products and/or services are produced. For example, NAICS Code 541611 is defined as ‘Administrative Management and General Management Consulting Services.’ NAICS Codes do not describe who a business sells to. NAICS Codes are based on a production-oriented concept, meaning that it groups businesses into industries according to similarity in the processes used to produce goods and/or services.
In SAM, NAICS Codes should be focused on core business. Too much disparity or too many NAICS Codes can give the impression the business is not focused. What do you want to sell to the government? Less is more in this instance, and that focus is very important.
FedBiz Access’ fulfillment team takes the time to understand their client’s business and asks questions to pull information from the client to ensure their registration is complete, optimized and verified.
This podcast is sponsored by FedBiz Access. For government contracting made simple, call (888) 299-4498.
