The Destek Group (Appellant) Re: Naval Sea Systems Command Washington, D. C.
SBA No. 1921SBA No. 1921April 5, 1984
SBA No. 1921 (S.B.A.), SBA No. 1921, 1984 WL 41866
Small Business Administration (S.B.A.)
Office of Hearings and Appeals
[Standard Industrial Classification Appeal]
*1 THE DESTEK GROUP, APPELLANT
*1 RE: NAVAL SEA SYSTEMS COMMAND WASHINGTON, D. C.
*1 Docket No. SIC-84-02-14-32
*1 Solicitation No. RFP N00024-84-R-6144(Q)
*1 April 5, 1984
DIGEST
Where a solicitation for developing and maintaining a management control system and for providing logistics support for a complex deterrent weapon system, such as the TRIDENT Project, emphasizes the technical nature of the tasks to be performed and the bidder's expertise in such technical disciplines as engineering, and architecture, and concerns tasks that are predominantly of an engineering nature and in support of an engineering staff, and the preponderance of evidence supports the contracting agency's estimate, based on incumbents' reported labor mixes, that two-thirds of the man-hours expended will be for engineers with high levels of expertise, the solicitation is properly classified under SIC Code 8911, ‘Engineering, Architectural and Surveying Services,’ rather than SIC Code 7392, ‘Management, Consulting and Public Relations Services.’ The appeal is, therefore, DENIED. Code 15, 8911, 7392.
DECISION
*1 PHILLIPS, Administrative Judge, President:
Jurisdiction
*1 This appeal is resolved in accordance with the provisions of the Small Business Act of 1958, 1b U.S.C. 631 et seq. and regulations to be codified at 13 CFR 101.2-8 and 121.11, 48 Fed. Reg. 55, 832 and 49 Fed. Reg. 5024.
Issue
*1 Whether the proper SIC Code classification for the solicitation is SIC Code 8911 (‘Engineering, Architectural and Surveying Services') or SIC Code 7392 (‘Management, Consulting, and Public Relations Services')?
Facts
*1 On February 7, 1984, the Naval Sea Systems Command (NAVSEA) issued Solicitation No. RFP-N00024-84-R-6144(Q), requiring that proposals be received no later than March 16, 1984. The procurement is entitled as follows:
*1 Develop, operate, and maintain a management control system and provide associated technical support for program level ILS requirements planning, resource management and program assessment.
*1 The statement of work in Section C reads as follows:
SECTION C—DESCRIPTION/SPECIFICATIONS
*1 Item 0001—The Contractor shall develop, operate, and maintain a management control system to provide support to the TRIDENT Program Office in the areas of requirements planning, support definition, fiscal control, and technical evaluation.
*1 a. Analyze existing policy and procedures effecter by or having an effect on the management control process and develop a program management system plan. The system shall be capable of:
*1 1. Supporting the overall Trident acquisition program plan.
*1 2. Organizing Trident system requirements in a top down—work breakdown structure.
*1 3. Systematizing the acquisition requirements, fiscal control, and correlating management functions into program flow through ??.
*1 4. Tracking and monitoring key events in the acquisition and program process.
*2 5. Monitoring and providing initial assessment of the progress of planned requirements through the acquisition process to completion and within resource allocations.
*2 6. Generating data in support of the program acquisition and management process. Specific data requirements will be developed and identified in the program management system plan. The plan shall address the development of data in the following categories: (a) POM/budget backup data; (b) POM/budget status; (c) Task cost summary data; (d) Task man-day summary data; (e) Task products delivery schedules/status; and (f) Program support data.
*2 Item 0002—Provide engineering and technical support for program level ILS requirements planning, resource management and program assessment as associated with and in support of the management control system.
*2 a. Assist PMS 396 in the definition of ILS planned requirements in support of the Trident Submarine Acquisition Program.
*2 b. Using the NAVSEA approved planned requirements, develop the draft detailed technical task descriptions and associated manning and cost level estimates for work to be done by both Contractor and PARMS. All draft technical task description [sic] shall be reviewed and approved by NAVSEA.
*2 c. Match planned requirements against total program support, both Contractor and in-house, and produce summary data and recommended actions. All recommendations shall include supporting rationale.
*2 d. Monitor and progress program support deliverables from initiation to completion and produce summary data and recommended actions. All recommendations shall include supporting rationale.
