NAICS APPEAL OF: KATMAI NORTH AMERICA, LLC, APPELLANT

*1 On January 9, 2024, the U.S. Department of the Army, National Guard Bureau (Army National Guard), issued the subject Request for Proposals (RFP) for a contractor to provide “a full range of recruiting support services, maintenance support, quality assurance of documents, training, data entry, and support to the numerous personnel geographically spread across the 54 states and territories.” (RFP, at 71.) The Contracting Officer (CO) set the procurement 100% aside for concerns in the Small Business Administration (SBA) 8(a) business development program. On January 18, 2024, the CO amended the RFP to designate North American Industry Classification System (NAICS) code 541611, Administrative Management and General Management Consulting Services, with a corresponding $24.5 million annual receipts size standard, as the appropriate code for the procurement. (RFP, Amendment 0001 at 1.) On January 29, 2024, Katmai North America, LLC (Appellant) filed the instant appeal, arguing that NAICS code 561110, Office Administrative Services, with a corresponding $12.5 million annual receipts size standard, was in fact the appropriate code. For the reasons discussed infra, the appeal is GRANTED.

*1 The U.S. Small Business Administration (SBA) Office of Hearings and Appeals (OHA) decides NAICS code appeals under the Small Business Act of 1958, 15 U.S.C. § 631 et seq., and 13 C.F.R. parts 121 and 134. Appellant filed the instant appeal within ten calendar days after an amendment to the RFP affecting the NAICS code, so the appeal is timely. Federal Acquisition Regulation (FAR) 19.103(a)(1); 13 C.F.R. §§ 121.1103(b)(1), 134.304(b). Accordingly, this matter is properly before OHA for decision.

*1 The purpose of this RFP is for a contractor to provide “personnel, equipment, tools, materials, supervision, and quality control necessary ... to perform [[Recruit Sustainment Program (RSP)] and Retention Quality Control Services.” (RFP, at 39.) The procurement will provide a “mechanism for reducing the training pipeline loss of recruits preparing to attend Initial Entry Training.” (Id.) The Performance Work Statement (PWS) includes specific tasks pertinent to this appeal as follows:

*3 (RFP, 39-56.)

*3 Further, proposals are to be evaluated under four evaluation factors, Technical Approach, Staffing Approach, Past Performance, and Price. The Technical Approach factor is considered significantly more important than the Staffing Approach factor. The Staffing Approach Factor is considered more important than the Past Performance factor. All non-priced factors combined are considered significantly more important than the Price factor. Provisions pertinent from the evaluation factors are as follows:

*4 (RFP at 77-78.)

*4 On January 29, 2024, Appellant filed the instant appeal and asserts NAICS code 561110 is the optimal code for the RFP because the RFP “calls for office administrative services, not consulting services.” (Appeal, at 6.) More specifically, the primary work “will be completed by general office clerks conducting administrative tasks to determine whether potential National Guard recruit enlistment packages contain the required information”. (Id.) Appellant rejects NAICS Code 541611 because the RFP does not call for the clerks to provide any advice to the Army National Guard. (Id.) Further, Appellant notes that OHA precedent has determined “NAICS code 561110 is the appropriate designation for procurements which call for the performance of ‘a wide range of administrative services,’ and the ‘application of existing rules, not consultation on new policies.”D’ (Id. at 6, citing NAICS Appeal of Gemini Tech Servs. LLC, SBA No. NAICS-6237 (2023); NAICS Appeal of Laredo Tech. Servs., Inc., SBA No. NAICS- 6173 (2022).)

