Small Business Boom: The Fastest-Growing NAICS Codes in Federal Contracting — and How to Win in Them
Federal small-business contracting has been on a tear, growing from about $154 billion in FY2021 to over $183 billion in FY2024. Small firms are now landing roughly 28% of eligible prime contract dollars — well above the statutory 23% goal. That’s not just a nice statistic; it’s a signal that agencies are deliberately shifting more work to small businesses, particularly in certain NAICS codes where demand is exploding.
Here’s what’s driving that growth, why it matters for your government contracting business, and how to take advantage.
The Fastest-Growing Small Business NAICS Codes
From FY2022 to FY2025 (through August 11, 2025), the top performers in small-business contracting — measured by compound annual growth rate (CAGR) — include:
511210 – Software Publishers (~25% CAGR): Driven by cloud adoption, SaaS subscriptions, and enterprise software licensing, with many wins through GSA MAS and 8(a) sole source awards.
562910 – Environmental Remediation Services (~22% CAGR): Boosted by climate-related cleanup projects and Infrastructure Investment & Jobs Act funding.
541715 – R&D in Physical, Engineering & Life Sciences (~20% CAGR): Fueled by SBIR grants, innovation funding, and DoD/NASA research initiatives.
236220 – Commercial & Institutional Building Construction (~18% CAGR): VA hospital projects, MILCON, and federal facilities upgrades — often via SDVOSB and HUBZone set-asides.
541512 – Computer Systems Design Services (~17% CAGR): IT modernization, cloud integration, and cybersecurity projects on GWACs like STARS III and Polaris.
Other notable climbers: 541511 (Custom Software), 561210 (Facilities Support), 237130 (Power/Comm Line Construction), and 541330 (Engineering Services).
Why This Matters for Small Contractors
These NAICS codes aren’t just statistics — they represent real government contracting opportunities in sectors where policy priorities and budgets align. The federal government is:
Pouring billions into IT modernization and cybersecurity, opening the door for small tech firms and resellers.
Funding infrastructure and environmental projects at record levels, where local and small contractors have a competitive edge.
Leveraging federal contracting certifications — from SBA 8(a) certification to HUBZone, women owned small business certification, and disabled veteran small business certification — to meet socio-economic contracting goals.
Using set-asides strategically: in FY2024, $33.3B in small business awards came through set-aside programs, with 8(a) certification assistance proving critical in winning big-ticket IT and consulting contracts.
How to Position Your Business for These Growth Markets
Align Your NAICS Portfolio
Review your contractor NAICS code registrations in SAM.gov to make sure they match the fastest-growing sectors.
If you’re in a related field, consider adding best NAICS codes for small business aligned with your capabilities.
Maximize Your Certifications
Invest in SBA 8(a) certification services if eligible; 8(a) contracts are dominating growth in IT and R&D NAICS.
Pursue women business certification or disabled veteran government contracts eligibility to qualify for sole-source and limited competition awards.
Get on the Right Contract Vehicles
For IT NAICS, target GWACs like 8(a) STARS III or Polaris.
For construction, get pre-qualified for MATOCs and IDIQs run by VA and Army Corps.
Sharpen Your Proposal Game
In hot NAICS, competition is fierce — strong Government Contract Proposal Writing can make the difference.
Partner with firms offering SBIR Grant Assistance or Grant Writing for Nonprofits if you’re eyeing R&D work.
Track Agency-Specific Trends
DoD, VA, GSA, and DHS are the biggest small-business growth drivers. Monitor their forecasts and OSDBU outreach events.
The Big Picture
If your government contracting business is in IT, R&D, construction, environmental services, or specialized manufacturing, you’re in the sweet spot of federal demand. But opportunity isn’t automatic — aligning your federal contracting certifications, NAICS codes, and contract vehicle access with these growth areas will be key to capturing your share.
For a deep dive into which NAICS codes are not just big but most competitive, and strategies for winning in them, check out our related post: The Most Competitive Federal Contracting NAICS Codes of 2024 — and How Small Businesses Can Still Win. If you’re serious about scaling in federal contracting, it’s your next must-read.
If you aren't a Squared Compass partner, what are you waiting for? From getting your business set up with specific government set aside programs at both the State and Federal level, to being empowered by a Fractional Capture team to win government contracts, to receiving tailored government contract opportunities Squared Compass delivers immense value which helps propel our partners to success. Schedule a chat with our team today.
