I.T.S. Corporation, No. 3521 (September 24, 1991)
Docket No. Sic- 91-8-27-112



                     UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                     WASHINGTON, D.C. 20416
                      
SIC APPEAL OF:                     )
                                   )
I.T.S. Corporation                 )
                                   )
     Appellant                     )
                                   )  Docket No. SIC-91-8-27-112
Solicitation No.                   )
W100975-A2                         )
Environmental Protection           )
Agency                             )
Washington, D.C.                   )

                                 DIGEST
            
A procurement for property management services, which requires 
the contractor to provide management, technical and administrative 
support and assistance to EPA officials, is more appropriately classified 
under SIC code 8741, Management Services, with a $3.5 million size standard, 
than under SIC code 8721, Accounting, Auditing, and Bookkeeping Services.

                               DECISION

                           September 24, 1991

COLE, Administrative Judge, Presiding:

Jurisdiction

This appeal is decided under the Small Business Act of 1958, 15 U.S.C. 631 et seq., 
and the regulations codified at 13 CFR Part 121.

Issue

Whether the Standard Industrial Classification (SIC) code 8741, designated by
the Contracting Officer for this procurement, was in error.

Facts

On August 1, 1991, the United States Environmental Protection Agency,
Washington, D.C., issued the captioned Request For Proposal (RFP) for
"Property Management Services." The procurement is a total small business
set aside, and was classified under Standard Industrial Classification (SIC)
code 8741, Management Services, with a $3.5 million size standard.
Proposals were originally due by September 3, 1991; however, by Amendment
0001, effective August 22, 1991, the deadline for submission of proposals
was extended to September 25, 1991.

By letter postmarked August 23, 1991, I.T.S. Corporation (Appellant)
filed an appeal with the Office of Hearings and Appeals (OHA), contesting
the SIC code, 8741, designated by the Contracting Officer, and urging that
we find SIC code 8721, Accounting, Auditing, and Bookkeeping Services, to be
the appropriate classification, with a size standard of $4.0 million or
less in average annual receipts. The Appellant contends:

        I.T.S. asserts that over 50% of the procedures and tasks
        to be performed as described in this solicitation are comprised
        of records management, bookkeeping and auditing services.

The Appellant supports its contention by asserting that the
requirements in the RFP's Description/Specification/Work Statement

	consistently indicate that the Contractor shall be responsible 
	for; "maintaining property management records," "assistance in 
	inventory and reconciliation," "assistance to accountable areas,"
     "on-site audits," reconciliation of records," and "providing 
	recommendations and assistance to accountable areas."
     
Additionally, the Appellant cites duties and responsibilities under the
"Personnel Requirements" of Section C.2.2.6 which requires the contractor to:

     "reconcile annual and final inventories," "prepare special reports, 
	studies and reviews," "provide assistance in conducting physical
     inventories and reconciliations," "maintain property management 
	records," and "conduct bar code [and] annual wall-to-wall inventories 
	and reconcile."
     
According to the Appellant, the "Experience/Education Require ments"
of Section C.2.2.6 "indicate[s] that professional level personnel are
required." Furthermore, the Evaluation Factors for Award,
Section M.4, are alleged to support the Appellant's position because
they include consideration of the offeror's "understanding of the federal
budget cycle and budget functions" and "project/task tracking and reporting
system." Lastly, the Appellant points to the "Reports of Work" requirement,
that thecontractor provide detailed monthly financial reports.

On September 11, 1991, the Contracting Officer filed  a statement in
opposition to the appeal, which included a copy of Amendment 0002,
effective September 9, 1991. 1/ The Contracting Officer argues that
the successful offeror will be providing property management
technical support services in four areas, namely, National Technical
Assistance; Contract Property Administration; In-House Property Management;
and Training, and states:

      These services include maintaining, managing, and 
	monitoring the EPA's personal property, as well 
	as aiding in developing recommendations to enhance 
	the EPA's property management function.
     
