Codes, registration and small business status

Before the government can pay you, it has to be able to identify you, classify what you sell and decide which competitions you are eligible for. That is done with a registration and a handful of codes. This guide explains each one and how they connect.

Register in SAM#

The System for Award Management, at SAM.gov, is the government’s register of the businesses it can contract with. With few exceptions you must be registered there before you can be awarded a contract, and stay registered to be paid.

• Registration is free. Companies that offer to register you for a fee are not the government. You can do it yourself.
• It takes time. Allow several weeks. Your legal name and address are validated against other records, and a mismatch stalls the process.
• It expires. Registration has to be renewed every year. A lapsed registration can stop an award or a payment.

Registration gives you two identifiers and holds a set of statements:

Those statements are made to the government. Read each one before you confirm it.

1. ValidationValidate name & addressLegal business name and physical address validated against official records.
2. IdentifierReceive Unique Entity ID12-character UEI assigned directly in SAM.gov.
3. IdentifierReceive CAGE code5-character CAGE code assigned for your physical location.
4. StatementsComplete reps and certsConfirm size, ownership, and compliance statements; renew annually.

↺ Renew registration every year

NAICS codes#

The North American Industry Classification System sorts businesses by what they do. A NAICS code has six digits, and each digit narrows the industry. Codes in the 54 group, for example, cover professional, scientific and technical services, and the codes under 5415 cover computer systems design and related services.

NAICS codes matter in contracting for one reason above all: each code has a size standard, and the size standard decides whether you count as small.

Two different sets of codes are in play:

• Yours. In SAM you list the codes that describe your business. You can list many. One is marked as primary.
• The solicitation’s. The contracting officer assigns one NAICS code to each solicitation, the one that best describes the main purpose of the purchase. That code’s size standard applies to that competition, whatever your primary code is.

The codes are revised every five years. The 2022 edition was in use when this guide was checked.

Product and service codes#

A product and service code (PSC) describes what is being bought, where a NAICS code describes the kind of business that sells it. A PSC has four characters.

Buyers record a PSC on every contract action, and many search by it when they look for vendors. So PSCs are how you find what an agency has bought before, and from whom. Knowing the handful of PSCs your work falls under makes searching past awards much more precise than searching by keyword.

There is no official one-to-one mapping between the two systems. One NAICS code corresponds to many PSCs and the reverse. A crosswalk is a starting point for a search, built from how the codes have been used together.

Size standards#

A size standard is the largest a business can be and still count as small for a given NAICS code. The Small Business Administration sets them, in 13 CFR Part 121, and publishes them in a table.

There are two kinds of measure:

For example, in the table in effect when this guide was checked, custom computer programming services (NAICS 541511) had a size standard of $34 million in average annual receipts.

Three things to know:

• Affiliates count. Your size includes companies you control or that control you. Ownership, shared management and some contractual relationships can all create affiliation.
• Size is judged per solicitation, under the NAICS code assigned to it, as of the date you submit your offer.
• The standards move. They are adjusted for inflation and reviewed industry by industry, and a broader restructuring was under consideration in 2026. Always read the current table.

For most set-asides you represent your own size. If a competitor believes you are not small, they can protest, and the Small Business Administration decides.

Set-asides#

A set-aside is a competition limited to a group of businesses. The basic rule, often called the rule of two: when a contracting officer reasonably expects offers from at least two capable small businesses at fair prices, the purchase is set aside for small businesses.

Dollar value changes the default. As of October 2025:

This is why answering a request for information matters. Those answers are how a contracting officer learns that two capable small businesses exist.

DecisionWhat is the anticipated dollar value of the purchase?

• Up to $15,000
  Micro-purchase thresholdBought without competition, often by government purchase card.
• Above $15,000 up to $350,000
  Simplified acquisition thresholdReserved for small businesses unless two capable small businesses cannot be expected.
• Above $350,000
  Rule of two appliesSet aside for small businesses when offers are expected from at least two capable small businesses at fair prices.

The programs#

Beyond the general small business set-aside there are programs for particular groups, each with its own eligibility rules. All require the business to be small under the relevant code.

Each program’s rules run to many pages, and ownership and control are tested closely. Read the regulation and the Small Business Administration’s own guidance before you apply, and do not claim a status in SAM that you have not confirmed. A wrong status on an offer is a false statement to the government.

Doing the work yourself#

Winning a set-aside comes with a limit on how much of the work you can hand to others. For a services contract, a small business prime generally may not pay more than half of what the government pays it to subcontractors that are not themselves similar small businesses. The percentages differ for supplies and for construction.

Check this before you build a team. A small prime that passes most of the work through to a large partner has not met the terms of the set-aside.

Nontraditional defense contractors#

A nontraditional defense contractor is defined in law, at 10 U.S.C. 3014, as a business that is not currently performing, and has not performed in at least the year before a solicitation, any Department of Defense contract or subcontract that is subject to full coverage under the Cost Accounting Standards.

Full coverage under those standards applies only to large contract awards, and contracts with small businesses are exempt from the standards altogether. As a result, most small businesses, and most commercial companies new to defense work, qualify.

The status matters because some ways of doing business with the department are built around it:

• Other transaction agreements for prototypes, under 10 U.S.C. 4022, generally require that a nontraditional defense contractor or a nonprofit research institution takes a significant part in the project, or that all significant participants are small businesses or nontraditional contractors, or that part of the cost is shared.
• Commercial treatment. The law lets the department treat what a nontraditional contractor supplies as commercial, which brings simpler terms.

Nobody issues a certificate for this status. You establish it by comparing your own contract history with the definition, and you may be asked to represent it in an offer. If you have ever held a large cost-type defense contract or subcontract, look closely before you claim it.

DecisionHas your business performed a DoD contract subject to full CAS coverage in the past year?

• No (includes all small businesses)
  Qualifies as nontraditionalEligible for prototype other transaction agreements and potential commercial treatment.
• Yes
  Traditional defense contractorMust partner with nontraditional contractors or small businesses, or share costs, on prototype OTAs.

Put it to use#

A short routine for a new company:

1. Register in SAM, and put the renewal date in a calendar.
2. Choose the NAICS codes that describe what you actually do. Look up the size standard for each.
3. Work out your size under each: average receipts or employees, including affiliates.
4. Identify the PSCs your work falls under.
5. Search past awards by those PSCs and NAICS codes to see who buys what you sell.
6. Check which programs you may be eligible for, and apply for certification where it is required.
7. Answer requests for information in your area, and say plainly that you are small and capable.

Sources#

• SAM.gov, for registration, the Unique Entity ID and contract opportunities.
• U.S. Census Bureau, North American Industry Classification System.
• The Product and Service Code Manual, at acquisition.gov.
• Small business size regulations, 13 CFR Part 121, and the Small Business Administration’s table of size standards.
• Program rules: 13 CFR Part 124 (8(a)), Part 126 (HUBZone), Part 127 (women-owned) and Part 128 (veteran-owned), at ecfr.gov.
• Limitations on subcontracting, 13 CFR 125.6, and FAR clause 52.219-14.
• Federal Acquisition Regulation, Part 19, “Small Business Programs”, and the definitions of the dollar thresholds in FAR 2.101, at acquisition.gov.
• 10 U.S.C. 3014, “Nontraditional defense contractor”, and 10 U.S.C. 4022, on prototype projects.