The Importance of NAICS Codes to MWBEs

Being certified as a woman or minority-owned business has many advantages, the most significant of which is greater access to government contracts in your area of expertise. However, finding, bidding on and winning these contracts is far from a simple process. What’s more, your access to contracts will be limited by the NAICS codes assigned to your business when you are certified as an MWBE.

What Is an NAICS Code?

In the most basic terms, the North American Industry Classification System (NAICS) is a series of codes that tell procurement agencies what industry your business is in. Housed on the website of the U.S. Census Bureau, the system has gone through many revisions, the most recent of which was in 2017. NAICS codes are data-driven and categorize businesses based on the goods and/or services they provide.

Each valid NAICS code is six digits long, with each digit representing a finer level of detail. In the present system:

  • Digits one and two designate the economic sector
  • Digit three the designates the subsector
  • Digit four designates the industry group
  • Digit five designates the NAICS industry
  • Digit six designates the national industry

The sixth digit allows the three countries who participate in the system, the United States, Canada and Mexico, to include country-specific detail.

How Do NAICS Codes Impact MWBEs?

When you apply for MWBE certification, the certifying agency will consult with you to determine what goods and services your business supplies and identify the applicable NAICS codes. Your business can apply for certification under several different codes as long as you meet the eligibility requirements for each one. The certifying agency makes the final determination, assigns the codes, and issues a certification letter that says in which NAICS codes your business is certified.

On the procurement end, NAICS codes are defined in project specifications. In other words, prime contractors who seek to meet MWBE participation goals must select firms certified in a specific area of work as defined by the NAICS Code. For example, in a procurement for industrial design services (NAICS code 541420), only work by contractors certified under NAICS code 541420 would count towards meeting MWBE participation goals.

NAICS codes also include a size standard, which is typically listed on the RFP. As a rule, the standard is determined by the Small Business Administration and is based either on the company’s annual receipts or average number of employees. For example, a call for proposals on the FedBizOps website might include language such as “The proposed NAICS for this contract is 541213 Tax Preparation Services (size standard $10M). So, even if your business is certified as code 541213, you won’t be eligible to bid on the contract if your annual revenue exceeds $10 million.

How Do I Find Appropriate NAICS Codes?

The NAICS coding system is extraordinarily detailed, and finding the right codes for your business can take a bit of work. Unless you’re already familiar with the coding system, the best place to start is by finding the two-digit code that corresponds to the economic sector to which your business belongs. For example, the digits 11 designate Agriculture, Forestry, Fishing and Hunting. The number 54 designates professional services, and numbers 48 and 49 designate transportation and warehousing.

Once you find the right economic sector, click on the corresponding number, and a web page will open listing all of the codes within that sector and the industries that correspond to them. For example, if you click on 54, you’ll be taken to a list that includes providers of professional services, from landscape architects to accountants to lawyers to veterinarians. Select the code that most closely applies to your business, and click on that.

Another web page will open that explains exactly what business activities firms within that NAICS code provide. It will also cross-reference similar codes that may also apply to your firm.

When applying for certification, include all codes under which your company might be eligible. The certifying agency may ask you to submit additional documentation explaining why your business should be certified with a specific code, which could slow down the certification process a bit. But requesting a new code after you’re certified can be quite difficult. So it’s best to request certification under all applicable NAICS codes right off the bat. It’s also a good idea to double-check your codes each time the Census Bureau issues a new version of the NAICS database.

About The Carmoon Group

The Carmoon Group Ltd. is a minority-owned insurance brokerage headquartered in Hicksville, New York. Through our large network of nationwide affiliates, we offer risk management solutions and comprehensive insurance programs for businesses in a wide range of industries. We have the expertise and experience to provide you optimal coverage at the best possible price. So why not give us a call today to set up an appointment for your insurance review? Or if you prefer, just reach out online and we’ll get back to you at a convenient time.

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