CASDE Corporation and George G. Sharp, Inc., No. 3503 (August
16, 1991) Docket NO. (SIC-91-7-23-89)



                    UNITED STATES OF AMERICA
                  SMALL BUSINESS ADMINISTRATION
                 OFFICE OF HEARINGS AND APPEALS
                     WASHINGTON, D.C. 20416

SIC APPEALS OF:                    )
                                   )
CASDE Corporation and              )
George G. Sharp, Inc.              )
                                   )
     Appellants                    )  Docket Nos. SIC-91-7-23-89
                                   )              SIC-91-7-26-90
Solicitation No.                   )
N00024-91-R-4217(Q)                )
Department of the Navy             )
Naval Sea Systems Command          )
Washington, DC                     )

                             DIGEST

When the majority of tasks required in a solicitation are marine
engineering and ship design related, and the Request for
Proposals requires that the personnel assigned to these tasks
have extensive experience in both of these areas, the solici
tation is properly classified under the $9.0 million average
annual receipts size standard for the "Marine Engineering and
Naval Architecture" component of Standard Industrial
Classification code 8711.

                            DECISION
                                
                         August 16, 1991

WHITE, Administrative Judge, Presiding:

Jurisdiction

This decision is rendered pursuant to the provisions of the
Small Business Act of 1958, 15 U.S.C. 631 et seq., and the
regulations codified at 13 CFR Part 121.

Issue

Did the Contracting Officer properly assign the $9.0 million
average annual receipts size standard for "Marine Engineering
and Naval Architecture" under Standard Industrial Classification
code 8711 to this solicitation, or should it be classified under
the $13.5 million size standard for engineering services
covering "Military and Aerospace Equipment and Military Weapons"
under this same Standard Industrial Classification code as
advocated by the Appellants?

Facts

On July 15, 1991, the Department of the Navy, Naval Sea Systems
Command, Washington, DC, issued the above-referenced
solicitation (RFP) for Ship Design Management Support. The
solicitation was a total small business set-aside, with a size
standard of $9.0 million or less in average annual receipts
under Standard Industrial Classification (SIC) code 8711
(Engineering Services: Marine Engineering and Naval
Architecture). Proposals are due on August 28, 1991.

On July 23, 1991, this Office received a timely appeal of the
designated $9.0 million size standard from CASDE Corporation
(CASDE). In its appeal, CASDE contended that the $13.5 million
size standard for Military and Aerospace Equipment and Military
Weapons under this same 8711 SIC code for Engineering Services
should have been assigned to this solicitation by the
Contracting Officer. To support its position, CASDE argued, in
part, that:

     The SIC Manual shows no industry descriptions for the 8711
     subcategories at issue here, e.g., "Marine Engineering and
     Naval Architecture" or "Military and Aerospace Equipment
     and Military Weapons." See "Exhibit 1." Accordingly,
     reference is next made to the product or service
     descriptions in the solicitation. These are found in
     Solicitation Section C-"Description/Specifications."
     Nowhere in the six single spaced pages describing the
     solicitation requirements is there even one reference made
     to "Marine Engineering" or "Naval Architecture." Rather, a
     broad range of engineering and technical support services
     is called for. See "Exhibit 2."

     There is also no reference to Marine Engineering or Naval
     Architecture in the solicitation section titled "Submission
     of Proposals" instructing offerors as to the contents of
     their proposals and setting out the demonstrated.  See
     "Exhibit 3."
     
     In fact, the only reference in the solicitation to these
     terms is in solicitation Table L-1.  Table L-1 sets forth
     the educational requirements for the ten solicitation labor
     categories.  Marine Engineering and Naval Architecture are
     among several alternative degrees which may satisfy the
     education requirements for the Program Manager, Project
     Engineer, Senior Engineer, Engineer and Junior Engineer
     labor categories.  Since these requirements are listed in
     the alternative, offerors may entirely satisfy the
     solicitation requirements without any proposed employees
     having degrees in Marine engineering and Naval
     Architecture.  See "Exhibit 4."
     
                 *    *    *    *    *    *    *
     
     This is a procurement to provide services for the Naval Sea
     Systems Command, a component of the Department of Defense.
     Without doubt, the main business of NAVSEA is military ship
     platforms and their associated weapon systems.
     Solicitation Section C specifically provides that the word
     "ships," which is used extensively in the
     description/specifications, includes all ship systems, ship
     sub-systems and components.  See "Exhibit 2." Since many
     major systems and components of naval ships are weapons
     this description must necessarily include such equipment.

