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Desparado

NAICS Code Question

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I have a solicitation where one of the requirements is that an offeror has to have the listed NAICS code in their ORCA in order for them to submit an offer.

In 13 CFR 121.402(B) it states, "... Acquisitions for supplies must be classified under the appropriate manufacturing NAICS code, not under a Wholesale Trade or Retail Trade NAICS code..." Since this solicitation is for an IDIQ contract for supplies, I would assume that we should follow this CFR. I have been an 1102 for awhile, and when I came across this CFR reference in a WIFCON post, it surprised me. I wonder why this isn't incorporated into the FAR somewhere (or at least I could not find it), as I would imagine many (if not most) 1102s are not aware of this. I have seen many FBO posts listing wholesale or retail NAICS codes.

If a company is a retail company (for example, a department store), they would logically not have the manufacturing NAICS code in their ORCA registration. Could they add these NAICS codes in order to be in compliance with the solicitation, or would they be violating some law/rule/etc..?

Or should local policy of the solicitation requirement be removed?

Thank you in advance for your input.

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I would remove the solicitation requirement. Sounds like a bleed over from the requirements of the 8(a) program. Having retail vendors add the manufacturing NAICS to their profile would be encouraging them to misrepresent themselves. If this is a SB set-aside, this may impact your acquisition strategy if there are no small business manufacturers; unless it is already on the waiver list.

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I found this old thread and felt I should provide an update to it based on my recent experience with a bit of NAICS Code turmoil in the Prime Contractor arena. I work for a NASA prime contractor and we have our Small Business (SB) goals to meet, and we usually do a pretty good job of meeting those goals using small distributors around the country. These SBs supply the parts we need to support the Engineering & Technical services we provide. By procuring from distributors, we can claim the SB dollars associated with those buys.

We have recently had to come up with new processes to accommodate changes in policy from our local SBA office. We have been instructed that NAICS codes 423xxx, 424xxx, 425xxx, 44xxxx or 45xxxx can no longer be used to classify our prime contract acquisitions; therefore, our SB vendors must enter actual manufacturing codes for all items they can supply to us. This has resulted in our vendors entering hundreds of NAICS codes in SAM (System for Award Management), because if they are not listed in SAM as a SB for the particular NAICS code of the item we are buying, then we can not claim the procurement dollars against our SB goals.

I'm uneasy with telling our SBs to enter manufacturing codes, when they are clearly not manufacturers. Yet that is our new policy. A lot of our normal competition has gone out the window as a result of not being able to find more than one SB listed for the NAICS code of the item being bought. It's extremely time-consuming for the SBs to spend hours on the SAM website entering code after code to their profile -- one of my SBs spent over 5 hours listing over 250 NAICS codes to his profile!

Have any of you other prime contractors run into this issue? How did your company work out a resolution? I'd be interested in knowing if any of you are struggling with this.

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Desperado, I think you can keep your local policy if you amend it to state that offers will be accepted from non-manufacturers in accordance with 13 CFR 121.402© and 121.406.

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Elf949: Did the SBA tell you to have your vendors enter the manufacturer NAICS, or was that an interpretation made by your company? When the Gov't buys a supply, it is supposed to use the manufacturer NAICS to establish the size standard for the acquistion. That doesn't mean we cannot buy the item from a retailer, so long as they meet the size standard. It sounds like the SBA is asking you to follow the same principle. Hopefully they didn't tell you how to do it.

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Elf949 – To expand on Velhammer’s comments, and in my experience you could simply allow the firm to certify to the specific code(s) at the time of each solicitation rather than making them upload to SAM. This is done sort of like it is done on the Government side. Take a look first at FAR Subparts 4.11 and 4.12 and then FAR Clauses 52.204-7 and 204-8 and note that on the Federal side a firm may, for a specific solicitation, amend it’s representations and certifications in SAM (see para. (d) of the 52.204-8). So a firm would simply state that with regard to FAR Clause 52.219-1 I hereby amend my annual reps/cert with the following.

As to your concern about folks showing manufacturing codes when they are not remember the NAICS code use is to set the size standard for the solicitation. Or stated another way a firm, any firm can provide a product as a small business as long as they meet the size standard as the manufacturer or under the “non-manufacturer” rule (FAR Subpart 19.1).