*2 e. Analyze/evaluate all program support deliverables to ensure compliance with task description, technical accuracy, timeliness and within cost. Contractor shall provide supporting data and rationale for its analysis.
*2 The procurement was 100% set aside for small business, classified as SIC Code 8911, ‘Engineering, Architectural and Surveying Services,’ and a $7.5 million aar size standard applied under 13 CFR 121.3-8(e)(1). The proposal deadline was subsequently amended and is currently April 6, 1984.
*2 On February 14, 1984, Counsel for the Destek Group, Inc. (Destek) filed a timely appeal alleging that the correct service classification is SIC Code 7392, ‘Management, Consulting and Public Relations Services,’ to which a $2 million aar size standard applies under § 121.3-8(e), (‘services not elsewhere defined’). Destek argues that the tasks associated with developing, operating and maintaining the management control system (MCS) in item 0001 are purely management oriented, like the enumerated functions in SIC Code 7392, and, according to the work level estimates on page 60 of the solicitation, account for 62% of the total man-hours estimated for performance of the contract. With respect to the remaining 38% of the man-hours allocated to integrated logistics support (ILS) tasks enumerated in item 0002, Destek argues that they too are essentially management oriented because they are limited to support of ILS activities ‘as associated with and in support of MCS' and ‘are in fact much like those in 0001.’ To the extent the tasks enumerated in item 0002 could be construed as technical or engineering in nature, Destek emphasizes that their performance accounts for only 38% of the contract effort and thus does not constitute the ‘principal nature of the product or service being procured’ in accordance with § 121.3-1(b)(4). Based on this analysis of the work to be performed under the contract, Destek concludes that the solicitation neither requires licensed or professional activities nor presents any of the following conditions under which Destek alleges the Size Appeals Board has previously found a SIC Code 8911 classification to be appropriate:
*3 When the procurement is for prototype manufacturing (No. 1148); when the performance of the contract requires personnel with engineering backgrounds (No. 1251); or when the primary purpose of the procurement is to support a scientific and engineering staff (No. 1403) . . .. Conversely, SBA has ruled that SIC 7392 applies when the procurement involves services for development of an organizational and management structure with an implementation plan and a management information system (No. 1229).
*3 Finally, Destek notes that the solicitation itself imposes no requirement that the enumerated services be performed by engineering or scientific personnel and that the ‘primary requirement placed on offerors is a knowledge of the U.S. Navy Ship acquisition process and the management technigues associated with that process.’
*3 NAVSEA filed a response to Destek's appeal on March 6, 1984 containing the following description of the TRIDENT Program Office and primary purpose of the solicitation:
*3 The TRIDENT Submarine Ship Acquisition Project Office (PMS 396) manages NAVSEA's TRIDENT Program responsibilities. The TRIDENT Submarine is the Navy's primary deterrent weapon system. The TRIDENT Submarine is unprecedented in size and complexity. It incorporates the Navy's most advanced electronic control sensor navigational and computer systems. TRIDENT Submarines are built at an approximate cost of $1 billion per ship with 24 Submarines projected. The submarine is supported by a number of dedicated and supporting shore activities, the most important of which are the two TRIDENT bases at Rangor, Washington and Kings Bay, Georgia. PMS 396 is responsible for planning and managing the design, development, construction and procurement of the TRIDENT System which is comprised of the submarine and its associated support systems and facilities. PMS 396 is supported by a broad community of headquarters-level equipment and functional engineering managers (PARMS, dedicated laboratory and field activity personnel and numerous contractor groups.
*3 Under the RFP in issue, the contractor is to develop, operate, and maintain a management control system supporting PMS 396 and provide associated engineering and technical support for program level integrated logistic support (ILS) requirements planning, resource management, and program assessment . . .. The primary purpose of the RFP is to contract for professional support of an engineering and scientific staff. NAVSEA is an engineering command; the TRIDENT Program, which is NAVSEA's highest priority, is an engineering program. The TRIDENT Program staff, including its managers, consist primarily of engineers.