George G. Sharp, Inc. (Sharp) also timely filed a Notice of
Appeal on July 26, 1991.  Sharp argued, as did CASDE, that the
$13.5 million size standard under SIC code 8711 for Military and
Aerospace Equipment and Military weapons should apply to this
solicitation.  In support of this argument, Sharp stated that:

     The basis for Sharp's appeal is that the services sought
     apply to the total ship where all naval ship related
     engineering disciplines are required, including naval
     architecture and marine, electrical, electronics,
     mechanical and weapons engineering.  The Solicitation is
     clearly not confined to the individual naval architecture
     and marine engineering disciplines alone.
     
It then cited SIC Appeal of George G. Sharp Inc. and Giannotti
and Associates of Texas. Inc., No. 2749 (October 20, 1987),
where we held that the $9.0 million size standard for Marine
Engineering and Naval Architecture was the appropriate size
standard for that solicitation, and noted the following
distinguishing characteristics:

     ...In that case, however, Sharp argued for the $9.0 million
     size standard since the scope of work, while mixed, was
     predominately that of naval architecture and marine
     engineering....
     
     Attached as enclosure (1) is the pertinent portion of the
     statement of work for that procurement where the
     preponderance of naval architecture and marine engineering
     can be seen.
     
     In the present solicitation, however, there is no mention
     whatsoever of naval architecture nor marine engineering in
     the statement of work. The emphasis is on ship design
     management support.

     Ship design management support requires extensive
     management skills in addition to all the traditional
     engineering disciplines as well as many other non
     engineering disciplines. In the case of naval ships,
     weapons and electronics engineering are also integral to
     naval ship design management support. Attached as enclosure
     (2) is a copy of the entire statement of work. It can be
     seen that not one engineering discipline is singled out
     throughout the entire statement of work. In total ship
     design management, all engineering disciplines are
     essential; management and many non-engineering disciplines
     are essential as well and in no event could one deem naval
     architecture and marine engineering predominant in such a
     wide spectrum of skills.

Sharp further contended that "all similar recent NAVSEA engineer
ing management support solicitations" were issued under the
$13.5 million size standard and attached a list of previously
issued solicitations to support its position.

A response to the CASDE appeal was received from the Contracting
Officer on August 6, 1991. He disagreed with the arguments
presented by CASDE and stated that this solicitation is for the
procurement of professional engineering services to support the
design of U.S. Navy vessels. As such, he contended that the

selection of the Marine Engineering and Naval Architecture $9.0
million size standard was based specifically and exclusively on
the nature of the engineering services to be acquired. The
Contracting Officer further noted that there is an ongoing
requirement for these services, and that the three incumbent
contractors are currently performing on contracts awarded under
the $9.0 million size standard for Marine Engineering services.
He further stated that:

     The services being acquired under the RFP are marine
     related engineering services. Both "Military and Aerospace
     Equipment and Military Weapons" and "Marine Engineering and
     Naval Architecture" type engineering services are included
     in SIC Code Classification 8711. Therefore, a distinction
     must be made between the two phrases. The key word is
     "marine". The term "marine engineering services" is not
     defined in the SIC Manual or other indices upon which such
     classifications are based. However, the SBA regulations
     make it clear that the terms which adequately reflect the
     industry and services of the acquisition should be used.
     The term "marine" is understood to apply to the specific
     areas of maritime or naval services as distinguished from
     "military and aerospace equipment and military weapons"
     which is a significantly broader classification than that
     of maritime or naval industries. The engineering services
     being acquired under the RFP were appropriately classified
     "marine" because of the maritime or naval nature of the
     acquisition arising out of the unique ship design and fleet
     support efforts and requirements imposed on the contractor
     and the specific fields in which the contractor will be
     required to furnish its services. The word "ship" is a term
     which qualifies the design efforts and which indicates the
     maritime, naval or marine aspects of the engineering
     services.

