NAICS Codes don't matter

Author's Note: There are over 1,000 NAICS Codes referenced by federal agencies in buys made each fiscal year, and just as many opinions about the meaning of NAICS Codes, and how they are used by agencies and their vendors. This includes the "advice' regarding how many NAICS Codes should be listed on a company's SAM.gov profile and marketing materials. Let's set the record straight.

I'll begin with the fact NAICS Codes did not matter to me or anyone else during my first ten years supporting defense and intelligence agencies, because they did not exist. My opinion is they still don't matter, especially not in the way they are portrayed by small business offices and contracting activities. NAICS Codes, at best, are a semi-relevant classification that enjoy a popular existence in federal contracting because of SBA Size Standards. Period. Remove the size standards, and what's the value of a NAICS Code then? I see NAICS Codes as a massive distraction to the Government and to Industry, costing precious time and money that could be better utilized on more important activities. Much of the distraction is due to poor understanding and inconsistent use of NAICS Codes, on both sides.

Let's get to it.

Since Product Services Codes are the established classification for WHAT the government buys (you can view the PSC Manual at Acquisition.gov) and there are 3-to-1 the number of PSCs to NAICS referenced each fiscal year, I want to directly address everyone who says having too many NAICS Codes will be viewed as a negative. If this is truly the case, it means you, or others with this opinion, likely don't understand these systems.

Here's why.

The guidance provided to contracting officers for selecting NAICS Codes is based on choosing the one that best describes how goods and services purchased will be used. There is no parity between NAICS and PSCs. One represents industries, and the other is goods, services, and research and development. PSC Codes can be used in conjunction with any NAICS Code, and they are. The PSC for Engineering Services, R425, was referenced by 230 NAICS Codes in 17 of the 20 industry sectors (represented by the first two digits of a NAICS Code).

Not done yet.

Let's say a company has determined PSC R425 is relevant to their offering and 40% of the opportunities that reference it are viable based on the goods to be delivered, or the work to be done. This means opportunities referencing up to 92 of the 230 NAICS Codes are relevant. Which of them should not be listed on their SAM.gov profiles? Is it the assertion of the "too many NAICS crew" that vendors should ignore those other opportunities because it would result in them having too many NAICS Codes on their profiles?

Since quite a few solicitations require NAICS Codes to be present on vendor profiles in order to submit a response, my rule of thumb is to update SAM.gov profiles at the earliest opportunity, with the NAICS Code current and future customers are using to buy what you sell.

I offer the following for your consideration:

During FY 2024 (year-to-date since the DoD delay is in effect until January 1, 2025), the PSC for Medical-Nursing, Q401, accounted for nearly $500M in obligations. These transactions referenced twenty-seven (27) unique NAICS Codes from six different industry sectors. Of the 28 contracting agencies making these buys, five of them referenced Q401 using 8-10 unique NAICS Codes, each.

Which of those NAICS Codes should be ignored, and what is the magic number for too many? Keep in mind, this is for one PSC. How many PSCs are relevant to your company's offering?

One more time.

Four contracting agencies within the Department of Defense obligated over $90 million buying hardware last fiscal year. Specifically, they identified the PSC for screws (5305) in nearly thirty thousand contract actions. This PSC was referenced by sixty-six (66) unique NAICS Codes in half a dozen industry sectors. Which of these buckets of relevant dollars would the "too many NAICS crew" like vendors, especially small businesses, to ignore?

As Captain America said, I can do this all day.

Peace, Health, and Thriving,

Go-To-Guy Timberlake