*3 NAVSEA argues that the solicitation ‘requires an integration of technical engineering and management capability,’ that ‘engineering services is integral to the entire statement of work,’ and that ‘Destek's assumption that the development of a management control system can be performed without the expertise of engineering and architectural disciplines is erroneous.’ NAVSEA advances several arguments in support of its position. With respect to the Statement of Work in Section C of the solicitation (pages 6 and 7), it argues that the nature of the tasks undertaken and personnel employed by TRIDENT Program Office components such as the TRIDENT Refit Facility requires engineering and technical background to develop an MCS capable of ‘supporting the overall TRIDENT Acquisition Program Plan.’ (See item 0001, a, 1.). NAVSEA argues that, while the work breakdown structure identified in item 0001, b is a management tool, its purpose is to support engineers, and engineering and architectural expertise are required to develop and maintain a viable work breakdown structure.
*4 NAVSEA contends that the MCS (Management Control System) primarily supports ILS (integrated logistics support) activities, which it describes as follows:
*4 TRIDENT Submarine ILS requires the development, delivery, and certification of each ILS product requires to support the operational submarine. The development, operation, and maintenance of the management control system for ILS requires a supporting contractor capable of providing maintenance engineers who are experienced in submarine maintenance, programs and production, plan and corrective maintenance and engineering data, and logistics engineers/logisticians experienced in supply support, configuration management and all other integrated logistics support disciplines.
*4 NAVSEA further argues that the functions concerning ILS enumerated in item 0002 are specifically denominated ‘engineering and technical’ and emphasizes that the contractor will be required to ‘assess, audit and verify major engineering programs.’
*4 NAVSEA argues that the need for technical and engineering experience is further reflected in paragraph 46 of Section L of the solicitation, containing ‘instructions, Conditions and Notices to Offerors' and in Section M of the solicitation establishing evaluation criteria for award. It notes the emphasis in both sections on ‘technical expertise’ and ‘knowledge of administrative and technical processes required to acquire the TRIDENT System,’ the requirement that the offeror ‘[understand] the technical services requires as they apply to each of the four functional areas of the procurement [the MCS, fiscal management, ILS and technical support assessment],’ and the requirement that offerors provide resumes for all personnel who will ‘provide significant technical support to this system.’ NAVSEA states that ‘any competent offeror will recognize the need for engineering services, ‘and that permitting competent offerors to propose their own professional mixes rather than mandating employment of a certain number of engineers or scientists, does not undermine NAVSEA's position that substantial engineering services are required in order to perform the contract. NAVSEA states that:
*4 [b]ased upon NAVSEA's experience with contractor support for similar requirements, including those currently supporting PMS 396, it is expected that approximately two-thirds of the man-hours expended under the RFP work requirements will be engineers with high levels of expertise in specialized disciplines.
*4 NAVSEA notes that the Board in Size Appeal of Nuclear Power Consultants, Inc., No. 1251 (1979) deferred to the contracting officer's determination that an engineering background was required in order to perform the contract in that case and argues that the same weight should be given to the contracting officer's determination regarding engineering expertise needed for this solicitation.
*4 NAVSEA presents the following analysis of SIC Codes 8911 and 7392 in support of its classification. It asserts that ‘the category of services classified under SIC 7392 pertains predominantly to business' and that ‘there is no category under 7392 which includes scientific or technical effort.’ It contends that SIC Code 8911, on the other hand, ‘has a specific category for engineering of the scientific/technical type.’ It analogizes the procurement in this case to that at issue in Size Appeal of Mantech International Corporation, No. 1445 (1981) which required engineering and technical services in support of ILS and other support functions and which was determined to be properly classified under SIC Code 8911. NAVSEA distinguishes Petition for Reconsideration of Synoptic Systems Corporation, No. 1229 (1973) and Sic Appeal of Columbia Research Corporation, No. 1890 (1984), in which SIC Code 7392 was found to be appropriate, because in Synoptic the management services supported a non-engineering command and in Columbia Research the command was a laboratory, the classification was consistent with prior classifications of similar services, and the contracting officer had not established that over 50% of the work was required to be done by engineers. Finally, NAVSEA states that, of the 1600 NAVSEA procurement requests reviewed for set aside over the last year, 400 were classified under SIC Code 8911 and only one was classified under SIC Code 7392.