The Contracting Officer agreed that there were no specific
references to "Marine Engineering" or "Naval Architecture" in
the Statement of Work (SOW), as it was written in very broad
terms, but argued that the nature of a majority of the tasks
required are marine engineering and ship design related. As
such, experience in naval architecture and marine engineering
would be required, as well as a thorough understanding of the
ship design and construction process. He then cites several
examples from the SOW which would require knowledge and
understanding of the specific functions and processes involved.
He also stated that:

     The RFP in total, however, requires considerable experience
     in Marine Engineering and Naval Architecture, which is
     necessary to maximize effective performance of the types of
     tasks contemplated which relate directly to the design of
     ships (marine engineering and naval architecture).
     
     With respect to the educational requirements of the various
     labor categories, Marine Engineering or Naval Architecture
     degrees are desired but not required, nor are they listed
     as preferred over other degree disciplines, as the nature
     of the degree in not of paramount importance. What is
     considered important, and what Appellant has ignored in his
     appeal, is the degree of experience clearly required by the
     RFP in these fields. Case in point, an individual with a
     degree in Electrical Engineering may be capable of
     performing the work. This capability, however, was not
     gained through academics. Rather, the individual would have
     to have gained the knowledge and experience in the field of
     ship design, construction, modernization, etc. primarily
     through actual work experience. This experience would be
     considered much more significant than the mere possession
     of a degree in the field. As reflected in the labor
     category descriptions for specific positions, the primary
     emphasis is not on education. Rather, it is the extensive
     experience required in the areas of Naval Architecture and
     Marine Engineering which is of paramount importance.

The Contracting Officer also pointed out that the Navy produces
as many non-military ship platforms, including research ships,
auxiliaries, floating drydocks, service craft, and a host of
material support ships, as it does military ship platforms.
Therefore, contrary to CASDE's assertions, military weapon
systems and sub-systems are not a major factor.

Section C of the solicitation, which covers the procurement
description, specifications and statement of work, requires that
the contractor furnish certain "ship design, construction and
service life management support services to the Ship Design and
Engineering Directorate." It also notes that the word "ship" is
meant to include all ship systems, ship sub-systems and ship
components.

Table L-1 of the solicitation, which contains the labor category
descriptions, states that:

     The following are descriptions of the experience and
     educational characteristics identified by the Government as
     being the minimum required for the respective labor
     categories. The offeror shall utilize the description of
     the labor categories to base its classification of
     personnel by labor category. Each individual proposed must
     have the stated number of years of related experience in
     the areas of the Statement of Work. Years of experience
     refers to elapsed calendar time since completion of
     undergraduate education during which the individuals'
     effort include one or more of the technical work areas.

The labor categories listed are Program Manager, Project
Engineer, Senior Engineer, Engineer, Junior Engineer, Principal
Analyst, Senior Analyst, Analyst, Junior Analyst, and Support
Personnel. Representative examples of the experience and
educational requirements for these positions are as follows:

     Program Manager
     
     Position requires the ability to provide guidance,
     direction, supervision and management for Ship Design
     Management support tasks as discussed in the Statement of
     Work. Educational requirements are a BS/BA degree in
     Engineering, Computer Systems, Naval Architecture,
     Business, Mathematics or related fields and at least ten
     years of professional experience in the Naval Architecture,
     Marine Engineering, Engineering Management or computer
     fields. This experience must also include at least three
     (3) years of demonstrated supervisory and management
     experience. The qualified individual must be able to review
     and approve work performed by contractor/subcontractor
     program personnel for compliance with task requirements....
     
     Product Engineer
     
     Position requires extensive experience and knowledge in
     coordinating and conducting Ship Design Management support
     tasks as discussed in the Statement of Work. The qualified
     individual must be capable of reviewing and approving work
     performed by related program personnel and have the
     capability to perform the identical tasks in an independent
     manner. The project engineer will be the primary technical
     point of contact with task-related Government technical
     personnel. Educational requirements are BS/BA degree in
     Engineer
     ing, Computer Systems, Naval Architecture, Mathematics or
     related fields as well as at least ten years of
     professional experience in the Naval Architecture, Marine
     Engineering, Computer Analysis, or related fields. This
     experience must also include at least three (3) years as a
     Project Engineer in charge of efforts as discussed in the
     Statement of Work....

