Last reviewed on May 12, 2026.
What NAICS is and how the government uses it
The North American Industry Classification System (NAICS) is a six-digit code used to classify business activities across the United States, Canada, and Mexico. Federal contracting uses NAICS for three jobs:
- Defining the scope of a solicitation. Every federal solicitation lists a NAICS code that describes the principal purpose of the procurement. Vendors registered under that code are surfaced in agency searches.
- Setting size standards. Each NAICS code has a corresponding size standard — either average annual receipts (for service codes) or average number of employees (for manufacturing and many other codes). Below the standard, you are "small" for SBA purposes in that code.
- Anchoring set-aside eligibility. Set-asides reserve work for small businesses under specific socioeconomic categories. Your size status is evaluated against the NAICS code on the solicitation, not against your overall business size.
Why this matters: the size standard moves contract to contract
A common surprise for new contractors: a firm can be small under one solicitation and large under another, depending on which NAICS code the contracting officer assigned. A software firm at $20M in revenue is small for most computer services codes (which carry a $34M-ish receipts standard at this writing) but may be large for some specialized publishing or product codes with lower receipts standards.
The SBA publishes the authoritative size standards table at sba.gov/document/support-table-size-standards. Check the current version before relying on a number you found elsewhere; SBA periodically inflates the receipts thresholds and occasionally restructures the table.
How size is calculated
The two main measures:
- Average annual receipts — used for most service codes. SBA averages the past five fiscal years of receipts (after a transition from a three-year average). "Receipts" generally means gross income from sales or services, before subtracting costs.
- Number of employees — used for manufacturing, wholesale trade, and selected other codes. SBA averages full-time-equivalent employee counts over the prior 24 months.
Receipts and employees are calculated for the firm plus its affiliates. Affiliation rules are technical and worth attention — common pitfalls include shared ownership across multiple entities, identity of interest among family members, and joint venture relationships outside the SBA Mentor-Protégé Program. The SBA's affiliation regulations at 13 CFR 121.103 are the authoritative source; consult counsel if your ownership is complex.
Choosing your primary NAICS code
SAM.gov lets you list multiple NAICS codes, but one must be designated primary. The primary code is what filters searches by contracting officers and determines small business eligibility for several SBA programs. Selection criteria:
- Match the actual work. Pick the code that best describes what your business does day-to-day. SBA, the Office of Hearings and Appeals, and contracting officers will all look at actual revenue mix when challenged.
- Pick a code with room to grow. If your business operates near the edge of a size standard, check whether a related code carries a higher threshold. Don't game the system, but don't pick artificially restrictive codes either.
- Check what set-asides the code supports. Some NAICS codes are eligible for WOSB or HUBZone set-asides; others are not. Eligibility lists are published by SBA and change over time.
- Look at actual federal spending under each candidate code. Use USAspending.gov to see which NAICS the agencies you target actually buy under — this is a better signal than a textbook description of the code.
How many codes to list
Three to ten codes is a common range. Fewer than three may make your SAM record too narrow for searches; more than ten is rarely meaningful because contracting officers usually filter by a single code per solicitation. Each additional code should describe a service line you can actually deliver — not a wish list. Inflated NAICS lists make your capability statement and SAM record look unfocused.
What happens when a contracting officer picks the "wrong" NAICS
Sometimes a solicitation is issued under a NAICS code that does not seem to match the work. This is grounds for a NAICS code appeal at the SBA Office of Hearings and Appeals (OHA). Timing is short — typically 10 calendar days from the issuance of the solicitation. Successful appeals can change the size standard and either expand or restrict who can compete.
Most contractors never need to file a NAICS appeal. But knowing it exists is useful when a solicitation looks miscoded and the difference materially affects who is "small."
Decision criteria checklist
- Does the code describe the principal product or service we actually deliver?
- Does the size standard match the size we currently are or expect to be in two years?
- Does the SBA list this code as eligible for the set-asides we plan to pursue?
- Does USAspending.gov show meaningful federal spending under this code by the agencies we target?
- Are there related codes that better fit specific service lines we want to highlight in SAM?
Common mistakes
- Picking codes from the description rather than the title and definition. NAICS titles can be misleading; the official definition (and SBA's size standard table) is the authoritative source.
- Treating size as a one-time calculation. Receipts are recalculated annually based on a rolling average. Firms can drop in and out of "small" status over time.
- Ignoring affiliation. A founder who also owns related companies may exceed the size threshold even if each entity individually is small.
- Listing too many NAICS codes. A 30-code SAM record looks unfocused and rarely improves search visibility.
- Updating NAICS in SAM but not in supporting documents. Capability statements, marketing collateral, and proposal templates should reflect the same codes the firm claims in SAM.