NAICS Codes Explained: A Guide for Government Contractors

What Are NAICS Codes?

NAICS codes — the North American Industry Classification System — are standardized numerical codes used by the United States, Canada, and Mexico to classify businesses by their primary economic activity. In government contracting, NAICS codes do one thing that matters above all else: they determine whether your business qualifies as "small" for a given contract. The NAICS code assigned to a solicitation sets the SBA size standard, and that standard decides if you can compete for set-aside work.

The NAICS system was developed in 1997 to replace the older Standard Industrial Classification (SIC) system. It is maintained by the Office of Management and Budget (OMB) and updated every five years to reflect changes in the economy. The most recent revision was published in 2022. NAICS codes are used not only in federal contracting but also in tax filings, census data, economic analysis, and regulatory compliance.

How NAICS Codes Are Structured

NAICS codes use a hierarchical, six-digit structure that ranges from broad economic sectors down to specific industries. Each level of the hierarchy adds more specificity:

• 2 digits — Sector: The broadest classification. There are 20 sectors in NAICS, such as 54 (Professional, Scientific, and Technical Services) or 23 (Construction).
• 3 digits — Subsector: A subdivision of the sector. For example, 541 is Professional, Scientific, and Technical Services within sector 54.
• 4 digits — Industry Group: A further refinement. For example, 5415 is Computer Systems Design and Related Services.
• 5 digits — NAICS Industry: The standard level used in North American comparisons. For example, 54151 is Computer Systems Design and Related Services (same at this level).
• 6 digits — National Industry: The most detailed level, specific to each country. For example, 541512 is Computer Systems Design Services, while 541511 is Custom Computer Programming Services.

For government contracting purposes, the six-digit code is what matters. Contracting officers assign a NAICS code to every solicitation, and this code determines the applicable size standard. Understanding the distinction between similar six-digit codes can be the difference between qualifying as a small business and being classified as "other than small."

Finding Your NAICS Code

Pick the wrong NAICS code and you limit the contracts you can pursue or misrepresent your capabilities. Here are the most reliable methods for finding your code:

1. Census Bureau NAICS Search: The U.S. Census Bureau maintains the official NAICS lookup tool at census.gov/naics. You can search by keyword or browse the hierarchical structure to find codes matching your business activities.
2. SBA Size Standards Table: The SBA publishes a complete table of NAICS codes with their corresponding size standards at sba.gov. This is the definitive reference for government contracting.
3. SAM.gov: When you register on SAM.gov, you can select multiple NAICS codes that describe your business. Look at what codes similar businesses in your industry use.
4. Competitor research: Search for awarded contracts in your industry on Drexault or USASpending.gov and note which NAICS codes were used. This tells you what codes contracting officers actually assign to work similar to yours.
5. IRS business tax returns: Your tax return (Schedule C for sole proprietors or Form 1120 for corporations) includes a principal business code that maps closely to NAICS codes.

Why NAICS Codes Matter

NAICS codes affect your business in several concrete ways:

• Small business determination: Each NAICS code has an SBA size standard. If your business falls below the threshold for a given code, you are a "small business" for that procurement. This determines your eligibility for small business set-asides, which represent over 25% of all federal contract dollars.
• Contract search and filtering: When searching for government contracts, NAICS codes are one of the primary filters. Setting up saved searches by NAICS code ensures you see relevant opportunities in your industry.
• Certification eligibility: Programs like 8(a) and HUBZone use NAICS codes to determine which contracts an applicant is eligible for. Your primary NAICS code influences the types of set-aside work available to you.
• Market research: Agencies use NAICS codes during acquisition planning to identify potential vendors and determine whether to set a contract aside for small businesses. If there are enough capable small businesses in a given NAICS code, the agency is more likely to restrict competition.

SBA Size Standards by NAICS

The Small Business Administration (SBA) assigns a size standard to every NAICS code. Size standards are expressed in one of two ways:

• Average annual receipts — typically used for service industries and construction. For example, NAICS 541512 (Computer Systems Design Services) has a size standard of $34 million in average annual receipts over the last five years (based on current SBA rules, formerly three years).
• Number of employees — typically used for manufacturing and some other industries. For example, NAICS 336411 (Aircraft Manufacturing) has a size standard of 1,500 employees.

If your business falls below the applicable size standard for the NAICS code assigned to a particular contract, you qualify as a small business for that procurement. This is important because the size standard is not universal — your company might be "small" under one NAICS code and "other than small" under another, depending on the thresholds.

The SBA updates size standards every five years based on industry data. The most recent update adjusted thresholds for inflation and current market conditions. Always check the current size standard table on sba.gov before relying on any specific number.

Using Multiple NAICS Codes

Most businesses perform work that spans multiple NAICS codes. When you register in SAM.gov, you can — and should — list all NAICS codes that apply to your business activities. However, there are important nuances:

• Primary NAICS code: You designate one NAICS code as your primary code. This should represent your main line of business and the area where you generate the most revenue.
• Per-contract determination: Your small business status is determined on a contract-by-contract basis using the NAICS code that the contracting officer assigns to each solicitation. You might be small for a software development contract (NAICS 541511) but not for a systems integration contract (NAICS 541512) if the size standards differ and your revenue is between the two thresholds.
• Self-certification: For most small business designations, you self-certify your size status. However, your certification can be challenged by competitors through an SBA size protest. Losing a size protest can result in being found ineligible for the contract.

NAICS Codes vs. PSC Codes

In federal contracting, you will encounter both NAICS codes and PSC (Product and Service Codes). While they may seem similar, they serve different purposes:

• NAICS codes classify the industry of the contractor (what type of business you are). They determine your small business size standard.
• PSC codes classify the product or service being purchased (what the government is buying). They are used for tracking and reporting federal spending by category.

A single contract will have both a NAICS code (identifying the type of contractor needed) and a PSC code (identifying what is being procured). When searching for opportunities, you may want to use both — NAICS for broad industry matching and PSC for specific product/service matching.

Common NAICS Codes for Contractors

Here are some of the most commonly used NAICS codes in federal contracting, particularly in the technology and professional services space:

• 541511 — Custom Computer Programming Services ($34M size standard)
• 541512 — Computer Systems Design Services ($34M)
• 541513 — Computer Facilities Management Services ($34M)
• 541519 — Other Computer Related Services ($34M)
• 541611 — Administrative Management Consulting ($20.5M)
• 541612 — Human Resources Consulting ($20.5M)
• 541613 — Marketing Consulting ($20.5M)
• 541614 — Process, Physical Distribution, and Logistics Consulting ($20.5M)
• 541690 — Other Scientific and Technical Consulting ($19.5M)
• 541715 — Research and Development in the Physical, Engineering, and Life Sciences ($1,000 employees)
• 561210 — Facilities Support Services ($47M)
• 238210 — Electrical Contractors ($19M)

Your NAICS codes affect what you can bid on, whether you qualify as small, and how agencies find you during market research. Get them right, keep your SAM.gov profile updated, and use NAICS-based filters when searching for contracts on Drexault.