Opportunity Systems, Inc., No. 3367 (October 24, 1990) Docket No. 90-8-29-101 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. 20416 SIC APPEAL OF: ) ) Opportunity Systems, Inc. ) ) ) Appellant ) Docket No. SIC-90-8-29-101 ) Solicitation No. RFPˇ90ˇ012 ) Department of Education ) Washington, D.C. ) DIGEST A solicitation for the conduct of a survey of school districts to identify potential civil rights problems should be classified under SIC code 7379, to which a $12.5 million average annual receipts size standard applies, if the predominant task involves data processing rather than data collection. DECISION October 24, 1990 PHILLIPS, Administrative Judge, Presiding: Jurisdiction This appeal is resolved in accordance with 15 U.S.C. 632 and the regulations published at 13 CFR Part 121. Issue Whether the solicitation should have been classified under Standard Industrial Classification (SIC) code 7379, to which a $12.5 million average annual receipts size standard applies, or SIC code 8732, to which a $3.5 million average annual receipts size standard applies. Facts On June 8, 1990, the Department of Education issued Solicitation No. RFP-90-012 as a small business set aside under a 500-employee size standard for a survey of public schools to be used to identify potential civil rights problems. On June 11, 1990, the size standard was amended to $3.5 million average annual receipts but was amended again on August 17, 1990, to $12.5 million average annual receipts. On the latter date the date for submitting proposals was extended to September 14, 1990. On August 29, 1990, the incumbent contractor, Opportunity Systems, Inc. (OSI), filed a timely appeal contending error in the Contracting Officer's failure to include a SIC code in the solicitation along with the size standard and alleging that the solicitation should have been classified under SIC code 8732, "Commercial Economic, Sociological and Educational Research," to which a $3.5 million average annual receipts size standard y applies, rather than SIC code 7379, "Computer Related Services, Not Elsewhere Classified," upon which it presumes the Contracting Officer's ultimate selection of the $12.5 million average annual receipts size standard was based. OSI points out that, under the regulations codified at 13 CFR 121.902(b), a solicitation must be classified according to its principal purpose and argues as follows as that criterion applies to the present solicitation: Solicitation No. RFPˇ90ˇ012 concerns performance of the Department of Education's biennial "Elementary and Secondary School Civil Rights Survey." The Solicitation's statement of work succently [sic] sets forth the services expected of the contractor: The contractor shall provide services from designing and printing forms, using specifications provided by OCR and approved by the Office of Management and Budget, to producing statistical tables, graphics and reports. The contractor shall conduct a mail survey of selected school districts throughout the United States for the 1990 Elementary and Secondary School Civil Rights Survey. The contractor shall also be responsible for mailing the survey instruments, collecting, editing and processing the data, and conducting analyses in accordance with the specifications enumerated in the Scope of Work and in the Department of Education Standards ADP Procedures Manual. The contractor shall also assist OCR in the design and development of the 1992 survey. Solicitation No. RFP-90-012, Attachment A at 3. As the solicitation makes clear, the data collected and analyzed by the contractor is used to help the Office of Civil Rights ("OCR") identify potential civil rights problems in public schools offering elementary and secondary programs, examine the status of civil rights in the nation and each state, determine changes in the data over the years in various aspects of civil rights, and provide technical assistance where needed. Id. at l. An SIC code designation must consider the principal purpose of the procurement, with the service description contained in the solicitation among the primary considerations. 13 C.F.R. _121.902(b). Here, the solicitation's primary purpose is to provide information to OCR from which it can identify potential civil rights problems in public schools. The contractor is expected to collect, organize, and analyze the necessary data. In short, the work required under solicita tion no. RFPˇ90ˇ012 clearly constitutes research regarding educational and sociological issues.... With respect to SIC code 7379, OSI argues that computer services play a merely subsidiary role in performance of the contract and that the major portion of the work involves data collection, not processing. OSI buttresses its argument that a $12.5 million average annual receipts size standard is inappropriate by referencing previous, allegedly similar solicitations that it contends were classified otherwise. Specifically, OSI notes that a previous solicitation, issued in 1986, regarding the Depart ment's civil rights survey was classified under SIC code 7374, "Computer Processing and Data Preparation and Processing Services," to which a $7 million average annual receipts size standard applies, and that the 1988 solicitation under which it is presently performing as the incumbent contractor was classi fied under SIC code 8732. It argues that the latter fact creates a "strong presumption" under _121.902(b) in favor of the $3.5 million average annual receipts size standard. On September 14, 1990, the Contracting Officer filed a response to OSI's appeal requesting that this Office "uphold the Depart ment's size standard of $12.5 million and clarify that the proper SIC code is 7379." He argues as follows concerning the inappli cability of SIC code 8732: The principal purpose of this procurement is data collection, preparation, data base development and/or modification, data input, programming, report generation, and requirements analysis. This requirement is divided into five distinct phases. Phase I is the design and production of the survey instrument. Phase II is the actual conduct of the survey. Phase III involves data preparation and editing and updating of the data base. Phase IV requires various computer generated analyses and reports. Phase V provides for analyses, diskette generation, and design development of a 1992 survey. OSI