Selecting incorrect NAICS codes in SAM registration can prevent businesses from qualifying for federal contracts and set-asides. Common mistakes include choosing codes based on business names rather than primary activities, failing to include secondary activities, and misunderstanding size standards. To correct errors, contractors should review their offerings against registered classifications, verify business structure, and update their SAM profile through the “Core Data” section. Proper code selection directly impacts contract eligibility and competitive positioning in the federal marketplace.
Understanding NAICS Codes and Their Impact on Federal Contracting
The foundation of successful federal contracting begins with proper industry classification. NAICS codes serve as the standardized system that federal agencies use to categorize businesses according to their primary economic activities. These hierarchical codes, ranging from two to six digits, enable government entities to match contracts with appropriate business sectors. The recent transition from DUNS numbers to UEI demonstrates the evolving nature of federal identification systems.
In the federal marketplace, NAICS codes function as critical filters that determine which solicitations businesses can access. Agencies utilize these codes to define set-aside opportunities, conduct market research, and shape competitive landscapes. Size standards tied to SBA size determinations are directly linked to specific NAICS codes and vary significantly across different industries. SAM registration is mandatory for businesses seeking government contracts, as it provides the official platform for NAICS code designation.
The selection of accurate codes directly influences a company’s eligibility for specialized programs like 8(a), HUBZone, WOSB, and SDVOSB set-asides. Importantly, incorrect classification can disqualify businesses from relevant opportunities and greatly impact access to federal certifications designed for specific industry segments.
Common Mistakes When Selecting NAICS Codes for SAM Registration
When registering in the System for Award Management (SAM), businesses frequently encounter pitfalls that compromise their federal contracting eligibility.
Companies often select codes based solely on their name rather than primary business activities, resulting in misclassification that limits contract opportunities.
Many businesses fail to include multiple NAICS codes, overlooking secondary activities that could qualify for additional contracts.
Data entry errors and typographical mistakes in code fields lead to instant rejections or processing delays.
Other common errors include inadequate documentation supporting code selection and relying on outdated codes that no longer reflect current operations.
Companies frequently neglect to verify NAICS codes against DUNS/CAGE records, creating compliance issues during audits or protests.
These mistakes can be avoided by consulting available resources or seeking expert guidance during the registration process.
Businesses in construction or manufacturing sectors often misunderstand how size standards linked to NAICS codes dictate small business eligibility, potentially disqualifying them from set-aside opportunities.
Failing to understand that NAICS codes are six-digit numbers representing specific industry classifications can result in improper categorization and missed contract opportunities.
Legal advisors should be consulted to ensure business name consistency across all government registrations and NAICS code selections.
How to Identify and Correct Improper NAICS Code Selection
Identifying improper NAICS code selection requires careful examination of a business’s primary activities against their registered classifications in SAM.gov.
Companies should review their current codes using the SAM Status Lookup Tool, which provides a summary of registered NAICS codes and other entity information.
Business structure verification helps prevent registration delays and ensures proper NAICS code alignment with your organization’s classification.
To correct improper selections, businesses should:
- Log into SAM.gov and navigate to the “Entity Registration” option
- Access the “Core Data” section where NAICS codes are stored
- Initiate an update to add, remove, or modify codes
- Research appropriate codes using Census.gov or SAM.gov’s embedded search features
- Confirm selected codes accurately match actual service offerings
Remember that selecting the wrong NAICS code can lead to missed opportunities when searching for relevant government contracts that match your business capabilities.
Regular review of NAICS codes is essential as business operations evolve, helping maintain accurate classification and maximizing relevant contract opportunities.
Contracting officers will specifically check NAICS codes on your SAM profile before awarding contracts to ensure your business is properly classified for the project.
Frequently Asked Questions
Can I Change My NAICS Code After Winning a Contract?
Yes, a company can change their NAICS codes in SAM.gov after winning a contract.
However, this change will not affect the NAICS code associated with the already awarded contract. The awarded contract permanently retains the NAICS code designated by the contracting officer at the time of solicitation and award.
Updates to SAM.gov NAICS codes will only apply to future contract opportunities, not retroactively to existing awards.
How Many NAICS Codes Can I List in My SAM Registration?
There is no strict limit to the number of NAICS codes that can be included in a SAM registration.
However, best practices suggest:
- Most businesses list 3-5 codes for ideal clarity
- Larger or diversified companies may reasonably include up to 10 codes
- Each code should accurately reflect actual business capabilities
- One primary NAICS code must be designated to represent the main business activity
- Adding excessive unrelated codes may reduce credibility with contracting officers
Do State and Local Government Contracts Use NAICS Codes?
State and local government contracts sometimes use NAICS codes, but unlike federal contracts, they are not required to do so.
Many jurisdictions incorporate NAICS codes into their procurement systems for classification purposes, while others rely on their own unique commodity codes.
Usage varies considerably across different states and municipalities, with some mapping their local codes to NAICS for consistency when dealing with federal grants or joint procurements.
Are Some NAICS Codes More Competitive Than Others?
Yes, NAICS codes vary considerably in competitiveness. Data shows NAICS 541611 (Administrative Management) has 1,758 GSA Schedule Contractors, making it highly competitive, while NAICS 511210 (Software Publishers) has only 252 contractors despite substantial contract values.
IT-related codes generally face intense competition, with the top three codes (541519, 541611, 541511) having considerably more contractors than others.
Competition levels correlate with federal spending patterns and industry-specific barriers to entry.
Can Different Business Divisions Have Separate NAICS Code Designations?
Yes, different business divisions can have separate NAICS code designations. Companies with diverse operations commonly register multiple codes to accurately represent their various business activities.
Each division or department can operate under distinct NAICS codes that reflect their specific functions or services.
During SAM registration, businesses should designate one primary NAICS code while including additional codes for other divisions to guarantee proper classification for government contracting opportunities.