*5 Destek was permitted to file a response and the record was closed on March 20, 1984. Destek contends in its response that NAVSEA impermissibly preselected the size standard and merely chose a SIC Code that would support that size standard. Citing Columbia Research and SIC Appeal of Technology Incorporated, No. 1403 (1980), respectively, Destek argues that SIC Code 8911 is appropriate only if the work to be supplied is ‘primarily services of a professional nature in the fields of engineering, architecture and land surveying’ or if the primary purpose of the contract is to support a scientific and engineering staff, and argues that neither situation obtains in this case. Destek argues that NAVSEA has incorrectly characterized the solicitation as providing support services to TRIDENT Program engineering staff (PMS 396) when, in actuality, the work will he done for two allegedly non-engineering components: PMS 396-3 (TRIDENT ILS Management Division) and PMS 396-P (TRIDENT Plans, Programs and Financial Management).1 Based on the descriptions of work in items 0001 (MCS) and 0002 (ILS) at page 2 of the solicitation and man-hour allocations at page 60 of the solicitation, Destek claims the following allocation of work to be performed under the contract:
*5 Management Control Support Function
*5 For 396-P—19,966 M/H
*5 For 396-3—31,200 M/H
*5 ILS Function
*5 For 396-3—31,200 M/H
*5 Destek argues that the MCS related services are nowhere defined in the solicitation as engineering, that they are purely administrative in nature and that they are ‘in large measure, budget oriented,’ citing particularly item 0001, a, 6. Destek argues that PMS 396-P, ‘Plans, Programs and Financial Management’, as the name implies, has no engineering mission whatsoever and makes the following allegations with respect to PMS 396-3, the ‘ILS Management Division,’ to be supported by the MCS and provided ‘engineering and technical support’ in accordance with item 0002.
*5 PMS 396-3 does not have ‘Engineering’ in its Division name. Even the technical director is not an engineer. Only two billets in the entire Division have the title ‘engineer’. (The organization chart is provided as Exhibit 1 hereto.) Under the Facilities Branch there is a civil engineer billet and a water front engineer billet. Only five (5) of the sixteen (16) people on board are engineers. The Personnel and Training Branch is involved in the manning of ships and the training of personnel. The contractor is not required to provide either manning or training analysis much less engineering. The Ship Support Branch, as its name implies, is concerned with making certain that the supplies and spare parts necessary for the ship to be operational are delivered in a timely fashion. No engineering function whatsoever! Furthermore, the Division does not even establish the requirements, such as spares. They simply look at paper to see what the status is and initiate action. The Facilities Branch does review A & E [architectural and engineering] plans prepared by other activities, such as an A & E firm that might design a docking facility; and the incumbent contractor probably has never provided original engineering comments on documents they process. They do no original engineering in that Branch.
*6 The truth is that PMS 396-3 is a logistics data collection and review activity. It engineers nothing and is only involved in a minimum facility engineering review function. It handles tons of paper, reviews, collects, follows-up etc. Therefore, the contractor who supports PMS 396-3 obviously has no engineering function, since he does not support an engineering function, except of course for minor facility review. [emphasis in original]
*6 Based on this analysis, Destek contends that 62% (19,9??
*6 [t]he services required are in reality simple contract management support. The entire effort is program, budget, funding, and acquisition management, with some support of the engineering in [F]acilities [Acquisition Section].
*6 With respect to the Facilities Acquisition Section, Destek alleges that its engineering product accounts for only one-eighth of the man-hours currently expended by the ILS Management Division. In essence, Destek argues that NAVSEA has obscured the true nature of the program offices to be supported and the role that the headguarters organization, PMS 396, plays in technical work on the TRIDENT Program, emphasizing instead the complex engineering and scientific nature of the entire TRIDENT Project, in order to bootstrap the solicitation into SIC Code 8911 by investing it with an engineering orientation it does not contain. Challenging the contracting officer's estimate that approximately two-thirds of the contract man-hours will be provided by highly trained engineers, Destek alleges that a former employee of the incumbent contractor stated that only five or six out of forty-five of the incumbent's staff are engineers. Destek requests that the contracting officer be required to support his estimate with documentary evidence.
