I’ve penned three articles recently on the importance of understanding and utilizing the classification systems federal agencies use to describe the industries in which they do business and the goods and services they procure from those industries, and how vendors often have a very limited view of business opportunities due to not leveraging both classifications.
To further drive the point home, I decided to reach out to a Department of Defense Contracting Officer for additional insights on the subject.
Here are some of the bullets from our conversation:
- The North American Industrial Classification System (NAICS) refers to the industries in which agencies are spending contract dollars
- Product and Service Codes (PSC) refer to the specific products and services being purchased
- PSCs are used by agency senior leadership (specifically DoD for this discussion) and Congress so they know what is being purchased
- There is no one-to-one matching for NAICS and PSC
- Contracting officers typically leverage both classifications when conducting industry research
- Basis for assigning NAICS Codes to purchases is choosing the prominent NAICS based on highest value for the requirement
- PSC Codes are assigned based on the prominent product or service based on highest value for the requirement
- Warns vendors not to rely solely on NAICS or PSC in research and marketing – requires a balanced approach or opportunities will be missed
In a recent article I used the example of DoD citing NAICS Code 541519 – Other Computer Related Services in $5.1 billion in FY14 obligations and referencing 275 Product and Service Codes under that NAICS. Companies who sell products and might customarily ignore this NAICS Code would have missed $1.5 billion in business. Companies providing Administrative and/or Professional Services who ordinarily shun IT NAICS Codes would have missed nearly $500 million in opportunities. Keep in mind, this is based on one NAICS Codes leveraged by DoD last fiscal year. Overall, the Department of Defense referenced 1,104 NAICS Codes in FY14 and 2,365 PSC Codes under those NAICS. To illustrate why it’s important to consider actual and related PSC Codes in addition to relevant NAICS Codes, consider this. The total number of NAICS and PSC Codes referenced by DoD created 40, 764 NAICS-PSC combinations for DoD in FY2014.
The lesson here? Understand NAICS and PSC, then expand your criteria for identifying opportunities, or suffer the consequences.
Guy Timberlake, The Chief Visionary
“The person who says it cannot be done should not interrupt the person doing it.”