Guidance - North American Industry Classification System (NAICS) Coding on Stewardship Contract Solicitations in Compliance with Federal Acquisition Regulation (FAR) and Small Business Administration (SBA) Regulations

UNITED STATES DEPARTMENT OF THE INTERIOR
BUREAU OF LAND MANAGEMENT
WASHINGTON, D.C. 20240

March 11, 2009
In Reply Refer To:
1510, 1511, 5400, 5920 (270, 850) P

EMS TRANSMISSION 03/17/2009
Instruction Memorandum No. 2009-089
Expires: 09/30/2010

To: All Washington Office and Field Office Officials
Attn: Contracting Officers

From: Assistant Director, Renewable Resources and Planning

Subject: Guidance - North American Industry Classification System (NAICS) Coding on Stewardship Contract Solicitations in Compliance with Federal Acquisition Regulation (FAR) and Small Business Administration (SBA) Regulations

Program Areas: Forests and Woodlands Management, Procurement and Acquisition.

Purposes: The purpose of this Instruction Memorandum (IM) is to provide information and guidance to Bureau of Land Management (BLM) offices on applying appropriate NAICS coding of stewardship contract solicitations and to assure compliance with the Federal Acquisition SBA small business set aside regulations.

Policy/Action: To comply with the Federal Acquisition Regulation (FAR) and SBA requirements and to assure appropriate coding of stewardship contract solicitations to the most appropriate NAICS code, the following steps shall be taken for each project:
Conduct outreach to determine the most common NAICS code category/categories of firms interested in the project. Most BLM Stewardship contractors are one or more of the following:
113110 – Timber Tract Operations
113210 – Forest Nurseries & Gathering of Forest Products
113310 – Logging
115310 – Support Activities for Forestry (including fuels management)
Outreach shall be conducted by:
The Contracting Officer (CO) posting a “sources sought” notice on the internet prior to issuing the solicitation. The notice will provide a brief description of the project and ask vendors to respond if they are interested.
Field Office or State Office placing calls or sending mailings to potential vendors and recording responses as to who is interested.
Whenever possible, conduct public outreach meetings prior to solicitation development to discuss project goals and design. Record names of vendors who attend.
The Project Lead/Contracting Officer Representative (COR) will provide a worksheet (see Attachment 6) to the CO with the initial contracting package. The worksheet will identify which service items are to be considered under the 113310 (Logging) NAICS code and which are to be considered under the 113110 (Timber Tract Operations), 113210 (Forest Nurseries and Gathering of Forest Products), and 115310 (Support Activities for Forestry) NAICS codes. Refer to the SBA’s Table of Size Standards and NAICS Code Description Footnotes (see Attachments 3, 4, 5) to assist in identifying the NAICS code for items in the contract. This worksheet is only for the purpose of assisting the CO in determining the NAICS code that should be used, and not to change the Schedule of Items or how items are shown on the Certificate for Contract Payment/Invoice (Form 1510-10).
Using all the information derived from the above steps, the CO will determine the NAICS code that best fits the project and determine whether the project shall be set aside for small business concerns or advertise it under full and open procedures. In concert with SBA regulations, the FAR requires that an acquisition be set aside for small business concerns if 1) there is a reasonable expectation to receive proposals from two or more small businesses and 2) that offers received from them will be reasonable in price. If there is no expectation of two or more small businesses then the contract should be advertised full and open.
Background: Concern has been raised in the private sector that the specific SBA NAICS coding that BLM has been using for stewardship contract solicitations is precluding some companies from bidding on stewardship contracts. Firms that are qualified to purchase small business set aside timber under the BLM 5400 Manual are typically categorized under the 113310 NAICS code. These firms do not, however, qualify if a project is set aside for small business firms under the 115310 NAICS code since the 115310 standard is based on the company’s gross income, in this case $7.0 million in average annual receipts ($17.5 million if it is for fire or fuels reduction work). This is also the case if the project is classified as 113110 or 113210 which also have small business size standards set by gross income. Conversely, the small business size standard for 113310 is set by number of employees, in this case 500 employees or less.
The main issue is how to code a stewardship contract solicitation based upon the work and
associated costs involved in the contract. Stewardship contracts consist of a variety of
both service work and product removal work. When field offices submit their contract packages,
government estimates for both the service work and net product values are included. Once the
contract is submitted, COs review the government estimates and the contract work specifications
to determine which NAICS code to use.
SBA regulations at 13 CFR121.402b state:
“(b) The procuring agency contracting officer, or authorized representative,
designates the proper NAICS code and size standard in a solicitation, selecting
the NAICS code which best describes the principal purpose of the product or
service being acquired. Primary consideration is given to the industry
descriptions in the NAICS United States Manual, the product or service
description in the solicitation and any attachments to it, the relative value and
importance of the components of the procurement making up the end item being
procured, and the function of the goods or services being purchased. Other
factors considered include previous Government procurement classifications of
the same or similar products or services, and the classification which would best
serve the purposes of the Small Business Act. A procurement is usually
classified according to the component which accounts for the greatest percentage
of contract value. Procurements for supplies must be classified under the
appropriate manufacturing NAICS code, not under the wholesale trade NAICS
code.”
There is confusion in separating the items between service work and product removal work.
Many of the items in the service side of the contract would be considered logging related (spur
road construction etc.) under 5400 Manual procedures but are being grouped into other AICS
codes based on the fact they are service work. As an aid to clarify the purpose of each line item
in the contract, the worksheet on Attachment 6 will identify which Schedule items are non-
logging related service work vs. product removal/logging related work and thus assist the CO in
selecting the most appropriate NAICS code for the project.

Timeline: Implementation is effective immediately and apply to all future stewardship contracts.

Budget Impact: Implementation has minimal budget implications, and will improve the efficiency and flexibility of stewardship projects. Field Offices will need to provide detailed appraisal information showing logging costs and how the net product/stumpage value was determined. This Policy/Action should result in a more consistent process in determining NAICS codes and small business set-aside usage which may result in potentially more competitive bidding.

Coordination: This IM was coordinated with Tom Clarke of the Small Business Administration, Oregon State Office, Division of Business Resources (WO-850), Division of Forests and Woodlands (WO-270), and the Office of the Solicitor.

Contact: Additional information is available by contacting Nancy Adrain, Bureau Procurement Chief, Division of Business Resources at 202-452-5175 or Jim Bowmer, National Stewardship Coordinator, Division of Forest and Woodlands at 202-452-5081.

Signed by: Authenticated by:
Edwin L. Roberson Robert M. Williams
Assistant Director Division of IRM Governance,WO-560
Renewable Resources and Planning

6 Attachments:
1 - Part 121 - Small Business Administration Size Regulations - Subpart A Size Eligibility
Provisions and Standards (1 p)
2 - Part 19.102 Federal Acquisition Regulations (1 p)
3 - NAICS Codes and Definitions for Logging (1 p)
4 - NAICS Code and Definition for Support Activities for Forestry (1 p)
5 - NAICS Code and Definition Timber Tract Operations (1 p)
6 - Worksheet for NAICS code determination (1 p)