argues that the majority of the work will occur during the first [two] phases of performance, and "that computer services play a limited role in this aspect of performance, which constitutes the core work procured by the solicitation." The solicitation clearly establishes that the predominant tasks to be performed are computer service tasks. While it is true that computer services play a limited role in Phases I and II, the tasks specified under Phase I have already been or are in the process of being completed by the Department (See Attachment A, RFP 90ˇ012, Page 5). Phase II involves mailing the Government provided survey material, receipt of completed surveys, distribution of copies of responses, and follow up on nonrespondents. The management plan for this phase is to be provided to the contractor by the Department (See Attachment A, RFP 90ˇ012, Pages 5ˇ10). The tasks in Phases I and II do not constitute the core level of effort required by this solicitation and they are not being performed in total by the contractor. Rather, they constitute only a minor portion of the solicitation requirement. The majority of the effort required under this solicitation will be in the database editing and testing, data entry and processing of the information provided in the survey documents, editing, and database analysis and report generation, which are performed in Phases III and IV (See Attachment A, RFP 90ˇ012, Pages 10ˇ21). In addition, approximately half of the requirements in Phase V are computer related services falling within SIC Code 7379 (See Attachment A, RFP 90ˇ012, Pages 25ˇ26). Contrary to OSI's allegation, these computer tasks do not merely play a subsidiary role, but rather, are the principal purpose of the contract. This is evidenced by the fact that all of the key personnel for this procurementˇˇthe Project Director/Senior Analyst, the Programmer/Computer Software Specialist, and the Data Technicianˇˇare required to have predominantly computer related experience: Project Director/Senior Analyst The project director must have demonstrated the ability to design, develop, and install surveyˇbased information systems with significant data processing applications. He/she must have the ability to conduct data gathering activities, define information require ments, determine feasibility of proposed solutions, and propose economical and efficient solutions to system problems based on cost effectiveness and other factors. * * * * * * * ....The project director must have a minimum of seven years experience as an analyst programmer. At least two years must be as a project manager. The project director must have demonstrated significant and recent experience in the following areas: research and survey studies, management of a team designing survey information systems, SAS, and any highˇlevel language consistent with the methods used in processing the data in this contract. Similarly, the Programmer/Computer Software Specialist "...must be capable, under general supervision, of analyzing and defining program solutions and of developing programs for automated data processing within time and resource constraints. He/she must translate the details into a program of coded instructions used by the computer." Finally, the Data Technician "...must have demonstrated data handling and editing experience for both manual and automated systems. He/she must have experience in the receipt and preparation of data as well as experience in microcomputer and mainframe computer programmer [sic]" (see RFP 90ˇ012, Section L.4). The SBA has held that the nature of the services to be performed by key personnel are indicative of the appropriate SIC code. SIC ADpeal of: Resource Consultants. Inc., Docket No. SICˇ85ˇ8ˇ12ˇ134, SBA No. 2275 (1985). Here, the key personnel are performing predominantly computer related activities, not research into educational and sociological issues. As noted above, the Contracting Officer has estimated that computer services tasks account for considerably more than 50% of the work under this contract. OSI has presented no evidence to the contrary, other than its own belief, that the bulk of the work is in Phases I, II and III do not require computer services. In fact, a major portion of Phases I and II will be performed by the Department, and Phase III consists exclusively of computer services [sic]. The SBA has held that, "Under such circumstances, precedent holds that the Office of Hearings and Appeals will defer to the Contracting Officer's Statement as to the allocation of costs or labor." See, e.g., SIC ADpeal of TECOM, No. 2053 (1984); SIC ApDeal of Dyneteria. Inc., No. 1986 (1984)." SIC Appeal of: TECOM, Docket No. SICˇ90ˇ411ˇ37, No. 3282 (May 2, 1990). With respect to previous classifications of allegedly similar solicitations, the Contracting Officer argues that the cover page of the previous, 1988 solicitation submitted by OSI provides no evidence that the services solicited there are similar to those at issue in this appeal and that although the SBA regulations do provide that consideration may be given to previous classifications of the same or similar products or services, the SBA has held that, where the Statement of Work, the projected labor mix, and the evaluative factors establish clearly the SIC code designation, evidence of previous classifications is irrelevant. SIC Appeal of: Resource Consultants. Inc., [No. 2275 (1985)]. The Contracting Officer states that he selected SIC code 7379, rather than SIC code 7374, which was assigned to the 1986 solicitation, because the actual processing of the data would be performed through a Government furnished computer facility (See Amendment no. 3, RFP 90ˇ012, Clause H.18) and did not include the data processing consulting, database development and maintenance, requirements analysis and diskette conversion and production services required under the solicitation, which are encompassed by SIC Code 7379. Discussion The standards for determining the proper SIC code and size standard for a solicitation are set forth in 13 CFR 121.902(b) as follows: The proper SIC code designation for the goods or services being procured is that which best describes the principal purpose of the procurement, giving primary consideration to the industry descriptions in the SIC Manual, the product or service description in the