Distributed Information Systems, Inc., No. 4189 (June 13, 1996) Docket No. SIC-96-5-10-39 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. ______________________________ ) SIC APPEAL OF: ) ) Distributed Information ) Systems, Inc. ) ) Appellant ) Docket No. SIC-96-5-10-39 ) Solicitation No. ) DAAH01-96-R-0022 ) Department of the Army ) Acquisition Center ) Redstone Arsenal, Alabama ) ______________________________) DIGEST While the Office of Hearings and Appeals (OHA) will consider the Standard Industrial Classification (SIC) code classifications for previous procurements of the same products or services, a previous classification will not, by itself, be dispositive. A SIC code designation must describe the actual products or services the Government is procuring, and not the activities the procurement is supporting. The appropriate SIC code for a procurement of Information Mission Area Support Services is SIC code 7379, Computer Related Services, Not Elsewhere Classified. DECISION June 13, 1996 HOLLEMAN, Administrative Judge: Jurisdiction This appeal is decided under the Small Business Act, 15 U.S.C. Sections 631 et seq., and 13 C.F.R. Part 121.[1] Issues How much weight should the Office of Hearings and Appeals (OHA) give to the Standard Industrial Classification (SIC) code classifications for previous procurements of the same products or services. Whether a SIC code designation for a services procurement may be based upon the activities the procurement is supporting. Whether the appropriate Standard Industrial Classification (SIC) code for this procurement is 3761, Guided Missiles and Space Vehicles, or 7379, Computer Related Services, Not Elsewhere Classified. I. BACKGROUND A. The Solicitation On May 1, 1996, the Department of the Army, U.S. Army Missile Command at Redstone Arsenal, Alabama (MICOM), issued the subject Solicitation for Information Mission Area Support Services (IMA) as a 100% set-aside for small business. Proposals are due on June 17, 1996. The Contracting Officer (CO) assigned to the procurement Standard Industrial Classification (SIC) code 3761, Guided Missiles and Space Vehicles, with a corresponding size standard of 1,000 employees. The CO's formal SIC code determination states that the requirement is to provide Federal Information Processing (FIP) services to support MICOM's mission activities.[2] IMA consists of support services for automation, telecommunications, visual information, and records management. The services will support MICOM's Corporation Information Center (CIC), which provides a wide range of services to a large number of customers including Department of Defense activities other than MICOM, other federal, state and local government agencies, tenant activities at the Redstone Arsenal, and other agencies world-wide requiring the services. MICOM anticipates that new missions and new customers will continually expand its requirements for IMA. The Statement of Work (SOW) requires the contractor to provide: technical support services for MICOM's automated systems; onsite support for IMA at MICOM; support in the utilization of microcomputer hardware, software, and tele- communications; operations support for MICOM's computer; telecommunications and laser printing services; programming and systems administrations for computer operating systems; software development and maintenance; requirements analysis; systems analysis, computer training of federal personnel; and computer support of MICOM's Evaluation and Test Center. The Solicitation includes a roster of positions the contractor will be required to fill, together with qualifications for those positions. Nearly all the of qualifications include experience in information management, automated data processing, or telecommunications. None of the qualifications includes any mention of guided missile training or experience. The senior positions require engineering, technical, or business degrees. Many of the lower-level positions require degrees in Computer Science or Management Information Systems, and experience with particular types of computer hardware and software. A three-page attachment has an extensive list described as "IMA Hardware and Software Environment". The list identifies a large number of pieces of computer equipment and software programs, which the contractor must use in performance of the contract. B. The Appeal On May 10, 1996, Distributed Information Systems, Inc. (Appellant) filed the instant appeal, by commercial delivery, with this Office. Appellant asserts the appropriate SIC code for this procurement is 7379, Computer Related Services, Not Elsewhere Classified, with a corresponding average annual receipts size standard of $18 million. Appellant asserts the services sought are computer-related support services, and do not appear related to the manufacture of guided missiles and space vehicles. Appellant requests this Office to (1) direct the CO to designate SIC code 7379 as the appropriate SIC code for this procurement; (2) direct the CO to postpone the proposal due date until after the instant appeal is decided; and (3) direct the CO to revise the solicitation to include provisions for multiple awards, delivery order or task order contracts. C. Contracting Officer's Response On May 20, 1996, the CO filed a Response to the appeal. The CO asserts the SIC code designation is proper under the general description of the Services Division in the SIC Manual[3]: Establishments which provide specialized services closely allied to activities covered in other divisions are classified in such divisions. SIC Manual, p. 353. Since these services are supporting guided missile programs, they are properly classified with guided missile programs. The CO further asserts since this requirement has been classified under this SIC code in the past, this classification should continue. The CO also asserts her actions were proper because when acquiring a product or service which could be classified in two or more size standards, a contracting officer must apply the size standard for the industry accounting for the greatest percentage of the contract price. She