NAICS Codes Explained

The North American Industry Classification System (NAICS) is the standard system used by the United States, Canada, and Mexico to classify business establishments by type of economic activity. In federal contracting, NAICS codes determine which businesses can compete for specific contracts and define the small business size standard that applies. Understanding NAICS is fundamental to navigating the federal procurement system.

How NAICS Codes Are Structured

NAICS codes are hierarchical, ranging from 2 to 6 digits. The structure works as follows:

• 2-digit (Sector): Broad economic sectors like Manufacturing (31-33), Information (51), or Professional Services (54)
• 3-digit (Subsector): More specific groupings within a sector
• 4-digit (Industry Group): Further refinement by activity type
• 5-digit (Industry): Detailed industry-level classification
• 6-digit (National Industry): The most granular level, specific to each country

Federal contracts are typically assigned a 6-digit NAICS code. For example, NAICS 541511 covers Custom Computer Programming Services, while 541512 covers Computer Systems Design Services. The distinction matters because different codes may have different small business size standards.

NAICS and Small Business Size Standards

The SBA assigns a size standard to each NAICS code. Size standards are measured in either average annual revenue or number of employees, depending on the industry. For example:

• NAICS 541330 (Engineering Services): $25.5 million in average annual revenue
• NAICS 336411 (Aircraft Manufacturing): 1,500 employees
• NAICS 541511 (Custom Computer Programming): $34 million in average annual revenue

If your business falls below the size standard for the NAICS code assigned to a contract, you qualify as a small business for that procurement. A company might be small under one NAICS code but large under another, depending on the size standards.

Why NAICS Codes Matter for Contractors

When you register in SAM.gov, you must list all NAICS codes that describe your business capabilities. When an agency posts a solicitation, it assigns a NAICS code that determines:

• Which businesses are eligible to compete
• Whether the contract can be set aside for small businesses
• The applicable size standard for small business eligibility
• Whether industry-specific regulations apply

Choosing the right NAICS codes for your SAM.gov profile is important. If you miss a relevant code, you may not appear in searches for opportunities you could win. If you claim codes you cannot support, you risk compliance issues.

Common NAICS Codes in Federal Contracting

Some NAICS codes receive disproportionately large shares of federal contract dollars. You can explore the full distribution on our industries page. Sectors like engineering services, aircraft manufacturing, and research and development consistently rank among the highest-volume NAICS categories. IT-related codes (541511, 541512, 541519) collectively represent billions in annual obligations.

Finding Your NAICS Code

The Census Bureau maintains the official NAICS lookup tool. You can search by keyword to find codes that match your business activities. The SBA also provides a size standards tool that shows the revenue or employee threshold for each code.

Learn More

For more on federal contracting, see our guides on how government contracts work and small business set-asides.