*4 Next, Appellant cites to the solicitation and asserts it “calls for a contractor to perform a wide range of administrative services.” (Id. at 7.) Specifically, Appellant asserts Section 1.2 of the PWS “can be equated to crossing off boxes on a checklist to ensure the administrative accuracy and completion of these packages.” (Id.) Also, under Section 5.8 of the PWS “the contractor provides administrative scheduling support services, indicating any available dates new recruits can be shipped off for training.” (Id.) Citing OHA precedent, Appellant notes OHA has determined NAICS code 561110 is appropriate for “scheduling support services.” (Id. at 7-8, citing NAICS Appeal of Laredo Tech. Servs., Inc., SBA No. NAICS- 6173 (2022).) Referencing Section 5.9 of the PWS, Appellant concludes NAICS code 561110 is the optimal code for this RFP because “the majority of services contemplated by the PWS are administrative in nature.” (Id. at 8.) Appellant notes “the majority of work under the [RFP] is performed by a labor category which primarily performs day-to-day office administrative support services.” (Id. at 8-9.)

*5 Lastly, Appellant contends that “the [RFP] does not call for consulting services.” (Id. at 9.) Citing OHA precedent, Appellant asserts NAICS code 541611, “‘pertains to consulting services such as giving advice on operations and management issues.”’ (Id., citing NAICS Appeal of Ace Consulting Servs., LLC, SBA No. NAICS-5574 (2014).) Thus, a NAICS code primarily for consulting is inappropriate in instances where the solicitation does not call for analyzing the process or providing advice, but instead calls for processing the application. (Id., citing NAICS Appeal of Panacea Consulting, Inc., SBA No. NAICS-4582 (2003).) Appellant notes that the “predecessor 10 contract has always been assigned NAICS code 561110.” (Id. at 9-10.) Thus, OHA should consider “that this fact further demonstrates the CO's erroneous decision to assign NAICS code 541611 to the [RFP].” (Id. at 10.)

*5 On February 15, 2024, Counsel for the Army National Guard filed a response to the appeal on behalf of the CO. Counsel asserts “NAICS Code 541611, Administrative Management and General Management Consulting Services, best describes the principal purpose of the services being procured.” (Response at 3.) Counsel summarizes the scope and background of the PWS and asserts “the most important aspects of the PWS involve operating advice and assistance to ARNG-HRR on administrative management issues with RSP support services.” (Id. at 4.) Counsel list responsibilities as “conducting statistical and trend analysis, ensuring compliance with quality control plans, drafting data trend reports, providing administrative support, coordinating conference calls and meetings, handling recruit allocations, and facilitating continuous improvement initiatives.” (Id.) Counsel contends that some tasks are basic administrative support, but the primary purpose of the procurement extends to “encompass strategic consulting, data analysis, and management advisory roles.” (Id.) Counsel further notes, “the contractor's role in offering recommendations for continuous improvement initiatives underscores the consulting functions inherent in the procurement.” (Id. at 5.)

*5 Next, Counsel cites to Section 5 of the PWS and asserts the “administrative management and general management consulting services aspects of the PWS outweigh other aspects of the RFP.” (Id.) Specifically, Section 5.5 “focuses on data collection, analysis, and system management in Vulcan, crucial for monitoring and updating RSP Metrics”; while Sections 5.10, 5.11, and 5.20 show “the contractor's role in providing strategic guidance, quality assurance, organizational advice, and continuous improvement initiatives within the ARNG.” (Id.) Further, Section 5.5 discusses data collection, analysis and system management. Counsel notes, the contractor will access recruitment and retention performance by collecting, uploading, tracking and analyzing data. (Id.) The contractor will also address system errors and issues and provide system recommendations, tasks that are “consistent with the consulting services' focus on optimizing organizational processes and systems for improved performance and outcomes.” (Id. at 6.) Further, Section 5.10 requires the contractor conduct statistical and trend analysis to create reports on a specific timeline and address any issues by submitting Help Desk tickets. (Id.) Counsel summarizes “the most important aspects of the PWS involve operating advice and assistance to ARNG-HRR for RSP support services ... [t]hese aspects of the PWS outweigh other aspects of the RFP.” (Id. at 7.)

