I.T.S. Corporation, No. 3521 (September 24, 1991) Docket No. Sic- 91-8-27-112 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. 20416 SIC APPEAL OF: ) ) I.T.S. Corporation ) ) Appellant ) ) Docket No. SIC-91-8-27-112 Solicitation No. ) W100975-A2 ) Environmental Protection ) Agency ) Washington, D.C. ) DIGEST A procurement for property management services, which requires the contractor to provide management, technical and administrative support and assistance to EPA officials, is more appropriately classified under SIC code 8741, Management Services, with a $3.5 million size standard, than under SIC code 8721, Accounting, Auditing, and Bookkeeping Services. DECISION September 24, 1991 COLE, Administrative Judge, Presiding: Jurisdiction This appeal is decided under the Small Business Act of 1958, 15 U.S.C. 631 et seq., and the regulations codified at 13 CFR Part 121. Issue Whether the Standard Industrial Classification (SIC) code 8741, designated by the Contracting Officer for this procurement, was in error. Facts On August 1, 1991, the United States Environmental Protection Agency, Washington, D.C., issued the captioned Request For Proposal (RFP) for "Property Management Services." The procurement is a total small business set aside, and was classified under Standard Industrial Classification (SIC) code 8741, Management Services, with a $3.5 million size standard. Proposals were originally due by September 3, 1991; however, by Amendment 0001, effective August 22, 1991, the deadline for submission of proposals was extended to September 25, 1991. By letter postmarked August 23, 1991, I.T.S. Corporation (Appellant) filed an appeal with the Office of Hearings and Appeals (OHA), contesting the SIC code, 8741, designated by the Contracting Officer, and urging that we find SIC code 8721, Accounting, Auditing, and Bookkeeping Services, to be the appropriate classification, with a size standard of $4.0 million or less in average annual receipts. The Appellant contends: I.T.S. asserts that over 50% of the procedures and tasks to be performed as described in this solicitation are comprised of records management, bookkeeping and auditing services. The Appellant supports its contention by asserting that the requirements in the RFP's Description/Specification/Work Statement consistently indicate that the Contractor shall be responsible for; "maintaining property management records," "assistance in inventory and reconciliation," "assistance to accountable areas," "on-site audits," reconciliation of records," and "providing recommendations and assistance to accountable areas." Additionally, the Appellant cites duties and responsibilities under the "Personnel Requirements" of Section C.2.2.6 which requires the contractor to: "reconcile annual and final inventories," "prepare special reports, studies and reviews," "provide assistance in conducting physical inventories and reconciliations," "maintain property management records," and "conduct bar code [and] annual wall-to-wall inventories and reconcile." According to the Appellant, the "Experience/Education Require ments" of Section C.2.2.6 "indicate[s] that professional level personnel are required." Furthermore, the Evaluation Factors for Award, Section M.4, are alleged to support the Appellant's position because they include consideration of the offeror's "understanding of the federal budget cycle and budget functions" and "project/task tracking and reporting system." Lastly, the Appellant points to the "Reports of Work" requirement, that thecontractor provide detailed monthly financial reports. On September 11, 1991, the Contracting Officer filed a statement in opposition to the appeal, which included a copy of Amendment 0002, effective September 9, 1991. 1/ The Contracting Officer argues that the successful offeror will be providing property management technical support services in four areas, namely, National Technical Assistance; Contract Property Administration; In-House Property Management; and Training, and states: These services include maintaining, managing, and monitoring the EPA's personal property, as well as aiding in developing recommendations to enhance the EPA's property management function. The Contracting Officer contends that the RFP's technical evaluation criteria support her selection of SIC code 8741, citing their emphasis on the "approach to, as well as capabilities and experience in, the provision of property management services." Furthermore, respecting the types of personnel required to perform the contract, the Contracting Officer contends that "experience in property management, especially Government property management, is important...." Specifically, the Contracting Officer challenges the Appellant's allegation that "over 50% of the procedures and tasks to be performed as described in this solicitation are comprised of records management, bookkeeping and auditing services." The Contracting Officer explains certain terms and phrases which she contends the Appellant has misunderstood or taken out of context, as follows: (a) "Maintaining property management records"... consists of many managerial and administrative tasks including, but not limited to: - Reviewing new contracts, contract modifications, delivery orders, public vouchers, and seven point justifications for the acquisition of property; - Generating form letters for property administrators, requesting property control systems, inventories, reports, and advising of compliance reviews and reports; - Inputting data by entering and updating records in the Personal Property Accountability System; - Issuing bar code decals to contractors; - Maintaining basic information on all contracts administered by EPA Headquarters in the Contract Property Administration Program; - Reconciling annual inventories for contracts for the Contract Property Administration Program; - Preparing reports of excess property for submission to the General Services Administration and coordinating the disposal of that property. (b) "Assistance in inventory and reconciliation" is the physical inventory of property held by a contractor and the reconciliation of that property with existing documentation, as to the type and location of the property (c) "Assistance to accountable areas" is another phrase misused by ITS. Accountable areas is a term that refers to regions of the country...