The Contracting Officer contends that the RFP's technical evaluation
criteria support her selection of SIC code 8741, citing their
emphasis on the "approach to, as well as capabilities and experience in,
the provision of property management services."  Furthermore, respecting
the types of personnel required to perform the contract, the Contracting
Officer contends that "experience in property management, especially
Government property management, is important...."

Specifically, the Contracting Officer challenges the Appellant's allegation 
that "over 50% of the procedures and tasks to be performed as described in
this solicitation are comprised of records management, bookkeeping and 
auditing services." The Contracting Officer explains certain terms and 
phrases which she contends the Appellant has misunderstood or taken out of 
context, as follows:

         (a)  "Maintaining property management records"...
          consists of many managerial and administrative tasks 
	    including, but not limited to:          
 
                   -  Reviewing new contracts, contract
                      modifications, delivery orders, public
                      vouchers, and seven point justifications
                      for the acquisition of property;
                   -  Generating form letters for property administrators,
                      requesting property control systems, inventories,
                      reports, and advising of compliance reviews and
                      reports;
                   -  Inputting data by entering and updating records
                      in the Personal Property Accountability System;
                   -  Issuing bar code decals to contractors;
                   -  Maintaining basic information on all contracts
                      administered by EPA Headquarters in the Contract
                      Property Administration Program;
                   -  Reconciling annual inventories for contracts for the
                      Contract Property Administration Program;
                   -  Preparing reports of excess property for
                      submission to the General Services Administration
                      and coordinating the disposal of that property.
            
       (b)  "Assistance in inventory and reconciliation" is the
       physical inventory of property held by a contractor and
       the reconciliation of that property with existing documentation, as 
	 to the type and location of the property
       
       (c)  "Assistance to accountable areas" is another phrase misused by 
	 ITS. Accountable areas is a term that refers to regions of the 
	 country...[and thus] has nothing to do with accounting.
       
       (d)  "On-Site Audits" refers to Contract Compliance Reviews, and not to
	 audits conducted by auditors or accountants,...to verify that contractors 
	 are complying with the Federal Acquisition Regulation and contract 
	 requirements, and are operating in accordance with their written property 
	 control system....
       
The Contracting Officer dismisses the Appellant's suggestion that the requirement 
of "professional level" personnel indicates that the procurement is primarily 
for accounting, auditing, and bookkeeping services, and rejects the notion that 
the technical evaluation criteria support the Appellant's position, stating:

            An understanding of the federal budget cycle is considered a 
		routine evaluation factor under many procurements other than 
		accounting, auditing, and bookkeeping procurements to assess 
		the contractor's ability to coordinate expenditures with the 
		outlays of funds by the Government...[and]...to insure that 
		the Government does not expend funds for any task/project that 
		does not pertain to this procurement. Neither of these 
		evaluation factors requires accounting, auditing, and
	      bookkeeping services.
     
Lastly, regarding the requirements for monthly financial reports from
a successful offeror, the Contracting Officer explains that such reports

		are routinely required by the EPA for many procurements that 
		do not involve accounting, auditing, and bookkeeping. Monthly 
		financial reports are required so that the Project Officer may 
		accurately track the expenditures by the successful offerors 
		during contract performance...[and]...therefore, [it] tracks how 
		the successful offeror is performing, and does not  constitute the 
		work that the offeror is chosen to perform under the contract.....

The Statement of Work (SOW) set forth in Amendment 0002 provides, inter alia, that:

     The Contractor shall furnish the necessary personnel, material, equipment, 
     services and facilities (except as otherwise specified), to perform the 
     Statement of Work/Specifications as shown below.

	The Contractor shall perform work under this contract only as directed in
	Delivery Orders issued by the Contracting Officer.

