January 19, 2006

epipeline's Eye on "Research and Development in the Physical, Engineering, and Life Sciences," NAICS 541710

As the Business Development Manager responsible for creating the business plan for your company, it can be very challenging to gain a perspective of opportunities over the several years; and from that, determine the specific opportunities to pursue.

This week we are going to look at the "Research and Development in the Physical, Engineering, and Life Sciences " industry, as represented under NAICS 541710. To understand this NAICS code better, epipeline has asked the following questions:

1. Who issues the contracts?
2. Who wins the contracts?
3. Where are these contracts?

NAICS 541710 is used when the contract requires contractor-provided research and experimental development in the physical, engineering, and life sciences, such as agriculture, electronics, environmental, biology, botany, biotechnology, computers, chemistry, food, fisheries, forests, geology, health, mathematics, medicine, oceanography, pharmacy, physics, veterinary, and other allied subjects.

Unlike most service-related NAICS codes, NAICS 541710 relies on an employee-based size standard, rather than gross revenue. Specifically, the size standard associated with this code is 500 employees. This code also had some additional footnotes with regards to the size standard: For research and development contracts requiring the delivery of a manufactured product, the appropriate size standard is that of the manufacturing industry.  "Research and Development" means laboratory or other physical research and development. It does not include economic, educational, engineering, operations, systems, or other nonphysical research; or computer programming, data processing, commercial and/or medical laboratory testing. For purposes of the Small Business Innovation Research (SBIR) program only, a different definition has been established by law. See section 121.701of these regulations. "Research and Development" for guided missiles and space vehicles includes evaluations and simulation, and other services requiring thorough knowledge of complete missiles and spacecraft.

This NAICS was previously represented by three different Standard Industrial Classification (SIC) codes, as they pertained to the following requirements:

·         SIC 3764: Guided missile and space vehicle engine research and development

·         SIC 3769: Guided missile and space vehicle parts (except engines) research and development

·         SIC 8733: Observatories, research institutions

NAICS 541710 is further broken out to include these additional specific topics, that were not represented under the SIC code system:

·         Agriculture research and development laboratories or services

·         Bacteriological research and development laboratories or services

·         Biology research and development laboratories or services

·         Biotechnology research and development laboratories or services

·         Botany research and development laboratories or services

·         Cancer research laboratories or services

·         Cerebral palsy research laboratories or services

·         Chemical research and development laboratories or services

·         Computer and related hardware research and development laboratories or services

·         Dental research and development laboratories or services

·         Electronic research and development laboratories or services

·         Engineering research and development laboratories or services

·         Entomological research and development laboratories or services

·         Environmental research and development laboratories or services

·         Experimental farms

·         Fisheries research and development laboratories or services

·         Food research and development laboratories or services

·         Forestry research and development laboratories or services

·         Genetics research and development laboratories or services

·         Geological research and development laboratories or services

·         Health research and development laboratories or services

·         Industrial research and development laboratories or services

·         Life sciences research and development laboratories or services

·         Mathematics research and development laboratories or services

·         Medical research and development laboratories or services

·         Oceanographic research and development laboratories or services

·         Physical science research and development laboratories or services

·         Physics research and development laboratories or services

·         Veterinary research and development laboratories or services

Total reported spending under NAICS 541710 in FY03 was almost $30 Billion. FY04 increased spending, to over $33 Billion. (Source: epipeline's FPDS information, covering fiscal years 2003 and 2004).

Who issues the contracts?

NASA is the largest buyer of services under NAICS 541710, with over $17 Billion in contract spending over the last 3 fiscal years. This equated to a 24% market share. The United States Army, the Department of Energy, the Air Force, and the Navy round out the top five. These five departments comprise 84% of NAICS 541710 spending in FY03-FY05*, which equates to just over $67 Billion.

The Army had top honors in FY04 with just almost $8 Billion in reported contract spending under that NAICS, with the Department of Energy, the Air Force, NASA, the Navy, DoD and National Institutes of Health (NIH) all with reported spending of over $1 Billion in FY04.

The chart below illustrates the market share held by the top ten agencies under NAICS 541710 for FY03 through FY05** combined - these ten departments/agencies comprise 99% of reported contract spending during this period for this NAICS code.

Source: epipeline's FPDS information, covering FY03-FY05*
**Note: FY05 data may not include all contract expenditures for all quarters.

Who wins the contracts?

The two charts below identify the top 10 Companies, by market share, for FY04-FY05. The first chart represents the top 10 companies that were awarded their contracts under ANY type of competition, whether it was full and open, small business set-aside, sole-sourced, etc. This list primarily consists of large businesses. The second chart, however, lists the top 10 companies that won their contracts under RESTRICTED competition. Specifically, epipeline limited this to those contracts awarded under the following acquisition strategies:
 

·         8(a) Competed

·         8(a) Small Disadvantaged (SDB) set-aside

·         8(a) sole-source

·         SDB set-aside

·         SDB, 8(a) with HUBZone

·         Combination HUBZone and 8(a)

·         HUBZone set-aside

·         HUBZone sole-source

·         Service Disabled Veteran-Owned Small Business (SDVOSB) set-aside

·         SDVOSB sole-source

·         Emerging Small Business set-aside

·         Very Small Business set-aside

·         Reserved for Small Businesses ($2501 to $100,000)

·         Total Small Business set-aside

The California Institute (of) Technology is the top of the unrestricted competition list, with over $10 Billion in contract dollars for FY04/FY05. This is largely due to the Management and Operations contracts they hold with the Department of Energy.  The University of California earns their high rank (# 3, with over $4.5 Billion) for their Energy M&O contracts as well. Boeing holds two spots in the top five. They are ranked second with over $5.7 Billion and appear again at # 5 with over $1.8 Billion for FY04/FY05 as part of the Boeing Sikorsky Comanche Team. PLEASE NOTE: as this is a listing by Company name, rather than PARENT company, some companies may have more than one ranking, which is not reflected in the chart below.

BAE Systems Analytical Solutions, tops the "restricted" competition chart (limited to small businesses and listed above). Their FY04-FY05 contracts were valued at over $220 Million. The total contract value for FY04-FY05 - for contracts using restricted (small business-related) competition) was over $3.2 Billion. PLEASE NOTE: as this is a listing by Company name, rather than PARENT company, some companies may have more than one ranking, which is not reflected in the chart below.

Source: epipeline's FPDS information, covering fiscal years 2004 & 2005

Where are these contracts?

These contracts are being performed across the continental United States. The map below illustrates the distribution of locations where the market share is 2% or higher for the period of FY03 through FY05. California holds a whopping 29% of the market share, which equates to over $21 Million in reported contract spending for FY03 - FY05. Alabama is a distant second, with 10% (almost $7 Billion). Texas, Pennsylvania, and New Mexico round out the top five, and comprise almost 60% of the market share (over $42 Billion).

Contract Place of Performance: NAICS 541710, FY03 - FY05

Source: epipeline's FPDS information, covering FY03-FY05*
**Note: FY05 data may not include all contract expenditures for all quarters.

epipeline's application contains many opportunities which are identified by this NAICS code. To learn more about the NAICS 541710 opportunities or other opportunities that epipeline is tracking today; try the following search in the epipeline application:

What NAICS Code Do YOU Want To See

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