     Senior Engineer
     
     Position requires the ability to perform independently and
     have extensive experience and knowledge in conducting or
     supporting ship design and/or ship system/component
     design/engineering. Educational requirements are a BS
     degree in a field of engineering or naval architecture.
     Five to ten (5-10) years of experience conducting or
     supporting naval ship design engineering/analysis and/or
     engineering management is required. The individual must be
     capable of independent work requiring application of
     intensive and diversified knowledge of ship/ship
     system/component design requirements....
     
     Engineer
     
     Position requires an individual who possesses detailed
     knowledge of the procedures/analysis required and systems
     employed to conduct, construct and/or manage a ship, ship
     sub/system and/or component design. Educational
     requirements are a BS degree in a field of engineering or
     naval architecture. In addition, two to five (2-5) years of
     experience in conducting naval ship design
     engineering/analysis and/or engineering management support
     is required. The individual must be capable of working on
     specific aspects of task assignments with little or no
     technical supervision....

The other designated positions also have similar marine
engineering and ship design experience requirements in the areas
discussed in the SOW.

Discussion

Before addressing the merits of this case, it is necessary to
understand the history of SIC code 8711. In the 1972 edition of
the SIC Manual, the present SIC code 8711 was listed under SIC
code 8911 (Engineering, Architectural, and Surveying Services).

The Small Business administration (SBA) amended its size
standard regulations, effective March 12, 1984, and, in so
doing, divided SIC code 8911 into four components. 1J These four
components are as follows:

     SIC Code            Descriptive Title
     
     8911                Engineering Services, Except for
                         Military and Aerospace Equipment and
                         Except for Military Weapons.
     
     8911                Engineering Services for Military
                         and Aerospace Equipment and for
                         Military Weapons (Except Marine
                         Engineering).
                         
     8911                Marine Engineering and Naval
                         Architecture.
                         
     8911                Architectural Services (Except
                         Naval) and surveying services.

Emphasis added. The preamble to this revision, in discussing the
"Engineering Services for Military and Aerospace Equipment and
Military Weapons" component, stated that this component would:

     ...include highly sophisticated projects for the Department
     of Defense and NASA....

In addition, the preamble to this revision, in discussing the
"Marine Engineering and Naval Architecture" component, also
stated that:

     ...The Navy would prefer a 200-employee standard (about $11
     million in sales) which would include firms with the
     capacity to design entire ships, but they pointed out that
     many smaller firms with capability in specialized areas
     could bid for contracts smaller than the design of entire
     ships. Therefore, the Navy could accept retaining the
     current $9 million standard. Since the majority of comments
     favor a standard no higher than the current $9 million
     level, at which sufficient contracts would be available,
     SBA is retaining the present standard for marine
     engineering and naval architecture.

On October 1, 1986, effective January 1, 1987, the Office of
Management and Budget (OMB) revised the SIC codes and the 1972
SIC Manual. 2/ As a result, SIC code 8911 (Engineering,
Architectural, and Surveying Services) was subdivided into three
parts and new SIC code numbers assigned to each. These changes
are as follows:

                              1987
                         
     8711      Engineering Services
     
     8712      Architectural Services
     
     8713      Surveying Services

SIC code 8711 is described in the 1987 SIC Manual as being:

     Engineering Services
     
     Establishments primarily engaged in providing professional
     engineering services. Establishments primarily providing
     and supervising their own engineering staff on temporary
     contract to other firms are included in this industry.
     Establishments providing engineering personnel, but not
     general supervision, are classified in Industry 7363.
     Establishments primarily engaged in providing architectural
     engineering services are classified in Industry 8712, and
     those providing photogrammetric engineering services are
     classified in Industry 8713.
     
          Designing: ship, boat, and machine
          
          Engineering services: industrial, civil,
          electrical, mechanical, petroleum, marine,
          and design
          
          Machine tool designers
     
          Marine engineering services
          
          Petroleum engineering services
SBA issued an Emergency Interim Final Rule on January 6, 1987,
effective January 1, 1987, modifying its size standards to
"conform with the newly revised sic system which has been
revised by the office of management and Budget." 3/  The stated
intent was to make its size standards compatible with the new
SIC system, not to initiate any size standard change.  The
pertinent portion of this modification is as follows:

     1972      1987      1987 Descriptive Title
     
     8911      8711      Engineering Services:
     
                         Military and Aerospace Equipment and
                         Military Weapons
                         
                         Marine Engineering and Naval
                         Architecture
                         
                         Other Engineering Services

               8712      Architectural services (Other than

               8713      Surveying Services

On May 24, 1998, effective July 1,1988, SBA issued its final
rule concerning the 1987 OMB Changes. 4/  The final rule, and
our current regulation found at 13 CFR 121.601, reads as
follows:

     8711      Engineering Services:
     
               Military and Aerospace Equipment and        $13.5
               Military Weapons.
     