     				DESCRIPTION/SPECIFICATION/WORK STATEMENT

		     C.2 BACKGROUND

     			The Environmental Protection Agency (EPA) is
     			responsible for the management and accountability of 
			its personal property, including motor vehicles. This 
			includes approximately 91,000 items of accountable
     			property valued at over $370 million and expendable 
			supplies necessary to support over 15,000 employees.

		     These responsibilities include:

                 l)  Control of property, including the maintenance of 
		     inventory records and the accountability of owned and the 
		     leased property.
                 
		     2)  Determining the most cost-effective methods of storage, 
		     distribution, repair, and disposal of property supplies and 
		     equipment;
                 
		     3)  Administration of contractor-held and contractor acquired
                 property, Superfund, and otherwise;

	           4)   Development and implementation of property related training 
		     courses for property management personnel;

                 5)   Administration of the National Property Assistance Program 
                 and associated technical support;
             

				            *    *    *    *     *`   *    *
                            
		    C.3 PROPERTY MANAGEMENT TECHNICAL SUPPORT SERVICES

		    Property management technical support services shall
	          be provided, as ordered, in four areas; (1) National
                Technical Assistance, (2) Contract Property
                Administration, (3) In-House Property Management, and
                (4) Training, as follows:

                In support of the EPA Headquarters Project Officer, the 
		    Contractor shall provide support services and assistance 
                to the National Property Assistance Program which is designed
                to enhance as well as to ensure the Agency's property management 
                goals are implemented Agency-wide, at each local level. These
                services shall consist of: providing information, recommendations 
                and assistance for the development of technical direction for all
                accountable areas. Conduct special studies and analyses which will 
		    support the EPA Project Officer and staff to enhance the Agency's 
		    Property Management System, with regard to the review of existing 
		    related statutes, regulations, policies and procedures, as well as 
	  	    newly proposed ones; providing information, recommendations and
                assistance to facilitate timely and accurate management of the Personal 
		    Property Accountability System; providing assistance to the EPA Project 
		    Officer in conducting audits and evaluations of accountable areas for the 
		    purpose of assessing EPA's property management activities, and providing
                information and recommendations with regard to enhancing such activities; 
		    and, providing recommendations and assistance to accountable areas in 
		    implementing property management policies and procedures.

                       *  	*    	*	  *  	 * 	 *   *
                            
                In support of all EPA contractor locations, the Contractor
                shall assist EPA in maintaining property management records
                of Superfund and Non-Superfund Contractor-held Government-
                owned property; this includes daily monitoring of
                activities, contract file maintenance, inventory
                maintenance, inventory reconciliation and disposal. The
                Contractor shall also assist in the performance of reviews
                associated with  the maintenance of property management
                records of Contractor-held Government-owned property and
                recommend to the EPA Project Officer potential improvements
                and enhancements in the Contractor's property control
                systems. This is accomplished by performing on-site or desk
                compliance reviews to verify that contractors are complying
                with the Federal Acquisition Regulation and contract
                requirements, and are operating in accordance with their
                written property control systems

                             *    *     *    *    *    *    *
                             
	          In support of EPA, the Contractor shall assist EPA in
                maintaining property management records, to include; a).
                custodial areas, registers for vouchers, revocable license
                agreements and assistance in inventory and reconciliation;
                b). updating the local/national Personal Property System
                Database, which includes additions, deletions, transfers, or
                change in status and the generation of standard and special
                reports, as required; c). assistance to accountable areas*
                in the preparation and processing of documentation and
                liaison with the General Services Administration (GSA)
                regarding excess property disposition; and, d). assistance
                to accountable areas regarding the control and management of
                property at the local level. The Contractor shall also
                provide recommendations to the EPA Project Officer with
                regard to current operating procedures and offer suggestions
                for enhancements of the Headquarters Management function.
               
                              *     *    *    *    *    *    *
                              
                The Contractor shall provide support services to develop,
                implement and conduct training programs such as custodial
                officer training, and presenting briefings to newly assigned
                Contracting officers...