cites Federal Acquisition Regulation (FAR) Section 19.102(d). The CO asserts since the great majority of the services required are in support of specialized guided missile programs, 3761 is the appropriate SIC code. Further, the CO relies upon this Office's precedent to justify her decision. She cites SIC Appeal of Rothe Development, Inc., No. 2613 (1987), which affirmed a contracting officer's decision to classify a procurement for testing services under SIC code 3761, because it was servicing missile acquisition, as controlling. The CO asserts because of the unique nature of guided missile system procurement, this Office should affirm her SIC code determination. The CO also asserts if this SIC code is not affirmed, the set-aside will be dropped and the contract will be awarded by full and open competition. Finally, the CO asserts this Office has no power to order the procurement stayed or the form of the contract modified. D. Additional Pleadings On May 28, 1996, Appellant filed a Reply to the CO's Response. Appellant reasserts MICOM clearly is acquiring computer-related services. Appellant asserts, despite the CO's SIC code determination, only one sentence in the entire SOW and attachments refers to weapons systems, and there are no references to rockets or guided missiles. Appellant disputes the CO's assertion the majority of services in this procurement will support guided missiles acquisition. Rather, Appellant asserts the portion of the Solicitation the CO refers to represents man- hours which will be delivered under Technical Delivery Orders, which cover a wide range of services used by many Federal agencies. Appellant further asserts MICOM is procuring services largely associated with the acquisition, use, and support of commercial, off-the shelf computer hardware and software. Finally, Appellant withdraws its request this Office order the CO to change the contract form. On June 4, 1996, the Presiding Judge issued an Order directing the CO to clarify apparent discrepancies between her Response and the Solicitation. On June 5, 1996, the CO responded to Appellant's Reply. This Response reasserted the positions the CO took in her earlier Response, denied the services under the contract were available to any government agency, and asserted the primary users of the services are MICOM's Program Managers and Program Executive Officers, whose mission is the acquisition and maintenance of guided missiles. On June 7, 1996, the CO responded to the Presiding Judge's Order. The CO admits her Response contained errors in the calculations and breakdowns of the man-hours required in the Solicitation, and corrects them in her June 7th Response. The CO identifies a "base effort" of 230,400 man-hours of service. The CO asserts that 20% of this base effort is in support of the Engineering Data Management System Program Management Office, which provides services in direct support of Army missile systems. The CO identifies the remaining 6,209,105 man-hours required by the Solicitation as "surge effort". The CO further asserts most of the surge effort historically supports MICOM's Program Managers and Program Executive Officers, whose mission is the acquisition and maintenance of guided missiles, and MICOM's expectation is this will continue to be the case. Therefore, under FAR Section 19.102(b), the CO asserts it is proper to classify the procurement under the 3761 SIC code as a majority of the effort will support guided missile acquisition and maintenance. Finally, the CO asserts, in support of her 3761 SIC code determination, the contractor would be unable to provide the required services to MICOM without some knowledge of missile systems and programs. On June 11, 1996, Appellant filed a reply to the CO's June 5th and 7th pleadings asserting that the CO had failed to comply with the June 4th Order. II. DISCUSSION Because Appellant filed this appeal within ten days of the issuance of the solicitation, the appeal was timely. 13 C.F.R. Section 134.304(a)(3). The Presiding Judge will exercise his discretion to accept the Appellant's Reply into the record, as it was filed promptly and removes the issue of the proper contract form from the instant appeal. The Presiding Judge also accepts the CO's June 5th and 7th pleadings, as they are responsive to the June 4th Order and clarify matters left ambiguous by the first Response. Appellant's June 11th pleading is accepted, as it was filed timely in response to the CO's June 5th and 7th pleadings. 13 C.F.R. Section 134.207(b). The Appellant's request that this Office direct the CO to postpone the proposal due date is DENIED, as this Office has no jurisdiction to do so. See 13 C.F.R. Section 134.102. The correct SIC code for a procurement is that which best describes the principal purpose of the services being procured, in light of the industry description in the SIC Manual, the description in the solicitation, and the relative weight of each element of the solicitation. See 13 C.F.R. Section 121.402(b); SIC Appeal of Jack Faucett Associates, No. 4071 at 3 (1995). The standard of review is whether the SIC code designation is based on a clear error of fact or law. 13 C.F.R. Section 134.314. In a SIC code appeal proceeding, the appellant has the burden of proof, by a preponderance of the evidence, to show error in the contracting officer's SIC code designation. SIC Appeal of The Scientific Consulting Group, Inc., No. 4186 (1996). The SIC code designated by the CO, 3761, Guided Missiles and Vehicles, applies as follows: Establishments primarily engaged in manufacturing complete guided missiles and space vehicles. This industry also includes establishments owned by guided missiles and space vehicle manufacturers and primarily engaged in research and development on these products, whether from enterprise funds or on a contract or fee basis. SIC Manual, p. 240. Appellant asserts 7379 is the proper SIC code. This code applies as follows: Establishments primarily engaged in supplying computer related services, not elsewhere classified. Computer consultants operating on a contract or fee basis are classified in this industry. SIC