Is Your Business Missing Out on Small Business Set Asides?

Written by Marci Love Thomas, who just joined GCPC’s GovCon Legal Team after spending eight years as an Army JAG Officer and then nine years as an attorney at the SBA. Marci is a great addition to our team and will be a tremendous advocate for our clients.

Have you seen small business set asides that are in your company’s skill set, but the size standard is too small for your company to compete?  Or, alternatively, a set aside with a size standard so large that you will be contending with businesses with far greater resources?  Rather than abandon small business set asides squarely within a company’s competencies because the company is too large to be eligible, or too small to be considered competitive, a company can take simple steps to influence the size standard relied on to define what is an eligible small business.

For every federal small business set-aside, the government defines “small” by assigning a NAICS code to the solicitation that best describes the principle purpose of the product or service being acquired.  Each NAICS code has a corresponding size standard, which indicates the threshold a company must fall below to be considered a small business.  The size standard can be stated either in the business’s maximum number of employees or maximum average annual receipts.

The government’s flexible definition of “small” accepts that the market of small varies widely depending on the specific industry.  For example, even though they are in the same subsector of waste management and remediation services, hazardous waste collection has a size standard of $38.5 million in average annual receipts whereas septic tank and related services has a much smaller size standard of $7.5 million.

Assigning a NAICS code to a procurement is not a perfect science and potential offerors can influence the NAICS code, and related size standard, selected by the contracting officer (CO).  Once a pre-solicitation notice identifying the NAICS code is issued a business can review the solicitation, and possible NAICS codes, and contact the CO to suggest a NAICS code that better describes the principle purpose of the procurement.

If a conversation with the CO is not successful, a business can file an appeal with SBA’s Office of Hearings and Appeals (OHA) arguing the CO has erred and proffering a NAICS code that best describes the purpose of the procurement.  An OHA appeal must be filed within 10 calendar days after issuance of the solicitation, or an amendment affecting the NAICS code or size standard.  OHA generally issues a decision before the close of the solicitation and the solicitation is amended to reflect any change in the NAICS code and size standard.

Influencing the NAICS code assigned to a procurement can enhance a small business’s eligibility for small business set-asides and increase opportunities for success.  A business interested in shrinking the size standard—and pool of eligible small business competitors—could underscore how a NAICS code with a smaller size standard best describes the principle purpose of the procurement.  Conversely, a company excluded from the competition based on the size standard could argue for a NAICS code with a larger size standard to be eligible to compete.

If you have any questions or comments about the discussed content, please contact General Counsel, P.C.’s Government Contracts group.