*6 Counsel further argues Appellant fails to meet its burden and “fails to demonstrate the complete picture of the overall requirement in the RFP.” (Id. at 8.) More specifically, Appellant selects parts of the RFP to argue NAICS code 561110 best describes the principal purpose of the procurement; however, Appellant's selections are either “not even a requirement” or ““administrative.” (Id.) Like NAICS Appeal of IMPAQ International, LLC, SBA No. NAICS- 5415 (2012), “office administrative tasks are only one aspect of the RSP support requirement; that does not make those tasks the most important.” (Id. at 8-9.) Counsel contends the requirements of the PWS, such as administrative support, data analysis, quality assurance, documentation management, are fundamental aspects of NAICS code 561110; and the RFP “places a far greater emphasis on administrative management and consulting than the supporting tasks in office administrative services under NAICS code 561110.” (Id. at 9.)

*6 Counsel further contends that “[t]he mere fact that the previous contract was issued under a different NAICS code does not dictate the continued use of that code, especially if the current solicitation's requirements have evolved or expanded.” (Id. at 11.) More specifically, “[t]he appropriate NAICS code is driven by the current [RFP's] specifications and the nature of the services sought.” (Id., citing 48 CFR § 19.102(b)(1).) Lastly, although the terms ““consult”, “consulting”, or “consultant” are not present in the RFP, “[s] ervices under this NAICS code encompass a broad range of activities beyond the mere invocation of the word ‘consulting.”’ (Id. at 12.)

*6 The NAICS code selected by the CO is NAICS code 541611, Administrative Management and General Management Consulting Services, which covers:

*7 NAICS Manual,¹ at 469.

*7 On the contrary, Appellant advocates for NAICS code 561110, Office Administrative Services, which covers:

*7 NAICS Manual, at 485-86.

*7 Appellant has the burden of proving, by a preponderance of the evidence, all elements of its appeal. Specifically, Appellant must show that the CO's NAICS code designation is based upon a clear error of fact or law. 13 C.F.R. § 134.314; NAICS Appeal of Durodyne, Inc., SBA No. NAICS-4536, at 4 (2003). SBA regulations do not require the CO to select the perfect NAICS code. NAICS Appeal of Evanhoe & Assocs., LLC, SBA No. NAICS-5505, at 14 (2013). Rather, the CO must assign the NAICS code that best describes the principal purpose of the product or service being acquired in light of the industry descriptions in the NAICS Manual, the description in the solicitation, the relative value and importance of the components of the procurement making up the end item being procured, and the function of the goods or services being acquired. FAR 19.303(a)(2); 13 C.F.R. § 121.402(b). A procurement is usually classified according to the component that accounts for the greatest percentage of contract value. (Id.) OHA will not reverse a NAICS code designation “merely because OHA would have selected a different code.” NAICS Appeal of Eagle Home Med. Corp., SBA No. NAICS-5099, at 3 (2009).

*7 Upon reviewing the PWS, descriptions in the NAICS Manual, OHA's prior decisions, arguments on the record, and contract performance requirements, I agree with Appellant that NAICS code 561110, Office Administrative Services, is the appropriate code for the procurement. As a result, the CO erred in assigning NAICS code 541611, Administrative Management and General Management Consulting Services.

*7 The CO's designated NAICS code is 541611, Administrative Management and General Management Consulting Services. NAICS code 541611 is appropriate for solicitations that call for an array of consulting and administrative support services such as consulting services for acquisitions, assisting in proposal evaluation, crafting policy, and conducting independent cost analysis. NAICS Appeal of ALON, Inc., SBA No. NAICS-5148, at 8 (2010). Likewise, OHA has found this code appropriate for a solicitation that requires the contractor to develop and maintain management training and educational resources in an established Coordination Center, facilitating substantive discussions by specialists. NAICS Appeal of Information Ventures, Inc., SBA No. NAICS-5544, at 1-2 (2014); see also NAICS Appeal of IMPAQ International, LLC, SBA No. NAICS-5415 (2012) (determining NAICS code 541611 appropriate for a contract that requires contractors have “experience in preparing predictive analysis”.) This code covers not merely administrative work, but the provision of consulting and advice. NAICS Appeal of Millenium Health and Fitness, Inc., SBA No. NAICS-6094, at 11 (2021). It covers concerns providing advice and assistance to organizations on management issues. NAICS Appeal of Integrity Consulting Engineering and Security Solutions, LLC, SBA No. NAICS-5941, at 8 (2018); NAICS Appeal of Ace Consulting Svcs., LLC, SBA No. NAICS-5574, at 5 (2014). This advice can include strategic and organizational planning. NAICS Appeal of The Tolliver Group, Inc., SBA No. NAICS-5705 at 10-11 (2016). In the first case in which this code was at issue, OHA rejected its designation for a procurement seeking the operating of application processing centers, because the code covered the provision of advice and assistance in planning programs. NAICS Appeal of Panacea Consulting, Inc., SBA No. NAICS-4582 (2003).