*6 On March 23, 1984, NAVSEA filed a request to reopen the record and a response to Destek's allegations of March 20, 1984. NAVSEA denies having selected a SIC Code in order to support the desired size standard. NAVSEA states that the work will be ‘funded’ and ‘controlled’ by PMS 396-P and PMS 396-3 but that it will not be restricted to those offices. While NAVSEA admits that the 19,966 man-hours (24.2%) devoted to PMS 396-P are not ‘predominantly’ engineering, it emphasizes that the remaining 62,400 man-hours (75.8%) are devoted to PMS 396-3, an engineering activity. With respect to PMS 396-3, NAVSEA points out that thirteen of the twenty-eight billets are designed for engineers, that recruiting is currently in progress to fill eight of the thirteen positions that are currently vacant, and that this vacancy rate does not detract from the engineering mission of that division. NAVSEA provides the following examples of ILS functions to be performed and supported under the contract and their associated disciplines. It states that maintenance and logistics engineers, as well as logistics specialists, are required:
*7 to review the level of repair, develop replacement/repair of each component, develop test and certification procedures to TRIDENT quality standards, . . . determine planned maintenance of components . . . determine interchangeability and substitutability of parts, analyze failures of systems and components, and certify that the ship is loaded and ready for operations.
*7 It states that civil, mechanical and architectural engineers, as well as logistics specialists, are required in the Facilities Branch which:
*7 develops requirements and specifications for all industrial plant equipment for a major industrial facility, procures and delivers industrial plant equipment, and installs, tests and certifies operational capabilty of twenty-four major industrial projects.
*7 NAVSEA contends, as a result, that:
*7 integrated logistics support to the TRIDENT Program entails more than simply seeing that supplies are delivered. It calls for technical reviews and technical recommendations, detailed descriptions of technical tasks, definitions of technical requirements and reviews of products to ensure technical accuracy and compliance with technical requirements, as Item 0002 states.
*7 NAVSEA challenges the validity of Destek's allegation that only five or six engineers are currently involved in performing tasks to be provided under the procurement, because the procurement consolidates portions of at least four contracts and there is no single incumbent performing the work to be supplied. It also notes, with respect to the labor mix issue, that imposition of no minimum labor category requirements is ‘not uncommon’ in NAVSEA support contracts.
*7 On March 27, 1984, Destek filed a brief letter reaffirming its position that NAVSEA's solicitation ‘has not asked for the kind of people that NAVSEA now says are required’ and questioning why NAVSEA, after requesting that the record be reopened, has not volunteered documentary evidence of what is being done under ‘the current contract.’
*7 A telephone conference was held on April 2, 1984 in which Counsel for Destek as well as several components of NAVSEA, including the Technical Director of PMS 396-3, the Contracting Officer, and Procurement Counsel participated. The purpose of the telephone conference was to clarify certain portions of the solicitation, to ascertain the basis for the contracting officer's estimate that approximately two-thirds of the man-hours to be expended would be for engineers with high levels of expertise in specialized disciplines, and to identify the current labor mix for performing the various tasks required by the solicitation.
*7 NAVSEA reiterates its position that tasks to be performed under items 0001 and 0002 are interrelated and states that item 0002, in essence, requires the offeror to perform technical requirements to be structured by the Management Control System described in item 0001. (NAVSEA states that the term ‘technical,’ as used in the procurement, relates to engineering and engineering-related activities rather than computer technology.) While NAVSEA concedes that approximately 24% of the total work to be performed under the solicitation relates to purely financial activities within the responsibility of PMS 396-P, it emphasizes that the remaining 76% relates to and is in support of the ILS mission (PMS 396-3) which includes facilities design for the kings Bay, Georgia installation, implementation of engineering designs through contract specifications, and insuring that hardware (material acquisitions) and software (engineering studies) for construction and maintenance of the TRIDENT System comply with ILS contract specifications, and that they are received timely, and are within cost. NAVSEA reiterates that neither the performance of the technical functions under item 0002 nor the structuring of those technical requirements under item 0001 can be undertaken without substantial engineering expertise.
*8 NAVSEA reports that its estimate that approximately two-thirds of the man-hours to be expended under the contract will be for engineers with high levels of expertise in specialized disciplines was derived from inquiries made of approximately eight contractors who are currently performing various tasks to be consolidated under the instant procurement. The Technical Director for PMS 396-3 testifies that he performed this survey and derived the two-thirds estimate from the data acquired and that there is no other means of ascertaining this information, documentary or otherwise, because the work orders, monthly reports and other documentation required of incumbents are not segregated into tasks enumerated in the solicitation. In response to Destek Counsel's question whether it was true that only two of the eight employees of one of the incumbents, McDonald-Douglas Corporation, are engineers, the Technical Director testified that, according to McDonald-Douglas, of the 72, 813 man-hours expended on that portion of its contract covered by the solicitation, 52,672 are engineering man-hours.
