The federal government sets aside many contracts for small businesses, but not all small business set-asides are created equal.
Instead, different size standards define small business status for different procurements. The size standards vary from industry to industry, so a given firm may be a small business for one procurement at the same time it may be other-than-small for a different procurement for seemingly similar goods or services.
To keep order, the Small Business Administration (SBA) maintains a manual of industrial codes – called North American Industry Classification System (NAICS) codes – that are assigned to particular classes of manufacturing and service industries. Each NAICS code is associated with a particular size standard that changes over time. Some size standards are based on a firm’s revenues and are expressed as dollar values – a firm is small if its average annual receipts do not exceed the specified number of dollars. Others are based on the size of a firm’s workforce – a firm is small if its average number of employees does not exceed the figure associated with the particular NAICS code in question.
For each procurement in excess of the micro-purchase threshold (currently $3,500 for most acquisitions), the contracting officer, per FAR 19.303, must designate within the solicitation a single NAICS code that best corresponds to the goods or services the agency is soliciting. The chosen NAICS code establishes the size standard for that procurement. If the procurement is a small business set-aside, the size standard can determine (in large part) whether a particular offeror is eligible for award.
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