*8 I conclude the procurement at issue here is similar to the one in Panacea, in that it involves the processing of the recruits for the Army National Guard, and the handling of the administrative work involved in recruitment and retention, but not the provision of advice on how to conduct the program. The contractor “may” (PWS, § 5.20) recommend “improvements” but its real task is the administrative processing of the recruits. Section II.A, supra. Further, unlike ALON, where the contractor conducted independent cost analysis, and Information Ventures, where the contractor developed and maintained management and training recourses, the contractor here will perform administrative functions within an existing system that will not require consulting. Id. The contractor will collect data, upload into an existing system, and report any issues and recommendations to Help Desks (DPRO Help Desk or Vulcan Help Desk). Id. The contractor is not creating a new system nor consulting the Help Desks on an existing system, but merely has the option to provide recommendations while performing the day-to-day administrative work of the contract. Thus, while recommendations are part of contract performance, administrative services are the primary purpose of the contract.

*8 Conversely, the NAICS Manual description of NAICS code 561110 covers “establishments primarily engaged in providing a range of day-to-day office administrative services, such as financial planning; billing and recordkeeping; personnel; and physical distribution and logistics for others on a contract or fee basis.” Section II.D, supra. NAICS code 561110 is appropriate for solicitations that require administrative services which include performing intake of individuals seeking personnel services, issuing ID cards, performance of computer and printer maintenance, and generating casualty reports. NAICS Appeal of Gemini Tech Services, LLC, SBA No. NAICS-6237, at 10 (2023). Further, a contract for a wide range of day-to-day office administrative services, such as patient scheduling and general reception functions, scanning records and documents, and processing claims were also determined to be appropriate for this code. NAICS Appeal of Laredo Technical Services, Inc., SBA No. NAICS- 6173, at 6 (2023).

*8 Here, the RFP requires that the contractor perform administrative services similar to those in Gemini Tech Services, LLC and Laredo Technical Services. The contractor must adhere to “administrative completeness and accuracy of all enlistment documents, assistance coordinating shipping dates for new recruits, and timely response to administrative issues from the time of enlistment through transition to their ARNG unit.” Section II.A, supra. Further, the Technical Approach evaluation factor considers a contractor's ability to perform administrative functions within an existing systems such as administrative processing, clerical support, work on processing troops at basic training, and ability to collect data from Vulcan to create a report (the RSP QUICK Facts Report and National GC Shipper QC Report) to assist with RSP Retention Services, an existing system. Id. Thus, I find NAICS code 561110, Office Administrative Services, the appropriate code because the RFP calls for a contractor to perform administrative services that assist in maintaining the existing system, RSP Retention Services.

*9 Accordingly, I must conclude that the CO's designation of NAICS code 541611, Administrative Management and General Management Consulting Services, was based upon clear error.

*9 For the above reasons, the appeal is GRANTED. The CO clearly erred in assigning NAICS code 541611 for this RFP. The correct NAICS code for this RFP is 561110, Office Administrative Services, with a corresponding $12.5 million annual receipts size standard. Because this decision is being issued before the deadline for receipt of proposals, the CO MUST amend the task order to change the NAICS code designation from 541611 to 561110. 13 C.F.R. § 134.318(b); FAR 19.103(a)(7); Eagle Home Med. Corp., B-402387, March 29, 2010, 2010 CPD ¶ 82.

*9 This is the final decision of the Small Business Administration. See 13 C.F.R. § 134.316(d).