solicitation and attachments thereto, the relative value and importance of each of the components in the procurement (if in fact there is more than one component which makes up the end item being procured) and the function of the goods or services being purchased. Consideration may also be given to previous Government procurement classifications of the same or similar products or services, additional information on the industries and on the product or service procured, and to evaluations on which industry classification would best serve the purposes of the Small Business Act. Generally, a procurement will be classified according to the component which accounts for the greatest percentage of the contract value. A contracting officer must have a good reason to classify a procurement in a way that is inconsistent with this general rule. SIC code 7374 is described as follows in the 1987 edition of the Standard Industrial Classification Manual, published by the Office of Management and Budget: Computer Processing and Data Preparation and Processing Services Establishments primarily engaged in providing computer processing and data preparation services. The service may consist of complete processing and preparation of reports from data supplied by the customer or a specialized service, such as data entry or making data processing equipment available on an hourly or timesharing basis. Calculating service, computer Computer time-sharing Data entry service Data processing services Data verification service Keypunch service Leasing of computer time Optical scanning data service Rental of computer time Service bureaus, computer Tabulating service, computer SIC code 7379 is described in the Manual as follows: Computer Related Services Not Elsewhere Classified 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. Establishments primarily engaged in producing prepackaged software are classified in Industry 7372; and those engaged in offering data processing courses or training in computer programming and in computer and computer peripheral equipment operation, repair, and maintenance are classified in Industry 8243. Computer consultants Data base developers Data processing consultants Disk and diskette conversion services Disk and diskette recertification services Requirements analysis computer hardware Tape recertification service SIC code 8732 is described in the Manual as follows: Commercial Economic. Sociological. and Education Research Establishments primarily engaged in performing commercial business, marketing, opinion, and other economic, sociological, and educational research on a contract or fee basis. Noncommercial economic, sociological, and educational research establishments funded from endowments, grants, or contributions are classified in Industry 8733. Business economists, commercial Business research, commercial Economic research, commercial Educational research, commercial Market research, commercial Opinion research, commercial Research: economic, sociological, and Educational - commercial Sociological research, commercial OSI contends that a majority of the work to be performed under the solicitation will occur during the first two phases, i.e., that data collection, rather than data processing, constitutes the principal purpose of the solicitation. In contrast, the Contracting Officer argues that "a major portion of Phases I and II will be performed by the Department" and that [t]he majority of the effort required under this solicitation will be in the database editing and ˇ testing, data entry and processing of the information provided in the survey documents, editing, and database analysis and report generation, which are performed in Phases III and IV.. He adds that "approximately half of the requirements in Phase V are computer related services," concluding that "computer ser vices tasks account for considerably more than 50% of the work under [the] contract." Review of the solicitation leads us to agree. Under Phase I the contractor is required physically to produce the survey instrument. Its content, however, is provided by OCR. Conduct of the survey under Phase II includes the provision of assistance to public school and district respondents and follow up with schools and districts that fail to respond to the survey. Clearly, neither phase involves computer services to any signi ficant degree. However, Phases III and IV, almost exclusively, involve computer related services. The contractor is responsible for all data preparation, entry and editing as well as all reports and analyses based thereon. Design of the 1992 survey instrument under Phase V will be accomplished with the aid of OCR and includes an analysis of future software and hardware require ments. The conclusion from these facts that the predominant activities are computer related is buttressed by the expertise requirements for key employees, which demonstrate substantial emphasis on computer-related experience. Under such circumstances, it is not probative what size standards were assigned to previous solicitations concerning the survey, only that this survey predominantly involves computer-related services, which would make its classification under educational research inappropriate. We agree that SIC code 7374 implies use of the contractor's own facilities to perform under the contract. This solicitation, however, provides for the use of the Department's computer facilities. Furthermore, SIC code 7374 contemplates far less comprehensive services than those sought under this solicitation. Here, the contractor has substantial responsibility for collecting the data, whereas, under SIC code 7374, the "data [is] supplied by the customer." Hence assignment of SIC code 7379 is more appropriate for this solicitation. Conclusion The proper SIC code for the solicitation is SIC code 7379, "Computer Related Services, Not Elsewhere Classified," to which a $12.5 million average annual receipts size standard applies. In consequence, the appeal is DENIED. This constitutes the final decision of the Small Business Administration. See 13 CFR 121.1720(a), (b) and (c). _______________________________ Jane E. Phillips residing) Administrative Judge _______________________________ Gloria E. Blazsik (Concurring) Administrative Judge t ________________________________ G. Stephen Wright (Concurring) Administrative Judge