Context is critical to success in government contracting. Not understanding meaning, significance and timeliness of something such as how an agency describes what you want to sell them, can and will likely result in lost opportunities and the dollars that might have come with them.
If you read my previous post about the North American Industrial Classification System or NAICS, you know these codes represent one of the tools used by government agencies to classify acquisitions and procurements for goods, services and solutions. I referenced ‘one of the tools‘ because there is another classification system in use that is frequently misunderstood by many companies, or worse, not known to them whatsoever. Unfortunately, lack of knowledge and a lack of understanding of these classification systems can cost your company time, money, situational awareness and visibility.
The other classification agencies use in describing procurements is Product and Service Codes, or PSCs which are used to ‘describe products, services and research and development (R&D) purchased by the federal government.’ They differ from NAICS Codes in that PSC Codes describe “WHAT” was bought for each contract action reported in the Federal Procurement Data System (FPDS),” whereas NAICS Codes describe “HOW” purchased products and services will be used. NAICS and PSC Codes look different, too. NAICS Codes are six position numeric values and PSC Codes are four position numeric or alphanumeric values. You can read a lot more about PSC Codes here.
Government Doesn’t Buy Using NAICS Alone
So we just established the purpose for PSC Codes versus NAICS Codes, but let’s take a real-world look at why you need to better understand PSCs. Let’s start with a common NAICS Code such as 541519-Other Computer Related Services. Let’s also look at the Department of Defense and what they purchased last fiscal year (FY2014) when their purchases referenced this NAICS Code. But first, let me ask this. If your company provides Administrative and/or Professional Services such as Financial, Logistics, Human Resources, Quantitative Analysis and more, what’s the likelihood you would search for business opportunities based on the 541519 NAICS? A lot of folks I asked said it was not very likely they would since Other Computer Related Services does not represent what they do. This is not at all unusual since a lot of us base many of our decisions on how agencies assign NAICS Codes. Given the SBA Size Standards are attached, it’s little wonder we place so much importance on them. But are we putting too much emphasis on NAICS Codes? I think so and here’s why.
The Department of Defense obligated $5.1 billion in contracts and orders in FY2014, when 541519 was the assigned NAICS Code. Here’s how that breaks down:
- Twenty-three Defense agencies made these obligations. Navy and DISA were tops
- Under this NAICS Code were 275 Product and Service Codes referenced in FPDS-NG
- These PSC Codes represented $1.5 billion in product buys and $3.5 billion in services buys
- Of the 108 product codes, ADP Software was number one
- Of the 167 service codes, IT and Telecom – Other IT and Telecom was number one
- Thirty (30) PSC Codes representing Administrative and/or Professional Services were referenced to include:
- Background Investigation
- Court Reporting
- Logistics Support
- Public Relations
- Human Resources
- Operations Research/Quantitative Analysis
- and more!
- The obligations associated with these PSC Codes accounted for $435 million
What NAICS Codes and associated opportunities are currently not on your radar? I recommend learning which PSC Codes best represents what you do and how agencies reference what you do, and base your marketing and market research efforts on this new information. Here’s one last piece of information to help you understand the significance of PSC Codes.
PSC Codes are Important to DoD
In a 2012 Department of Defense memo, the Department states ‘DoD organizes its spend for services and supplies & equipment using a taxonomy that maps Product Service Codes as set forth in the FPDS PSC Manual. DoD has used this taxonomy for several years to support strategic sourcing and Better Buying Power initiatives.’ DoD continues by saying ‘Analyses based on the taxonomy provide significant insight into the marketplace and organizational buying behaviors and are used to identify opportunities to create significant cost savings, leverage economies of scale and draws attention to procurement best practices.’
DoD has gone as far as launching the web-based PSCTool that allows users to find the right PSC using DoD’s taxonomy. It can also help vendors ensure they use PSC Codes aligned to the DoD way of thinking.
If the biggest spender in all of federal contracting views PSC Codes as important, it’s likely we in Industry should as well.
Guy Timberlake, @GovConGuy
#Ask@GovConGuy is a resource for you to get accurate and experience-based answers to questions to better understand the steps to take in getting started as a vendor to the federal government. You are welcome to #Ask@GovConGuy by commenting on our blog posts or by submitting questions on our LinkedIn group page.