If you wish to become a federal contractor, there are many tasks you must complete before you can bid on government contracting jobs. One essential requirement is selecting the North American Industry Classification System (NAICS) codes that best represent your business.
Although this step may seem routine, its importance is often underestimated, as choosing the right codes can significantly affect which contracting opportunities your business can pursue. Here are some facts and tips that can help you better understand these codes and select the ones that best represent your business.
What Are NAICS Codes?
These six-digit codes, adopted by the United States, Canada, and Mexico in 1997, describe the types of goods and services a business can provide to its clients, including the federal government. The codes replaced a previous code system known as the Standard Industrial Classification (aka SIC codes), which was developed in 1937. The U.S. Census Bureau updates the codes about every five years to account for changes such as new industries, products, and technologies.
To bid on federal contracting jobs, you must complete registration in the System for Award Management (SAM) database. During the registration process, you must provide a primary NAICS code, but you also can add secondary codes.
The primary code represents the goods or services that generate the largest share of your revenue. Secondary codes represent any additional products or services that your company is qualified and prepared to offer.
Why Are NAICS Codes Important?
There are a few reasons why these codes are significant. When federal agencies offer government contracting jobs, they will include specific NAICS codes. In many cases, this code must be listed in your SAM registration to qualify for the government contract. Keep in mind that if you do offer goods or services that fit the NAICS code, you can add it as a secondary code before submitting your bid.
It is also important to note that federal procurement agents search SAM.gov and other databases using NAICS codes to identify potential vendors. A well-chosen, accurate set of codes means you show up in searches across multiple federal agencies.
Additionally, not only do they describe the specific goods or services you provide, but each code impacts your business size standards, and this can be crucial for small businesses. The Small Business Administration sets size standards for businesses, and every NAICS code’s standards are unique. Standards are set based either on the number of employees or the average annual gross income.
If you are within the SBA’s size standards for a specific NAICS code, you qualify as a small business. However, it is possible to have several NAICS codes fit your business, but only one or two of those codes have size standards that allow you to be considered a small business.
For instance, if your business provides both IT system design and management consulting, you may fit the criteria for NAICS code 54512 (Computer Systems Design Services) and 541611 (Administrative Management and General Management Consulting Services).
For code 54512, you would be considered a small business if the business earns average gross receipts of less than $34 million per year. However, with code 541811, your average gross receipts can be no more than $24.5 million.
This can be important because it may allow you to bid on special small business set aside contracts. The government “sets aside” certain contracts for eligible small businesses. These contracts, because they are limited only to small businesses, can be easier to win than other federal contracts because the competition pool might be smaller.
Of course, with set-asides, you also must meet additional requirements beyond the size standards. For instance, for a federal contractor to qualify as a Woman-Owned Small Business (WOSB), 51% or more of your business must be owned and operated by a woman or women. This is just one of several programs offered by SBA, and each has unique requirements.
How Many NAICS Codes Should You List?
While one primary code is required, there is no limit as to how many secondary NAICS codes can be listed in your SAM registration. Most government contractors will register anywhere from 5 to 15 secondary codes. In general, the number of codes is not as important as the actual codes you select. You must select codes that describe goods or services you can actually provide.
As stated above, your primary code typically is the code that represents the primary business activity for a federal contractor. Secondary codes should include only goods and services you truly can provide. When it comes to NAICS codes, quality is more important than quantity.
Researching federal contracting opportunities can help you determine which NAICS codes are most relevant to your business. Search SAM.gov using each code you are considering to see how frequently it appears and whether the resulting opportunities match your capabilities. This research can help you identify the most useful secondary codes to include in your profile.
How Do You Find Your NAICS Codes?
NAICS codes are available at Census.gov. You can download the most recent version of the NAICS codes on that website. The first two digits of any NAICS code represent the industry sector, and codes are broken down into 20 sectors. The first step is to identify your sector and then search through the sector to determine the specific code or codes that match your business.
For instance, if your company manufactures furniture, you would first head to the section for Manufacturing, which begins with 31, 32, or 33. From there, the sectors are broken down into subsectors. The subsector for Furniture and Related Product Manufacturing is 337.
This is broken down further into additional categories. Office Furniture Manufacturing is listed with a code of 3372, and this is further broken down into additional categories
- 33721 Office Furniture (including Fixtures) Manufacturing
- 337211 Wood Office Furniture Manufacturing
- 337212 Custom Architectural Woodwork and Millwork Manufacturing
- 337214 Office Furniture (except Wood) Manufacturing
- 337215 Showcase, Partition, Shelving, and Locker Manufacturing
One of these likely will be the best match for your business. In most cases, more than one of the codes will be a match, and you can choose one as your primary code and a few others as your secondary codes. Keep in mind that there may be codes in other areas that also correlate with your business.
How to Become a Federal Contractor
While finding your NAICS codes is important, it is just one step along the journey to becoming a federal contractor. The first step you need to take is to complete your SAM registration, and we can help. While the government does not charge a fee for SAM registration, it is extremely complex and time-consuming. Hiring a third party ensures that the process is handled quickly and 100% accurately.
The team at Federal Contractor Registry handles hundreds of SAM registrations and SAM renewals throughout the year, for companies of all sizes and all industries. Not only can we complete your SAM registration, but we also can identify which NAICS codes are the best fit for your business.
Additionally, we will help you obtain your Unique Entity Identifier (UEI), which is a 12-character code required for anyone completing SAM registration. In the past, the federal government required businesses to provide their DUNS number, but this was replaced a few years ago with the UEI number.
We also can determine if your business qualifies as a small business according to SBA size standards, and we can determine if you qualify for any set-aside programs. If your business qualifies, we will help you sign up with the SBA so you can take advantage of these helpful programs.
Once your SAM registration is complete and approved by the government, you will be eligible to bid on any applicable federal contracts. To get started with your federal contractor registration, head to our homepage and click on the green New Registration tab and fill out our quick contact form.