Federal contracting data shows that Professional, Scientific, and Technical Services (NAICS 541), Information Technology (511210 and 541519), and Construction sectors dominate government contracts. Software Publishers (511210) ranks first in 2024 with a $1.6 billion increase from 2023. Other leading categories include Aircraft Manufacturing, Engineering Services, and Research and Development. These sectors collectively account for approximately 30% of the $627.28 billion in federal contract awards. Proper NAICS code selection greatly impacts contract eligibility and opportunity access.
Top 10 NAICS Codes by Federal Spending in 2023-2024
While federal contracting opportunities span numerous industries, certain NAICS codes consistently attract the largest portions of government spending. Recent NAICS code trends show Software Publishers (511210) claimed the top position in FY 2024, growing by approximately $1.6 billion from the previous year.
Software Publishers lead government spending in 2024, securing $1.6 billion more than previous fiscal year.
Conversely, Other Computer Related Services (541519) fell from its leading rank, decreasing by about $270 million. The SBA size standards help determine eligibility for these lucrative government contracts.
Federal contract analysis reveals the same NAICS categories remained dominant across both fiscal years, though their ranking shifted based on spending amounts. The IT and Professional Services industries continue to be top categories in the GSA Multiple Award Schedule Program.
Aircraft Manufacturing, Engineering Services, and Research and Development continued as leading sectors. The Professional, Scientific, and Technical Services sector represents approximately 30% of all government contract awards in FY 2023. Additionally, Construction, Facilities-related services, Health, and Computer-related codes constituted significant portions of the $627.28 billion in federal contract awards distributed to over 104,000 companies in FY 2023.
How to Leverage NAICS Codes for Government Contract Success
Every successful government contractor recognizes NAICS codes as powerful tools that extend far beyond simple classification numbers.
These codes provide strategic advantages when properly implemented in business development efforts.
Understanding federal set-aside programs helps businesses identify specialized contracting opportunities reserved for qualified participants.
Contractors can maximize NAICS codes benefits through targeted market research, analyzing procurement trends by industry classification to identify growth sectors and underserved niches.
Effective NAICS research techniques include monitoring competitor awards, tracking spending patterns, and aligning capabilities to high-demand categories.
Understanding how to select the correct NAICS codes enhances visibility and creates opportunities to secure suitable government contracts that align with your business capabilities.
Businesses should consider registering for multiple NAICS codes if their operations span various sectors to maximize potential contracting opportunities.
NAICS Code Selection Strategies for Small Business Set-Asides
Strategic NAICS code selection represents one of the most powerful advantages small businesses can leverage in government contracting. When registering in SAM, businesses must carefully choose codes that accurately reflect their primary activities while maintaining code accuracy to meet eligibility criteria. Federal contracting visibility depends heavily on selecting appropriate NAICS codes that match business capabilities with agency needs.
Selecting the appropriate NAICS code directly impacts a company’s ability to compete for set-asides, as only those classified as “small” under the designated size standard qualify. Federal agencies must select a single NAICS code that best describes the principal purpose of the product or service being acquired.
Companies should consider both broad and specific codes, balancing precise representation with market opportunity. Multiple codes can diversify revenue streams and spread contracting risk. Effective capability statements customized for specific NAICS codes significantly enhance a business’s appeal to contracting officers.
If an agency assigns a restrictive NAICS code, businesses can challenge this decision through formal protests, potentially expanding access to contracts. Regular review of selected codes guarantees continued compliance as business operations evolve and SBA updates size standards.
Frequently Asked Questions
How Often Are NAICS Codes Revised by the Federal Government?
NAICS code revisions occur on a five-year cycle, specifically in years ending in 2 and 7. The federal government, through the Office of Management and Budget and its Economic Classification Policy Committee, manages these updates.
The process includes public comment periods, interagency consultations, and collaboration with Canada and Mexico. The most recent NAICS updates occurred in 2022, with 2027 being the next scheduled revision.
These regular code revisions guarantee the classification system remains relevant as industries evolve.
Can a Business Challenge an Agency’s NAICS Code Assignment?
Yes, businesses can challenge an agency’s NAICS code assignment through the Small Business Administration‘s Office of Hearings and Appeals (OHA).
NAICS code disputes must be filed within 10 calendar days of solicitation issuance. The process examines whether the assigned code accurately reflects the procurement’s principal purpose.
Agency code reassignment occurs when OHA determines the original designation was inappropriate. Successful challenges can greatly affect which businesses qualify to compete for the contract.
What Happens if My Business Outgrows Its NAICS Size Standard?
When a business outgrows its NAICS size standard, several growth implications emerge. The company becomes ineligible for new small business set-aside contracts but can generally continue performing existing contracts until completion.
Recertification is required for long-term contracts at specific intervals and after mergers or acquisitions.
Businesses approaching size limits should develop shift strategies, including competing in full and open competitions, forming mentor-protégé relationships, or diversifying into industries with higher size thresholds.
Do International Companies Need NAICS Codes for U.S. Government Contracts?
Yes, international companies must have NAICS codes for U.S. government contracts.
These industry classification codes are essential for contracting eligibility regardless of a company’s country of origin. Foreign entities must select appropriate NAICS codes when registering in the System for Award Management (SAM).
International compliance requires these codes to determine size standards and eligibility for specific contract opportunities.
Without proper NAICS classification, international businesses cannot participate in the U.S. government procurement process.
How Do NAICS Codes Impact Joint Ventures in Federal Contracting?
NAICS codes directly determine joint venture eligibility in federal contracting through size standard compliance requirements.
Each joint venture partner must qualify as small under the procurement’s assigned NAICS code size standard. For mentor-protégé relationships, only the protégé must meet the size standard, regardless of the mentor’s size.
Joint ventures must carefully document compliance with these requirements in their agreements, as improper NAICS code classification can disqualify otherwise viable partnerships from contract opportunities.