Manual, p. 367. In light of the SIC Manual descriptions, and the description of the services MICOM seeks to procure in the Solicitation, the correct SIC code for this procurement is 7379. The SOW deals at length with the computer services the contractor must provide; requires the personnel the contractor provides be well-qualified in computers; provides an extensive list of the computer hardware and software that will be used in performing the contract; and the CO's own determination describes the requirement as information processing services. The Solicitation mentions weapons systems only once, and does not mention rockets or guided missiles at all. Nothing in the Solicitation indicates the contractor will be involved in the design, procurement or testing of guided missiles. This procurement is clearly for computer services. The CO's reliance on the general description of the Services Division in the SIC Manual is misplaced. First, the SIC Manual requires the services procurement be "closely allied" to the activity serviced in order to be classified under it. The Presiding Judge interprets this description as requiring that the services procurement must be inextricably intertwined with the activity serviced so that it is an intrinsic part of it, before the procurement may be found "closely allied", and thus classified under serviced activity's SIC code. Since nothing in the Solicitation refers to procurement of, production of, or research on, missiles, such intertwining is not established here. Second, this very general language cannot overcome the specific language of the SIC code descriptions, and of the Solicitation itself which compels a finding that the appropriate SIC code is 7379. Indeed, this Solicitation is significantly more specific in its description of computer services than several which this Office has previously ruled were properly classified under 7379. See SIC Appeal of Jack Faucett Associates, No. 4071 (1995); SIC Appeal of Information Ventures, Inc., No. 3731 (1993); and SIC Appeal of Challenger Engineering, Inc., No. 3684 (1992). The CO's reliance upon the previous classification of the procurement also is misplaced. While it is true this Office gives consideration to the previous SIC code classifications for the same services, they are by no means dispositive. See SIC Appeal of Oregon Iron Works, Inc., No. 2938 (1988). The previous classification is certainly not dispositive here, where the correct SIC code is clear from the text of the Solicitation itself. Further, the CO's reliance upon FAR Section 19.102(d) is misplaced. The CO's statement and the Solicitation support the assertion that the majority of the services here procured, measured both by man-hours and price, are supporting activities to acquire and maintain missiles. However, that is not relevant here. A SIC code designation must describe the actual services (or products) the Government is procuring, and not the activities the procurement is supporting. The instant Solicitation seeks to procure computer services to support MICOM in its missile acquisition program. The proper SIC code is thus for computer services, and not missiles. Under the CO's reasoning, almost any MICOM procurement for services could be characterized as a procurement for missiles, and this would render the SIC system meaningless. This Office declines to reach such a result on as slender a reed as one sentence in the general description of the Services Division of the SIC Manual. The CO's citation of Rothe Development, supra is inapposite. The procurement in Rothe was for research laboratory services for space and missile programs. Since research on missiles is explicitly included in the description of SIC code 3761, the procurement was properly classified under that code. The instant procurement is for computer services, which are not included in the description of SIC code 3761. Further, the fact that some familiarity with missile systems is required does not justify assigning to the procurement the 3761 SIC code. The required level of experience can be included as an evaluation factor in the Solicitation, both for the firm and for the individuals offered as part of its proposal. This would ensure that MICOM receives the expertise it needs, without assigning an inappropriate SIC code. Finally, the CO's regrettable threat to remove this procurement from the small business set-aside program, in the event it is reclassified, cannot and should not affect this Office's decision. This Office must render its decisions based upon the record before it and the law, and not upon unsupported and unverifiable predictions of future actions by the procuring agency, which may directly pervert the intent and the spirit of the small business set-aside program. This Office therefore concludes Appellant has met its burden of proof and demonstrated clear error in the CO's SIC code determination and the appropriate SIC code for this procurement is 7379. Conclusion This Office's clear precedent commands the holding that the proper SIC code for this procurement is 7379. The relief sought in the appeal is GRANTED as to the request to reclassify the procurement, and DENIED as to the other relief requested, and the Contracting Officer's SIC code designation is REVERSED. This constitutes the final decision of the Small Business Administration. See 13 C.F.R. Section 134.316(b). _______________________________ Christopher Holleman Administrative Judge ____________________ [1] The Small Business Administration's Size and SIC regulations, and the procedural regulations for this Office, have been revised. See 13 C.F.R. Parts 121 and 134 (1996). The instant solicitation was issued, and the instant appeal was filed, after the effective date of the new procedural and substantive regulations. Thus, the new regulations, both procedural and substantive, will apply to this proceeding. [2] The CO prepared a formal SIC code determination for this procurement. The regulations make no provision for this, but they do not prohibit it. [3] Standard Industrial Classification Manual, Office of Management and Budget, 1987 edition.