*8 NAVSEA also provided additional information on the current and projected staffing of PMS 396-3. NAVSEA reports that the 1LS Management Division is ‘gearing up’ to deal with the new base at Kings Bay and a new missile system proposed for TRIDENT. Explaining that the organization chart appended to Destek's March 20th submission is over six months out of date, NAVSEA states that, of the thirty-one positions currently scheduled for PMS 396-3, fifteen are engineers and eight of these are currently filled.2 Fourteen of the remaining positions are for technical personnel, including seven logistics technicians, who have Backelor of Science degrees. The remaining two staff members are clerical. In response to questioning by Counsel for Destek, concerning several specific staff positions alleged by NAVSEA to be ‘engineers', NAVSEA reported that the incumbents in those positions have degrees in engineering from the U.S. Naval Academy and other educational institutions.
Discussion
*8 Review of the solicitation and information concerning the incumbents' labor mixes in terms of man-hours and current staffing of the major program division to be directly supported under the contract confirms that the solicitation was properly classified by the Contracting Officer under SIC Code 8911, ‘Engineering, Architectural and Surveying Services' rather than under SIC Code 7392, ‘Management, Consulting and Public Relations Services.’ Moreover, review of the record shows that Destek has presented no evidence, such as that produced in SIC Appeal of Columbia Research Corporation, supra, to which it cites, to substantiate its allegation that the Contracting Officer preselected the SIC Code in order to support the $7.5 million aar size standard.
*8 Section M of the Solicitation identifies four ‘functional areas' for which the offeror is required to provide technical evaluations and into which the offeror is required to segregate experience of personnel that will work on the contract: management control systems, including program definition and work breakdown structure; fiscal management, including budget execution and data generation; integrated logistics support, including maintenance and configuration management; and technical support and assessment, including requirements definition and audit/verification. Examination of these four areas, each of which is accorded equal importance in the contract, indicates that only one, fiscal management, is of a strictly budgetary nature. The remainder are engineering oriented, and NAVSEA has testified that performance in these areas requires engineering expertise. For example, configuration management requires an understanding of the ramifications of changes made in the initial project design, in terms of interfacing design components and maintenance. The audit and verification function requires that the offeror evaluate engineering programs and production in the logistics support area. Both Paragraph 46 of Section L (‘Instructions, Conditions and Notices to Offerors') and Section M (‘Evaluation Factors and Award’) emphasize the offeror's understanding of the ‘technical’ aspects of the solicitation. Although there is some lack of rigor in the use of the word ‘technical’ throughout the solicitation, NAVSEA has testified and it is clear from an analysis of Paragraph P, l, a, (2) of Section M (‘Experience/Past Periormance’) that the term ‘technical’ is to be distinguished from expertise necessary for ‘implementation of program management information systems.’ That paragraph requires the offeror to demonstrate its ‘technical expertise’ in five specific areas, including ‘architectural and engineering design of major industrial activities' and ‘knowledge of administrative and technical processes required to acquire the TRIDENT System,’ in addition to demonstrating its corporate experience in management information systems.
*9 Furthermore, the Statement of Work in Section C and associated man-hour estimates on page 60 of the solicitation indicate that only 24% of the man-hours to be expended in performing the contract will be related to purely fiscal activities within the purview of the Plans, Programs and Financial Management Office (PMS 396-P) and that the remaining 76% will be related to and in support of the predominantly engineering mission of the ILS Management Division (PMS 396-3). The five tasks enumerated in item 0002, which is specifically denominated ‘engineering and technical support’ for 1LS, such as drafting ‘detailed technical task descriptions and associated manning and cost level estimates,’ ‘definition of 1LS planned requirements' and ‘analyz[ing]/ evaluat[ing] all program support deliverables to insure compliance with task description, technical accuracy, timeliness and within cost’ represent engineering functions which NAVSEA has testified will require substantial engineering experience. Although the final product to be produced under item 0001 is a ‘Management Control System,’ NAVSEA has provided preponderant evidence that development, operation and maintenance of this system will require substantial engineering expertise because of the technical nature of the information and processes to be controlled under the system. That such expertise is necessary is demonstrated by the evaluation criteria in the solicitation, information on the current labor mix, future labor mix estimates by the Contracting Officer based on the current mix, and analysis of the Management Control System capabilities identified in item 0001. With regard to the latter, for example, NAVSEA has testified that ‘organizing TRIDENT System requirements in a top down-work breakdown structure’ is an evaluative function that must be performed by personnel with substantial engineering expertise. So too, ‘monitoring and providing initial assessment of the progress of planned requirements through the acquisition process to completion and within resource allocations' will require the development of a Management Control System capable of assessing an engineering product and must be implemented by personnel with engineering expertise. Thus, there is extensive evidence in Sections C, L, and M of the Solicitation itself to demonstrate the predominantly engineering orientation of the tasks to be performed under the contract.
