NAICS Code

How It Works

The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments. Every federal solicitation must identify a primary NAICS code describing the work being procured, and the SBA assigns a size standard (by revenue or employee count) to each 6-digit NAICS code that determines which firms qualify as small. Size standards are periodically updated and currently range from $2.5 million revenue for some services (taxi service, janitorial for small contracts) up to $47 million for architectural services, $41.5 million for most IT services under 541512, $34 million for many professional services, and 1,000-1,500 employees for manufacturing industries. A few manufacturing size standards go as high as 2,500 employees (shipbuilding, aircraft manufacturing). Contractors register all applicable NAICS codes in SAM.gov and must self-certify as small for each code they choose, misrepresentation is grounds for SBA size protests that can strip an award post-selection, and willful size fraud has resulted in False Claims Act settlements of tens of millions of dollars. Contracting officers pick a single primary NAICS code per solicitation based on the predominant purpose of the contract; losing offerors can appeal an inappropriate NAICS assignment to the SBA Office of Hearings and Appeals within 10 days of the solicitation. NAICS codes are also used by USASpending.gov to categorize contract spending by industry, enabling analyses like "total federal spending on engineering services" or "top contractors in semiconductor manufacturing." The Office of Management and Budget updates NAICS codes every five years (most recent revision NAICS 2022), and SBA publishes an updated size standards table at 13 CFR 121.201 each time. When codes change, contractors must update SAM.gov registrations and agencies must re-examine solicitations that referenced retired codes.

Related Terms

• Small Business Set-Aside, A federal contracting provision that reserves certain contracts exclusively for small businesses, part of the government's goal of awarding 23% of contract dollars to small firms.
• SAM.gov (System for Award Management), The federal government's central registration database for entities doing business with the government, required for receiving contracts, grants, or other awards.
• Product Service Code (PSC), A 4-character code that describes what the government is buying, from "R&D in weapons systems" to "janitorial services", used to categorize contract spending.
• Small Business Administration (SBA), The federal agency that sets small business size standards, manages small business contracting programs, and provides loans and counseling to help small businesses grow.