NAICS Codes Explained: A Guide for Government Contractors
The North American Industry Classification System (NAICS) is the standard classification system used by the U.S., Canadian, and Mexican governments to categorize businesses. In government contracting, NAICS codes play a critical role because they determine which size standard applies to your business, which contracts you can compete for, and which set-aside programs you qualify for. Understanding NAICS codes is essential for any business entering the government marketplace.
What Are NAICS Codes?
NAICS codes are 6-digit numerical codes that classify businesses by their primary type of economic activity. The system uses a hierarchical structure: the first two digits represent the economic sector (e.g., 54 for Professional, Scientific, and Technical Services), the third digit represents the subsector, the fourth digit represents the industry group, the fifth digit represents the NAICS industry, and the sixth digit represents the national industry. For example, NAICS code 541512 represents Computer Systems Design Services, which falls under the Professional Services sector (54), the Professional, Scientific, and Technical Services subsector (541), the Computer Systems Design and Related Services industry group (5415), and the Custom Computer Programming Services industry (54151).
Why NAICS Codes Matter in Government Contracting
NAICS codes affect government contracting in several important ways. First, the SBA assigns a size standard to each NAICS code that determines whether a business qualifies as "small" for contracts in that category. Size standards are based on either average annual receipts or number of employees over the past three to five years. Second, when agencies post contract opportunities, they assign a NAICS code that determines which businesses can compete. Third, your registered NAICS codes in SAM.gov help agencies find your business when conducting market research. Having the correct NAICS codes ensures you are visible in government procurement searches.
How to Choose Your NAICS Codes
Selecting the right NAICS codes requires careful consideration. Start by reviewing the NAICS code descriptions at census.gov/naics to identify codes that match your products or services. Consider both your primary business activity and any secondary activities. Look at government contracts that similar businesses have won and note which NAICS codes were used. You can register for multiple NAICS codes in SAM.gov, but be strategic: only register for codes where you can genuinely deliver the products or services described. Having too many unrelated NAICS codes can actually hurt your credibility with contracting officers.
Size Standards and NAICS Codes
Each NAICS code has an associated SBA size standard. For example, NAICS 541512 (Computer Systems Design Services) has a size standard of $34 million in average annual receipts, while NAICS 236220 (Commercial and Institutional Building Construction) has a size standard of $45 million. Manufacturing NAICS codes typically use employee-based size standards (e.g., 500 or 1,000 employees). Understanding size standards is crucial because qualifying as a small business opens access to set-aside contracts, which have less competition. You might qualify as small under one NAICS code but not another, so choose the codes that give you the best competitive position.
NAICS Codes in the Bidding Process
When the government issues a solicitation, it assigns a single primary NAICS code. This code determines the applicable size standard for that particular procurement. If you disagree with the assigned NAICS code, you can file a NAICS code appeal with the SBA Office of Hearings and Appeals within 10 calendar days of the solicitation issuance. When searching for opportunities on SAM.gov, filter by your NAICS codes to find relevant contracts. Keep in mind that agencies sometimes use NAICS codes that do not perfectly match the work being procured, so also search by keywords related to your capabilities.
NAICS Code Updates and Changes
The NAICS system is updated every five years by the U.S. Census Bureau in coordination with Canadian and Mexican statistical agencies. The most recent revision was in 2022. Updates may add new codes, revise existing ones, or eliminate obsolete codes. When codes change, you need to update your SAM.gov registration. Stay informed about changes that affect your industry by checking the Census Bureau's NAICS website. The SBA also periodically revises size standards, which can change whether your business qualifies as small under a particular code.
Common NAICS Codes in Government Contracting
Some NAICS codes are particularly common in government contracting. In IT services: 541512 (Computer Systems Design Services), 541511 (Custom Computer Programming Services), 541519 (Other Computer Related Services). In professional services: 541611 (Administrative Management Consulting), 541690 (Other Scientific and Technical Consulting). In construction: 236220 (Commercial Building Construction), 237310 (Highway and Bridge Construction). In facilities: 561210 (Facilities Support Services), 561720 (Janitorial Services). Understanding the most commonly used codes in your industry helps you position your business effectively.