*9 The Contracting Officer's classification is also supported by evidence extrinsic to the solicitation, such as the current labor mix upon which the engineering man-hours estimate is based, and the projected staff mix for PMS 396-3, the major office to be supported by the procurement. NAVSEA states that approximately two-thirds of the man-hours to be expended under the contract must be provided by ‘engineers with high levels of expertise in specialized disciplines.’ The Technical Director of PMS 396-3 states that he derived this estimate from inquiries of approximately eight contractors working on various tasks to be consolidated under the instant procurement. In response to questions by Destek concerning a specific contractor, McDonald-Douglas Corporation, the Technical Director testified that, of a total of 72,813 man-hours devoted by McDonald-Douglas to that portion of its contract to be incorporated into the instant procurement, 52,672 man-hours will be or have been performed by engineers. Although Destek alleged that only two of eight employees performing the McDonald-Douglas contract are engineers, the allegation, even if true, is inconclusive because McDonald-Douglas is performing other tasks not to be included in the instant procurement, and there is no clear indication of what relationship this information bears to NAVSEA's testimony on this issue. (NAVSEA testifies that there is no documentary evidence to support the information supplied by the incumbents because their work is not segregated in terms of work covered by the instant procurement but is, instead, integrated for reporting purposes with other functions performed under the current contracts. Based on this estimate, NAVSEA is correct in classifying the contract under SIC Code 8911 because, in accordance with § 121.3-1(b)(4), ‘the principal nature of the product or service being procured’ is engineering services. Furthermore, review of the projected staffing for PMS 396-3, which is to receive 76% of the services rendered, also demonstrates that it is proper to so classify the procurement since the services solicited are intended to support an engineering staff. See, Sic Appeal of Technology Incorporated, supra, as construed in SIC Appeal of Columbia Research Corporation, supra, at page 6, holding that prior Size Appeals Board (Board) decisions have found SIC Code 8911 applicable ‘when the primary purpose of the procurement is to support a scientific and engineering staff.’3
*10 The solicitation was properly classified under SIC Code 8911 because the principal nature of the work to be performed is engineering services and those services are in support of an engineering staff. The instant procurement is similar in nature to that at issue in Size Appeal of Mantech International Corporation, supra, which was described by the Board as ‘engineering and technical services in support of integrated logistic support planning, Navy training plans, technical publications, ship material improvement, repairables management, configuration, and automatic test equipment requirements' and which also required the provision of management engineering services. The Board classified the contract in Mantech under SIC Code 8911 based on the provision in SIC Code 7392 that a service is to be classified in the industry of the establishment managed, where it is issued for the purpose of providing operating staff. To the extent that the instant procurement constitutes an analogous situation, the Contracting Officers' classification is alternatively supported by the rationale enunciated in Mantech.
*10 Although SIC Code 7392 was determined to be appropriate in SIC Appeal of Information Spectrum, Inc., No. 1469 (1981), in which ‘services, labor and materials necessary to accomplish integrated logistics support planning for new Navy ships' were solicited, the alternative SIC Code advocated in that case was SIC Code 3662 (‘Radio and Television Transmitting, Signalling, and Detection Equipment Apparatus') and the decision does not indicate that the Contracting Officer established that the ‘principal nature’ of the services to be provided was engineering. The facts in the instant case are also distinguishable from those in Columbia Research, supra, in which the scope of the solicitation was much wider and included substantial managerial/business services such as proofreading, wordprocessing, welding and graphic arts. Furthermore, although it was alleged that ‘some tasks require[d] a high degree of engineering skills,’ the Contracting Officer also admitted that other skills were of a ‘nontechnical, indeed clerical’ nature and failed to prove that the ‘principal nature’ of the services rendered was engineering.
