The Definition of Small Business is Changing for Some. Pt. 2

Sep 17, 2018
Bidsync Industry Blog
READ: THE DEFINITION OF SMALL BUSINESS IS CHANGING FOR SOME. WILL IT AFFECT YOUR “BIG” BUSINESS? OR TAKE AWAY YOUR “SMALL” BUSINESS ADVANTAGE? Pt 1.

In late 2017, NAICS created 21 new industries by reclassifying, combining, or splitting 29 existing industries under changes made to NAICS in 2012 (NAICS 2012). This NAICS 2017 update, part of a routine 5-year review of code relevance, gave some companies more than just a new NAICS code. The SBA’s subsequent update of its “table of small business standards” resulted in the following changes for companies previously assigned to some of the 29 NAICS 2012 codes:

In other words, companies in two industries may have lost their Small Business status – and their big “small business” advantage on government contract bids – depending on where they fall within the decreased sizing standards. At the same time, medium-sized companies in six and a half of the formerly-unique industry categories may have regained their small business advantage thanks to the increase in size standards – a welcome competitive boost that will unfortunately give other bidders more competition to contend with.  

Others may swing either way on the win-lose spectrum depending on how many employees they have. Where does that leave you?

Want to See if You Still Qualify as a Small Business for Government Contracting Purposes?  Use this SBA Size Standards Tool

Gaining A Small Business Advantage?

Congratulations! You are one of the few fortunate companies that once again qualifies to compete for small business set-asides. Just remember that your renewed eligibility isn’t an automatic “in” to government agencies. You still have to take the time to build relationships with customers and contracting officialsDemonstrate your value as a subject matter expert. And, don’t discount the impact of your past performance records and references on your proposal score. Any blemish could diminish the value of your newfound “small business” advantage. (Don’t forget to certify your small business eligibility, either.)

Losing Your Small Business Status?

Play Up Your Other Strengths to Regain a Competitive Advantage

Don’t fret if you lost your small business status due to the NAICS 2017 and subsequent SBA sizing table updates. Yes, it is a setback if you were in the running for a small business set-aside contract. However, there are many other ways to gain an advantage on contracts of all sizes, in all categories. For starters, many state and local agencies have set-asides for Woman Business Entities (WBE), Minority Business Entities (MBE), veteran-owned businesses, and other Disadvantaged Business Entities (DBE) – many of which don’t have business size parameters. Then there’s your past performance record, pricing, technical expertise and other business qualities that can prove advantageous during the proposal evaluation process. Of course, being a green business, or providing environmentally preferred products and services, could also help you bring in more “green” from government agencies. Whatever your strengths may be, be sure to showcase them when meeting with agency buyers and submitting bids. Being a small business isn’t the end-all-be-all path to increasing your profitability in the government sector.

Can’t I Just Change My NAICS Code?

“There is no central register that represents the "official" NAICS classification for business establishments,” according to the Census Bureau. In other words, there is no formal way to avoid the impact of recent – or future – changes on your size classification. That being said, “various Federal government agencies maintain their own directories of business establishments and assign classification codes based on their own needs.” Confirm if the agency you’re pitching will allow you to change your assigned code or add additional codes. For instance, “the System for Award Management (SAM), where businesses register to become federal contractors, will accept multiple classification codes per establishment.”

Just do not try to manipulate the system by straying from your company’s primary business activities in your NAICS code selection. While your code can’t officially be audited by the issuing agency, it can be verified by the government agency with which you want to do business, especially if you’re claiming a small business advantage. Fibbing will not win you favor with any public sector contracting officer; in fact, it could disqualify you from bids or, at a minimum, blemish your reputation.