[and thus] has nothing to do with accounting. (d) "On-Site Audits" refers to Contract Compliance Reviews, and not to audits conducted by auditors or accountants,...to verify that contractors are complying with the Federal Acquisition Regulation and contract requirements, and are operating in accordance with their written property control system.... The Contracting Officer dismisses the Appellant's suggestion that the requirement of "professional level" personnel indicates that the procurement is primarily for accounting, auditing, and bookkeeping services, and rejects the notion that the technical evaluation criteria support the Appellant's position, stating: An understanding of the federal budget cycle is considered a routine evaluation factor under many procurements other than accounting, auditing, and bookkeeping procurements to assess the contractor's ability to coordinate expenditures with the outlays of funds by the Government...[and]...to insure that the Government does not expend funds for any task/project that does not pertain to this procurement. Neither of these evaluation factors requires accounting, auditing, and bookkeeping services. Lastly, regarding the requirements for monthly financial reports from a successful offeror, the Contracting Officer explains that such reports are routinely required by the EPA for many procurements that do not involve accounting, auditing, and bookkeeping. Monthly financial reports are required so that the Project Officer may accurately track the expenditures by the successful offerors during contract performance...[and]...therefore, [it] tracks how the successful offeror is performing, and does not constitute the work that the offeror is chosen to perform under the contract..... The Statement of Work (SOW) set forth in Amendment 0002 provides, inter alia, that: The Contractor shall furnish the necessary personnel, material, equipment, services and facilities (except as otherwise specified), to perform the Statement of Work/Specifications as shown below. The Contractor shall perform work under this contract only as directed in Delivery Orders issued by the Contracting Officer. DESCRIPTION/SPECIFICATION/WORK STATEMENT C.2 BACKGROUND The Environmental Protection Agency (EPA) is responsible for the management and accountability of its personal property, including motor vehicles. This includes approximately 91,000 items of accountable property valued at over $370 million and expendable supplies necessary to support over 15,000 employees. These responsibilities include: l) Control of property, including the maintenance of inventory records and the accountability of owned and the leased property. 2) Determining the most cost-effective methods of storage, distribution, repair, and disposal of property supplies and equipment; 3) Administration of contractor-held and contractor acquired property, Superfund, and otherwise; 4) Development and implementation of property related training courses for property management personnel; 5) Administration of the National Property Assistance Program and associated technical support; * * * * *` * * C.3 PROPERTY MANAGEMENT TECHNICAL SUPPORT SERVICES Property management technical support services shall be provided, as ordered, in four areas; (1) National Technical Assistance, (2) Contract Property Administration, (3) In-House Property Management, and (4) Training, as follows: In support of the EPA Headquarters Project Officer, the Contractor shall provide support services and assistance to the National Property Assistance Program which is designed to enhance as well as to ensure the Agency's property management goals are implemented Agency-wide, at each local level. These services shall consist of: providing information, recommendations and assistance for the development of technical direction for all accountable areas. Conduct special studies and analyses which will support the EPA Project Officer and staff to enhance the Agency's Property Management System, with regard to the review of existing related statutes, regulations, policies and procedures, as well as newly proposed ones; providing information, recommendations and assistance to facilitate timely and accurate management of the Personal Property Accountability System; providing assistance to the EPA Project Officer in conducting audits and evaluations of accountable areas for the purpose of assessing EPA's property management activities, and providing information and recommendations with regard to enhancing such activities; and, providing recommendations and assistance to accountable areas in implementing property management policies and procedures. * * * * * * * In support of all EPA contractor locations, the Contractor shall assist EPA in maintaining property management records of Superfund and Non-Superfund Contractor-held Government- owned property; this includes daily monitoring of activities, contract file maintenance, inventory maintenance, inventory reconciliation and disposal. The Contractor shall also assist in the performance of reviews associated with the maintenance of property management records of Contractor-held Government-owned property and recommend to the EPA Project Officer potential