*10 The controversy generated by the instant solicitation derives from a continuing and broad-based controversy over the role of and necessity for specialization in an increasingly technological society. Although Destek appears at times to allege that very little if any engineering experience is required to perform the contract, it is, at the very least, alleging that, with minimal guidance and instruction from engineers, intelligent management consultants would be capable of performing at least those tasks associated with the Management Control System described in item 0001. NAVSEA, on the other hand, is arguing, at least in part, that the Management Control System function is so inextricably interwoven with the technical requirements that the MCS is designed to control, that ‘generalists' such as management consultants would be incapable of providing those highly technical services required to develop and maintain such a system. The Board first confronted this conceptual problem in attempting to classify procurements for technical writing services. In that line of cases, where the technical nature of the manuals and other materials to be produced required engineering knowledge and the solicitation itself required use of some engineering personnel (presumably to advise the technical writers) the Board held that the major activity to be performed, as opposed to the incioental background information required, determined which SIC Code would be appropriate for the procurement. See, Size Appeal of Ryco Engineering, Inc., No. 285 (1968); Size Appeal of Value Engineering Company, No. 275 (1967); Size Appeal of Rakco Creative Services, Inc., No. 267 (1967) and Size Appeal of McLaughlin Research Corporation, No. 179 (1966). However, in the cases, cites, the board determined that the principal nature of the functions to be performed was writing and graphic arts. There was no allegation, nor was there any finding, that the interdisciplinary nature of the work required its performance by engineers. In the instant case, however, NAVSEA contends, and has adduced evidence to support its contention, that the technical demands placed upon a management consultant require that the offeror employ substantial engineering personnel in order to accomplish the enumerated tasks associated with the Management Control System, as well as tasks necessary for ILS support.
*11 In the absence of persuasive evidence to the contrary, SBA has historically deferred to a Contracting Officer's estimates concerning the percentages of work to be performed under a solicitation, because of the procuring agency's ‘special ability to know such distinctions relative to procurements under their purview.’ Sic Appeal of City Roofing Company, No. 1784 (1983). SBA has also deferred to the Contracting Officer's classification where the issues to be resolved are close, so long as the classification adopted is reasonable. Sic Appeals of Contract Services Co. and Tecom, Inc., No. 1714 (1983). Although Destek has made certain allegations concerning the number of engineers employed by two of approximately eight incumbents, these allegations are inconclusive. Moreover, the Contracting Officer's classification is reasonable in light of the terms of the solicitation and projected staffing for PMS 396-3, the major division to be supported by the solicitation. Therefore, the solicitation was properly classified under SIC Code 8911, ‘Engineering, Architectural and Surveying Services.’
Conclusion
*11 The Contracting Officer was correct in assigning a $7.5 million aar size standard to this SBA set aside procurement, as provided in § 121.3-8(e)(1), because the solicitation was properly classified under SIC Code 8911 as ‘Engineering, Architectural, and Surveying Services.’ The appeal is, therefore, denied.
*11 This constitutes the final decision of the Small business Administration. See 13 CFR 121.3-11(t), (u) and (v).
Footnotes
Destek contends that, to the extent PMS 396, which is a headguarters operation, does engineering work for the TRIDENT Project, that work would be performed by PMS 396-1 and PMS 396-2, entitled ‘Ship System Engineering Management Division (CCS)’ and ‘Ship System Engineering Management Division (IIME)’, respectively, which ‘are responsible for engineering management—namely for the combat systems and for the null, machinery, and electrical portions. . . . If engineering support were required, it would normally be required for PMS 396-1 or PMS 396-2, or both—not for PMS 396-3.’
NAVSEA had previously reported total staff of twenty-eight, thirteen of which were engineers.
Although the Size Appeals Board no longer exists, the Office of Bearings and Appeals has adopted the body of its decisions as valid precedent for size and SIC Code appeals pursuant to the principle of stare decisis. Size Appeal of Genie Services, No. 1857 (1983).
SBA No. 1921 (S.B.A.), SBA No. 1921, 1984 WL 41866
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