SIO has updated the way we identify small businesses in our database, specifically with the Small Business data we receive from the System for Award Management (SAM). As a result of this change, suppliers that were previously listed as a small business in our database and included in Data Enrichment and software products may change and no longer be included as a Small Business.
What is a Small Business?
A Small Business Enterprise (SBE) is an independently owned and operated company that is limited in size and revenue depending on the industry. The Small Business Administration (SBA) has specified a size standard for each individual NAICS code.
It is common for companies to offer many products and services, and therefore have multiple NAICS codes that apply to their business. Since the small business size standard varies by NAICS code, it is possible that a company may qualify as a small business in some NAICS codes and not in others.
What is a NAICS code?
The North American Industry Classification System (NAICS) is the standard used by federal agencies to classify businesses by industry for the purpose of producing statistical data. NAICS codes are six-digit numerical codes developed under the U.S. Office of Management and Budget (OMB), and adopted in 1997 to replace the Standard Industrial Classification (SIC) system.
What is the System for Award Management?
The System for Award Management (SAM) is an online registration database operated by the U.S. Federal Government. Businesses register on SAM for federal contracting and grant opportunities, and complete an online attestation for their socio-economic status and their business size, as determined by SAM.
How does SAM determine business size for suppliers that register?
Businesses that register on SAM can select multiple NAICS codes that apply to their business and must also designate a Primary NAICS code. The SAM system then calculates whether the business qualifies as Small in each specific NAICS category selected by the business, using the Size Standards the SBA has set for each NAICS and the revenue/employees reported by the business. In the SAM data file shared with SIO , SAM provides the Small Business designation at the NAICS code level and identifies the primary NAICS code for the business.
How is SIO adding small business classifications from SAM to the SIO database?
For businesses that are registered on SAM, the SIO database and enrichment service will identify the company as Small Business in SAM only when the company is listed as small for its Primary NAICS code in SAM. In situations where a company is small for NAICS codes other than its Primary NAICS code on SAM, the business will not be added to the SIO database or enrichment results as Small Business from SAM.
Previously, SIO identified a business as Small Business from SAM if it qualified as small for any of the NAICS codes it reported in SAM. Previous SIO data enrichments included companies as Small Business from SAM that were identified as small for only one NAICS code in SAM, but not considered small in their Primary NAICS code. Future enrichments will not include such suppliers.
Why did we make the change?
In our evaluation of our data processes, we determined the previous approach was too lenient in its identification of small businesses. Large businesses could be identified as small if they had even one NAICS code in SAM where they qualified as small. While this increased the number of suppliers identified as small business, it also increased the risk that some customers may incorrectly classify some large suppliers as small. We assessed that the new approach provides a more accurate approach and one that our customers can better defend in case of an SBA audit.
How does this impact you?
If your prior data enrichment results included suppliers from SAM that were not small for their primary NAICS codes on SAM, future enrichments will not include such suppliers. As a result, you will see a change in the suppliers that we previously returned as small from SAM. You may also see such suppliers no longer displayed as Small Business in Supplier Locator, Tier 1 and Tier 2 Reporting.
If you track NAICS codes internally for your purchases and you are able to make the correct determination of size standards for your suppliers at the NAICS code level, please contact your SIO Project Manager or Client Success Manager. We can provide your enrichment results where for all suppliers registered on SAM, we can include each NAICS code reported on SAM along with the Small Business designation that applies to each NAICS. You can then utilize these results to identify which suppliers qualify as small business based on your specific purchases with them.
How can your Small Business suppliers be added to the SIO Database?
If you are working with small businesses that are not registered in SAM or certified by a government agency, you can have your suppliers register in the SIO database at our SupplierOne platform. Suppliers that register on SupplierOne will have the opportunity to self-certify as a small business by completing an online affidavit, and will be added to the SIO database as a Small Business. These suppliers would then be identified as Small Business in Data Enrichment results that include self-certified data. Please contact your SIO Project Manager or Customer Success Manager for more information.