                               *    *    *    *    *    *    *
                              
                The contractor will provide two employees to be located at the EPA
                facility in Cincinnati, Ohio. These employees will be provided office
                space at that facility. The two employees to be provided by the contractor
                will be a Senior Property Management Specialist and a Junior Property
                Management Specialist....

	The SIC code referred to by the Appellant is described in the 
	Standard Industrial Classification Manual ("SIC Manual"), 2/ in
	pertinent part, as follows:

               8721 Accounting. Auditing. and Bookkeeping Services
      
	         Establishments primarily engaged in furnishing accounting,
               bookkeeping, and related auditing services. These
               establishments may use data processing and tabulating
               techniques as part of providing their services.

	The industry description for SIC code 8741, selected by the
	Contracting Officer, is as follows:

	        8741 Management Services
      
              Establishments primarily engaged in furnishing general or
              specialized management services on a day to day basis and on
              a contract or fee basis. Establishments in this industry do
              not provide operating staff. Management and operation of a
              business, where operating staff as well as management is
              provided, is classified according to the activity of the
              establishment managed.

                  Administrative management services
                  Business management services
                  Circuit management services for
                    motion picture theaters
                  Construction management
                  Motel management services Office
                  management services
          
	This solicitation calls for a base period of one year, and three
      option years.

Discussion

In determining the appropriate SIC code designation in this
procurement, we are governed by the provisions of 13 CFR Part 121
which prescribe, in pertinent part:

     Sec. 121.902 Establishment of the size standard.

     *      *     *      *     *     *     *

     (b)  The proper SIC code designation for the goods or services
     being procured is that which best describes the principal purpose
     of the procurement, giving primary consideration to the industry
     descriptions in the SIC Manual, the product or service description
     in the solicitation and attachments thereto,.... Consideration may
     also be given to previous Government procurement classifications
     of the same or similar products or services, additional
     information on the industries and on the product or services
     procured, and to evaluations on which industry classification
     would best serve the purposes of the Small Business Act....
     
In this instance, we are not persuaded by the Appellant's
arguments. Although the Contracting Officer may be mistaken in
concluding that accounting and auditing firms do not ordinarily
conduct physical inventories and reconciliations, we find that
such services do not comprise the primary purpose of the procure
ment nor the predominate nature of the required services. The
presence of accounting and auditing aspects to this procurement
is clearly ancillary to the principal purpose, namely, for EPA to
obtain management support and assistance in implementing,
operating and improving the agency's property management system,
including the development and support of employee training. The
solicitation refers to technical support services; however, the
tasks described in the SOW and the "Sample Work Assignments"
(Attachment C to the solicitation) indicate that the contractor
will be primarily involved with management of the personal
property assets which fall under the jurisdiction of the EPA. The
hands-on activities of the contractor constitute an integral part
of the management function, as well as providing the basis for
the contractor's recommendations for improvements in the system
and in property management training. Therefore,
find that the Contracting Officer's selection of the
classification, "Management Services" (SIC 8741), is the most
appropriate in this instance.

Conclusion

For the reasons stated above, the appeal is DENIED; and the
Contracting Officer's designation of SIC code 8741, with a size
standard of $3.5 million in average annual receipts, is AFFIRMED.

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


                         ____________________________________
                         Michael S. Cole(Presiding)
                         Administrative Judge


                         _____________________________________
                         Gloria E. Blazsik (Concurring)
                         Administrative Judge


                         _______________________________________
                         G. Stephen Wright (Concurring)
                         Administrative Judge


______________

1/ This Amendment 0002 consists of "Questions," presumably from
offerors, and the procuring activity's "Answers;" the addition of
a clause pertaining to "Training;" and a revised "Statement of
Work" (SOW) to be substituted for the previous SOW in its
entirety.

2/ Standard Industrial Classification Manual, 1987 Edition,
Office of Management and Budget.