improvements and enhancements in the Contractor's property control systems. This is accomplished by performing on-site or desk compliance reviews to verify that contractors are complying with the Federal Acquisition Regulation and contract requirements, and are operating in accordance with their written property control systems * * * * * * * In support of EPA, the Contractor shall assist EPA in maintaining property management records, to include; a). custodial areas, registers for vouchers, revocable license agreements and assistance in inventory and reconciliation; b). updating the local/national Personal Property System Database, which includes additions, deletions, transfers, or change in status and the generation of standard and special reports, as required; c). assistance to accountable areas* in the preparation and processing of documentation and liaison with the General Services Administration (GSA) regarding excess property disposition; and, d). assistance to accountable areas regarding the control and management of property at the local level. The Contractor shall also provide recommendations to the EPA Project Officer with regard to current operating procedures and offer suggestions for enhancements of the Headquarters Management function. * * * * * * * The Contractor shall provide support services to develop, implement and conduct training programs such as custodial officer training, and presenting briefings to newly assigned Contracting officers... * * * * * * * The contractor will provide two employees to be located at the EPA facility in Cincinnati, Ohio. These employees will be provided office space at that facility. The two employees to be provided by the contractor will be a Senior Property Management Specialist and a Junior Property Management Specialist.... The SIC code referred to by the Appellant is described in the Standard Industrial Classification Manual ("SIC Manual"), 2/ in pertinent part, as follows: 8721 Accounting. Auditing. and Bookkeeping Services Establishments primarily engaged in furnishing accounting, bookkeeping, and related auditing services. These establishments may use data processing and tabulating techniques as part of providing their services. The industry description for SIC code 8741, selected by the Contracting Officer, is as follows: 8741 Management Services Establishments primarily engaged in furnishing general or specialized management services on a day to day basis and on a contract or fee basis. Establishments in this industry do not provide operating staff. Management and operation of a business, where operating staff as well as management is provided, is classified according to the activity of the establishment managed. Administrative management services Business management services Circuit management services for motion picture theaters Construction management Motel management services Office management services This solicitation calls for a base period of one year, and three option years. Discussion In determining the appropriate SIC code designation in this procurement, we are governed by the provisions of 13 CFR Part 121 which prescribe, in pertinent part: Sec. 121.902 Establishment of the size standard. * * * * * * * (b) 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,.... 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 services procured, and to evaluations on which industry classification would best serve the purposes of the Small Business Act.... In this instance, we are not persuaded by the Appellant's arguments. Although the Contracting Officer may be mistaken in concluding that accounting and auditing firms do not ordinarily conduct physical inventories and reconciliations, we find that such services do not comprise the primary purpose of the procure ment nor the predominate nature of the required services. The presence of accounting and auditing aspects to this procurement is clearly ancillary to the principal purpose, namely, for EPA to obtain management support and assistance in implementing, operating and improving the agency's property management system, including the development and support of employee training. The solicitation refers to technical support services; however, the tasks described in the SOW and the "Sample Work Assignments" (Attachment C to the solicitation) indicate that the contractor will be primarily involved with management of the personal property assets which fall under the jurisdiction of the EPA. The hands-on activities of the contractor constitute an integral part of the management function, as well as providing the basis for the contractor's recommendations for improvements in the system and in property management training. Therefore, find that the Contracting Officer's selection of the classification, "Management Services" (SIC 8741), is the most appropriate in this instance. Conclusion For the reasons stated above, the appeal is DENIED; and the Contracting Officer's designation of SIC code 8741, with a size standard of $3.5 million in average annual receipts, is AFFIRMED. This constitutes the final decision of the Small Business Administration. See 13 CFR 121.1720(b). ____________________________________ Michael S. Cole(Presiding) Administrative Judge _____________________________________ Gloria E. Blazsik (Concurring) Administrative Judge _______________________________________ G. Stephen Wright (Concurring) Administrative Judge ______________ 1/ This Amendment 0002 consists of "Questions," presumably from offerors, and the procuring activity's "Answers;" the addition of a clause pertaining to "Training;" and a revised "Statement of Work" (SOW) to be substituted for the previous SOW in its entirety. 2/ Standard Industrial Classification Manual, 1987 Edition, Office of Management and Budget.