               Marine Engineering and Naval Architecture    $9.0
     
               Other Engineering Services.                  $2.5
     
     
     8712      Architectural Services (Other Than Naval).   $2.5
     
     8713      Surveying Services                           $2.5

In Summary, the 1987 SIC Manual, which is the latest edition,
has only one category of "Engineering Services" under SIC code
8711.  This one category covers most professional engineering
services,


which are described in very general terms. As such, it provides
little guidance in the resolution of the issue in this case.

However, SBA, in 1984, divided SIC code 8911 into several
components. One component covered "Engineering Services for
Military and Aerospace Equipment and for Military Weapons
(Except for Marine Engineering), and another covered "Marine
Engineering[and Naval Architecture." At that time Marine
Engineering was specifically excluded from the Military and
Aerospace Equipment category. 5/ Both of these components were
changed by SBA to SIC code 8711 after OMB published the 1987 SIC
Manual. In the process, however, SBA deleted, without
explanation, the "Except Marine Engineering" qualifier that was
previously a part of "Engineering Services for Military and
Aerospace Equipment and for Military Weapons" category.  6/ But,
since Marine Engineering is listed separately with a different
size standard, it is clear on its face that it is not a part of
Military and Aerospace Equipment engineering services.
Therefore, the deleted qualifier would appear to have been
redundant and of no effect. Too, SBA's stated intent at the time
was to make its size standards compatible with the new SIC
system, not to initiate any size standard changes.

It is also clear from the quoted preamble to SBA's 1984
amendment to its size standard regulations that the "Marine
Engineering and Naval Architecture" component was to cover the
design of entire ships, with no distinction being made for ships
with military weapon systems and sub-systems.

Further, in SIC Appeal of Georae G. Sharp Inc. and Giannotti and
Associates of Texas. Inc., supra, we held that:

     The argument that the type of ship to be serviced is
     dispositive of the classification issue is also without
     merit. The types of services to be provided under the
     solicitation are primarily of a marine engineering and
     naval architecture nature.... In an analogous case, we held
     that the nature of the item itself, rather than the use to
     which it will be put, governs the SIC code

     services to be performed on ships that are "military in
     nature" or that carry military and weapon systems, should
     not be characterized according to the ultimate use of the
     ships. The $13.5 million aar standard is reserved for
     engineering services with respect to the military equipment
     or weapons themselves. The Contracting Officer's
     classification under the $13.5 million size standard was
     incorrect, and the solicitation should be classified under
     the $9 million aar size standard.

As for the present solicitation, we agree with the Contracting
Officer that the majority of tasks required are marine
engineering and ship design related. We also agree that the RFP
requires that the personnel assigned to these tasks must have
extensive experience in both of these areas. Accordingly, based
on the preceding analysis, it is our determination that this
solicitation was properly classified under the $9.0 million size
standard.

Conclusion

The Contracting Officer's classification of this solicitation
under the $9.0 million average annual receipts size standard for
the Marine Engineering and Naval Architecture component of SIC
code 8711 is AFFIRMED.

This constitutes the final decision of the Small Business
Administration. See 13 CFR 121.1720(a), (b), and (c).

                    ____________________________________
                    Elwin H. e (Presiding)
                    Administrative Judge
                    
                    _____________________________________
                    Michael S. Cole (Concurring)
                    Administrative Judge .
                    
                    _____________________________________
                    G. Stephen right (Concurring)
                    Administrative Judge

______________

1/ See 49 Federal Register 5024.

2/  See 51 Federal Register 35170.

3/  See 52 Federal Register 397.

4/  See 53 Federal Register 18821.

5/ It is noted that Naval Architecture was also specifically
excluded from Architectural Services and included with Marine
Engineering.

6/ The specific exclusion of Naval Architecture from
Architectural Services and its inclusion with Marine Engineering
is still a part of our current regulations.