And as an aside remember this definition of the FAR from FAR Part 2 - “Small business subcontractor” means a concern, including affiliates, that for subcontracts valued at— (1) $10,000 or less, does not have more than 500 employees; and (2) More than $10,000, does not have employees or average annual receipts exceeding the size standard in 13 CFR Part 121 (see 19.102) for the product or service it is providing on the subcontract.

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any entity registered in SAM can add any NAICS to their profile.

what possible sound business reason could there be for requiring something like this ?

1. Because we always did this.

2. Because my boss told me to.

3. Because we want to test to see if offerors are reading the RFP completely.

4. Because businesses have nothing better to do than a non-value added chinese fire drill.

5. Because we're the government, and I say so.

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Velhammer -- yes, the SBA is telling us that unless the SB is certified in SAM under the manufacturing NAICS code for the acquisition, we cannot claim the award in our SB goals. We can buy from them, but they would have to be coded in our system as a "large" business for that procurement. We were told to have our vendors enter as many manufacturing NAICS codes as possible in SAM. We were also told that in our next SBA audit, they will be looking specifically for NAICS codes printed on the RFPs/ITQs and on the POs, and they will be matching them to SAM to ensure that the vendor is indeed certified to that code. If they are not listed in SAM for the NAICS code we are buying, we have to get a separate signed certification from the vendor that they are "small" under the size standards for that NAICS code. It's quite the administrative nightmare right now.

And part of the problem is that we are having to do this with ALL of our procurements -- whether $5 or $5,000,000. If we want to claim the SB dollars in our goals, we have to ensure that EVERY solicitation/order to a small business includes the NAICS code and the SB is certified in SAM as meeting the SB size standard for that NAICS code. It's creating a lot of extra paperwork and time that we did not previously have to contend with.

Just wondering if any of the other primes out there are having to deal with this and how they are handling it.

(Brian: love your reasoning!)

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elf949 - My recent experience with SBA demand is understandable. From a data mind set. Depending on what system you are using to award a contract (e.g., PD2/SPS/PADDS, etc.). The issue is that if the NAICS code is not in SAMS, when running a Contract Action Report in the Federal Procurement Data System - Next Generation (FPDS-NG) it will not recognize the firm as a small business when awarded. As a result, the contracting agency will not get credit for its SB goal - whatever that may be.

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elf949 - Actually Brian’s reasoning is flawed. FAR 19.1 requires certification by “product” not by the type of business supplying the product (FAR19.102( B)). This is supported in several places by the Code of Federal Regulations but most specifically at 13 CFR 121.410 when it comes to subcontracting.

I do question that if your SBA representative is telling you “unless the SB is certified in SAM under the manufacturing NAICS code for the acquisition, we cannot claim the award in our SB goals.” Why?

You cannot use SAM to determine size of a subcontractor because13 CFR 121.411 says you cannot. Some primes put terms and conditions in their acquisition process that provide that “that by submission of the offer, the subcontractor certifications in SAM are correct and complete as of the date of the offer for the subcontract.” and by doing so get the required self certification.

“13 CFR 121.410 What are the size standards for SBA's Section 8(d) Subcontracting Program?

For subcontracting purposes pursuant to sections 8(d) of the Small Business Act, a concern is small for subcontracts which relate to Government procurements if it does not exceed the size standard for the NAICS code that the prime contractor believes best describes the product or service being acquired by the subcontract. However, subcontracts for engineering services awarded under the National Energy Policy Act of 1992 have the same size standard as Military and Aerospace Equipment and Military Weapons under NAICS code 541330.”

“13 CFR 121.411 What are the size procedures for SBA's Section 8(d) Subcontracting Program?

(a) Prime contractors may rely on the information contained in the Central Contractor Registration (CCR), or equivalent data base maintained or sanctioned by SBA, as an accurate representation of a concern's size and ownership characteristics for purposes of maintaining a small business source list. Even though a concern is on a small business source list, it must still qualify and self-certify as a small business at the time it submits its offer as a section 8(d) subcontractor.”

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