NAICS APPEAL OF: PHOENIX ENVIRONMENTAL DESIGN INC., APPELLANT

*1 On March 18, 2024, the Department of Veterans Affairs, National Cemetery Administration, Contracting Services, (VA), issued the subject Solicitation No. 36C78624Q50173 for a contractor to supply and deliver fertilizer supplies to Willamette National Cemetery in Happy Valley, Oregon. (Solicitation, Combined Synopsis, at 1.) The Contracting Officer (CO) set the procurement 100% aside for Service-Disabled Veteran-Owned Small Business (SDVOSB) and designated North American Industry Classification System (NAICS) code 561730, Landscaping Services, with a corresponding $9.5 million annual receipts size standard, as the appropriate code for the procurement. (Id.) On March 20, 2024, Phoenix Environmental Design Inc. (Appellant) filed the instant appeal, arguing that NAICS code 325311, Nitrogenous Fertilizer Manufacturing, with a corresponding 1,050 employee 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 issuance of the solicitation, 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 According to the Statement of Need (SON), the purpose of this solicitation is for a contractor to deliver fertilizer to Willamette National Cemetery. (SON, at 1.) More specifically, the contractor will supply:

*1 (Id.)

*1 On March 20, 2024, Appellant filed the instant appeal and asserts the CO selected an inappropriate NAICS code for the solicitation. (Appeal, at 1.) According to Appellant, the SON shows that this is a “product buy and delivery only” solicitation for 20-3-20 50% Polymer Coated Urea fertilizer and Water Activated Limestone Pellets. (Id. at 2.) Offerors will not be providing landscaping services or any type of service under NAICS code 561730. (Id.) Therefore, the CO erred by selecting NAICS code 561730, Landscaping Services. (Id. at 2-3.) Appellant maintains NAICS code 325311, Nitrogenous Fertilizer Manufacturing, best describes the principal purpose of the product the VA seeks to acquire with this solicitation. (Id.)

*2 The NAICS code designated by the CO, 561730, Landscaping Services, under the administrative support services category, covers:

*2 NAICS Manual¹ at 500.

*2 The NAICS code advocated by the Appellant, 325311, Nitrogenous Fertilizer Manufacturing, under the manufacturing services category, covers:

*2 NAICS Manual, at 196.

*2 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).

*2 After reviewing the SON and the arguments presented, I conclude the CO's designation of NAICS code 561730, Landscaping Services, is not appropriate for the instant procurement. The NAICS Manual clearly states that NAICS code 561730 applies to landscaping services to be performed such as “installing trees, shrubs, plants, lawns, or gardens”, and construction services such as constructing “walkways, retaining walls, decks, fences, ponds, and similar structures.” Section II.C, supra. This is a services code covering establishments engaged in activities which support the day-to-day operations of other organizations. NAICS Manual, at 485. Here, the SON expressly calls for the delivery of fertilizer and limestone, which are supplies. Section II.A, supra. According to SBA regulations, “[a]cquisitions for supplies must be classified under the appropriate manufacturing or supply NAICS code”. 13 C.F.R. § 121.402(b)(2). As Appellant observes, offerors are not required to provide any type of the landscape care or maintenance services that fall under NAICS code 561730. The contractor here is merely required to provide the fertilizer pellets, the supplies required by the Cemetery. There are no services component to this procurement. Section II.B, supra. Thus, I find the CO erred when it selected NAICS code 561730, a services code, for a solicitation that calls for fertilizer, manufactured products. OHA has held that, if the principal purpose of a procurement is the supply of goods, a manufacturing NAICS code should be utilized. NAICS Appeal of Noble Sales Co., Inc. d/b/a Noble Supply & Logistics, SBA No. SIZ-6067, at 6 (2020).

*3 Because Appellant has established that the CO clearly erred in selecting NAICS code 561730, OHA must assign the NAICS code that best describes the principal purpose of the products or services being acquired. Section III.A, supra. Appellant appropriately asserts that NAICS code 325311, Nitrogenous Fertilizer Manufacturing, best describes the principal purpose of this procurement. Section II.B, supra. Here, the SON calls for a fertilizer that must be polymer coated urea fertilizer, which is 20% nitrogen, 3% phosphorous and 20% potassium. Section II.A, supra. 20% of the fertilizer is comprised of nitrogenous fertilizer materials, which is covered under NAICS code 325311. Section II.C, supra. Applicable regulations stipulate that, when a procurement calls for qualitatively different types of products or services, the appropriate NAICS code is the one which represents “the greatest percentage of contract value.” 13 C.F.R. § 121.402(b)(2); see also FAR 19.102(b). Although this NAICS code does not perfectly encompass all the services sought by this solicitation, such as limestone pellets, I find that this NAICS code nevertheless best describes the principal purpose of the procurement as a whole because nitrogen is an important component of the end product. See, e.g., NAICS Appeal of Techflow, Inc., SBA No. NAICS-6200, at 15 (2023). Thus, I find NAICS code 325311 appropriately describes the supplies the contractor must provide.

*3 Appellant has shown that the Contracting Officer clearly erred in selecting NAICS code 561730, Landscaping Services, for the instant procurement, and I GRANT the instant appeal. NAICS code 325311, Nitrogenous Fertilizer Manufacturing, is the appropriate code for this procurement.

*3 Accordingly, because this decision is being issued before the close of the solicitation, the Contracting Officer MUST amend the solicitation to change the NAICS code designation 561730, Landscaping Services, with a corresponding $9.5 million size standard, to NAICS code 325311, Nitrogenous Fertilizer Manufacturing, with a corresponding 1,050 employee size. FAR 19.303(c)(8); Eagle Home Med. Corp., B-402397, March 29, 2010, 2010 CPD ¶ 82.

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