This case, an Appeal of Dellew Corp., SBA-NAICS-5837, concerns the Small Business Act of 1958. Recognizing the importance of free enterprise and competition, the Small Business Act requires the U.S. Government to assign a fair portion of contracts and purchases to small businesses. The Small Business Administration (SBA) and its Office of Hearings and Appeals (OHA) oversee the administration of the Small Business Act. The SBA uses size standards and the North American Industry Classification System (NAICS) to define what qualifies as a small business.

Factual Background

In 2014, the Naval Supply Systems Command (NAVSUP) issued a request through the Global Business Support (GBS) Multiple Award Contract programs. This request was assigned a single NAICS code – number 561210 for the category of “Facilities Support Services.”

In May 2017, NAVSUP issued a Request for Quotations (RFQ) to all qualified GBS members. The Contracting Officer designated this request under NAICS Code 561210 and reserved it for Women-Owned Small Businesses.

Ten days later, Dellew Corporation (Dellew) filed a NAICS Code Protest with the OHA, claiming that NAICS Code 561210 (Facilities Support Services) was not proper. Dellew argued that this request should be assigned to NAICS Code 541214 (Payroll Services) instead, as payroll services better represent the nature of the underlying contract.

The Contracting Officer and a third party, Coastal Management Solutions, Inc. (CMS), responded to Dellew’s appeal. Both the Contracting Officer and CMS argued that Dellew should have contested the NAICS classification in 2014, not three years later.

LEGAL ANALYSIS

OHA first considered SBA regulations governing size standards. Under 13 CFR 121.402, SBA regulations provide that for every Multiple Award Contract the Contracting Officer must “[a]ssign the solicitation a single NAICS code and corresponding which best describes the principal purpose of the acquisition.” This means that the Contracting Officer has to determine and set the NAICS industry category at the beginning of the contracting process.

But if the contract in question touches on multiple industries and NAICS codes, the Contracting Officer may “[d]ivide the solicitation into discrete categories . . . and assign each discrete category [a] single NAICS code and corresponding size standard.” In this way, the Contracting Officer can assign multiple NAICS codes to a single contract, ensuring the application of the proper size standard.

In this case, the Contracting Officer did not elect to assign any additional NAICS codes to the contract. Under 13 CFR 121.402, it was determined that NAICS Code 561210 (Facilities Support Services) “best describe[d] the principal purpose of each order to be placed under the Multiple Award Contract.” In other words, the Contracting Officer felt that only one NAICS classification was necessary for this contract. Moreover, the OHA decided in NAICS Appeal of Global Dynamics, LLC, SBA No. NAICS-5470 (2013) that all applicable NAICS codes must be present on the initial contract. Stated otherwise, NAICS codes must be determined at the beginning of the contracting process.

Overall, the OHA determined that Dellew received notice in 2014 that the contract would be classified under NAICS Code 561210 as “Facilities Support Services.” If Dellew objected to that classification, they had an opportunity to challenge it in 2014. Once NAICS codes are set and appear on the contract in question, however, adjustment is not possible. As a result, the OHA dismissed Dellew’s appeal.

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Navigating the Small Business Act and its application to government contracts can be a challenge. There are various legal regulations and considerations at play, which can make it difficult to understand the proper course of action. But a knowledgeable government attorney can make all of the difference, helping you avoid pitfalls and resolve any issues that might arise.