OHA: NAICS Code Should Be Diagnostic Imaging, Not Physicians Office

Key Takeaways

• OHA upheld NAICS 621512 for VA teleradiology contract
• Appellant bears burden; must prove clear error
• Service character, not location, drives NAICS classification
• Incorrect NAICS can limit small‑business eligibility and competition
• Appeals succeed only with substantive evidence, not just alternatives

Summary

The SBA Office of Hearings and Appeals upheld the VA’s use of NAICS code 621512 – Diagnostic Imaging Centers – for a teleradiology contract, rejecting Tribal Providers’ push to reclassify it as 621111 – Offices of Physicians. The appellant failed to meet the pre‑ponderance‑of‑evidence burden required to prove a clear error in the contracting officer’s designation. OHA emphasized that the character of the services, specifically image production and electronic transmission, determines the appropriate code, not the location of the physicians. The decision highlights the rigorous proof needed for successful NAICS appeals.

Pulse Analysis

The recent Small Business Administration Office of Hearings and Appeals (OHA) ruling on a VA teleradiology solicitation underscores how the agency interprets NAICS classifications. The contract was initially coded 621512 – Diagnostic Imaging Centers – with a $19 million size standard. Tribal Providers argued the work consisted solely of radiologist interpretations and should fall under 621111 – Offices of Physicians – hoping to shrink the offeror pool. OHA rejected the argument, noting that the production of images, including electronic transmission and annotation, is the decisive factor, not merely the location of the physicians.

Under 13 C.F.R. § 134.314, the appellant carries the preponderance‑of‑evidence burden to demonstrate a ‘clear error of fact or law’ in the contracting officer’s NAICS selection. The OHA decision makes clear that a mere preference for a different code is insufficient; the protest must show that the agency’s factual findings are plainly mistaken. This high evidentiary bar directly impacts small‑business strategies, because an incorrect code can inflate the size standard and disqualify firms from set‑aside competitions. Contractors must therefore assemble detailed market data, service descriptions, and NAICS manual citations to meet the standard.

For practitioners considering a NAICS appeal, the ruling offers two practical takeaways. First, focus the argument on the nature of the deliverables—image production, data handling, or equipment use—rather than on who performs the service. Second, prepare a robust evidentiary record before filing, including comparable contracts, industry classifications, and expert testimony. While agencies may sometimes amend solicitations voluntarily, once a protest reaches OHA the threshold is unforgiving. Understanding this precedent helps firms evaluate whether the potential benefit of a smaller pool outweighs the cost of a rigorous appeal, and when to seek counsel early.