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NAICS Appeal of Dellew Corp., SBA-NAICS-5837 - Small Business Act

Posted by Joseph Whitcomb on Jul 10, 2017 9:36:15 AM
Joseph Whitcomb

This case 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. 

SBA- Small Business Act 1958


Factual Background

In 2014, the Naval Supply Systems Command (NAVSUP) issued a request through the Global Business Support (GBS) Multiple Award Contract (MAC) program. 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 (CO) designated this request under NAICS Code 561210 and reserved it for Women-Owned Small Businesses. 

Ten days later, Dellew Corporation (Dellew) appealed to 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 represents the nature of the underlying contract.  

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

Legal Analysis

The OHA first considered SBA regulations governing size standards. Under 13 CFR 121.402, SBA regulations provide that for every MAC the CO must “[a]ssign the solicitation a single NAICS code and corresponding which best describes the principal purpose of the acquisition.” This means that the CO 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 CO 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 CO can assign multiple NAICS codes to a single contract, ensuring application of the proper size standard. 

In this case, the CO did not elect to assign any additional NAICS codes to the contract. Under 13 CFR 121.402, the CO 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 CO 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 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. 

Do You Need Legal Advice from an Experienced Government Attorney? 

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. 

If you are in need of assistance with government contracts or other related matters, please do not hesitate to contact Whitcomb, Selinsky, McAuliffe, PC immediately. Located in Denver, Colorado, you can reach our attorneys by phone at (303) 534-1958 or online by completing a simple form.

Topics: Government Contracting