Jack Faucett Associates, No. 3843 (October 7, 1993)
Docket No. SIC-93-8-20-98


                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.


SIC APPEAL OF:                )
                              )
Jack Faucett Associates       )
                              )
     Appellant                )
                              )    Docket No. SIC-93-8-20-98
Solicitation No.              )
DTFH61-93-R-00148             )
Federal Highway Administration)
Office of Contracts and       )
  Procurement                 )
Washington, D.C.              )

                             DIGEST

A procurement requiring the contractor to "(1) develop the
content for six 2-day regional workshops on public/private
partnerships in the deployment of intelligent vehicle highway
system (IVHS); (2) conduct the workshops for transportation
professionals at all levels of the government and for potential
private sector partners; and (3) provide a summary document" to
the Federal Highway Administration, in which "research" is the
predominent component, is more appropriately classified under SIC
code 8732, Commercial Economic, Sociological, and Educational
Research, advocated by the Appellant, than under SIC code 8731,
Commercial Physical and Biological Research, selected by the
Contracting Officer.

                            DECISION
                                
                         October 7, 1993

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 Contracting Officer was in error in designating SIC
code 8731 for the captioned procurement.

Facts

On August 17, 1993, Jack Faucett Associates (Appellant) timely
filed an appeal with the Office of Hearings and Appeals (OHA)
challenging the Contracting Officer's designation for the
captioned solicitation of Standard Industrial Classification
(SIC) code 8731, with a 500 or less employee size standard. The
solicitation, issued August 2, 1993, is a total small business
set-aside, and the deadline for proposals was September 2, 1993.

The Appellant states, in pertinent part:

     This SIC code (SIC 8731, Commercial Physical and Biological
     Research) is an improper SIC classification for
     [this]...solicitation. The size standard for SIC 8731
     (through incorporation of footnote 19 [1/] from 13 CFR part
     121 as published in the Federal Register Volume 53 Number
     101, May 25, 1988) clearly states that "Research and
     Development, as defined in the SIC Manual, means laboratory
     or other physical research and development on a contract or
     fee basis. Research and development for purposes of size
     determinations does not include the following: economic,
     education, engineering, operations, systems, or other
     nonphysical research; or computer programming, data
     process...." The Office of Hearings and Appeals has clearly
     stated in several opinions that for procurements to be
     assigned SIC 8731 they must constitute "'test tube' research
     analysis" (SIC Appeal of Jack Faucett Associates, No. 2672,
     1987), to be performed in a "typical laboratory setting"
     (SIC Appeal of CSR, Incorporated, No. 1910, 1984), and has
     reaffirmed this finding (SIC Appeal of Jack Faucett
     Associates, No. 2893, 1988).

     The substance of the work required in the solicitation,
     however, clearly does not involve "test tube research and
     analysis" in a "typical laboratory setting." The scope of
     work on page 2 of the RFP (attached) reads as follows. "The
     objectives of this contract, are to
     develop the content for six regional workshops on
     public/private partnerships in IVHS deployment, and to
     conduct the workshops for transportation professionals at
     all levels of government and potential private sector
     partners." ...[T]he RFP breaks the work into the following
     six tasks:

          - Literature Search
          - Prepare handbook
          - Organize Workshops
          - Case Studies
          - Conduct Workshops
          - Preparation of a summary document

     Based on the scope and the statement of work this
     procurement clearly involves no physical research and should
     be classified in either SIC 8732, Commercial Economic,
     Sociological, and Education Research (which includes
     operations research, physical distribution consultants,
     management engineering consultants, and management
     information systems consultants); or SIC 8748, Business
     Consulting Services, N.E.C. (which includes economic
     consulting, systems engineering consulting, and traffic
     consultants).
     
The Appellant alleges that the Contracting Officer advised it
that if the Appellant was eligible to bid then it had suffered no
harm from the SIC code designation. This, contends the Appellant,
is incorrect "as it requires us to compete against businesses
that should be categorized as large businesses subverting this
intent of the Act."

The Contracting Officer filed a statement in support of her SIC
code selection and in opposition to the appeal. 2/ In pertinent
part, the Contracting Officer argues as follows:

     ...The SOW [Statement of Work] requires the contractor to
     conduct the research necessary to develop the knowledge and
     material which will serve as the content for the workshop
     addressing the concept of public/ private partnerships and
     how they can be used beneficially to implement the
     Intelligent Vehicle/Highway System (IVHS) program. The
     concept of public/private

     partnerships is new to the Government, and very little
     knowledge exists. This is reflected in the FHWA [Federal
     Highway Administration] estimate for the work as shown in
     the table on page 38 of the RFP which breaks down the work
     by discipline. As noted, 62.8 percent of the total labor
     hours are expected to be performed by the
     Researcher/Technical Writer. The Evaluation Criteria stated
     in Section M of the RFP (beginning at page 45) clearly
     identifies [sic] the importance placed on the contractor
     having the resources to research technical and institutional
     issues related to public/private partnerships.

The Contracting Officer does not agree that "research," as meant
in the Standard Industrial Classification Manual, 1987 edition
(SIC Manual), is restricted to "test tube research and analysis
in a typical laboratory setting." In support of this position,
the Contracting Officer states:

     ...In three of the examples of work described in the Manual
     for SIC 8731, a reference to exclude testing from the
     definition of work is made. This is understood to include
     "test-tube" related work, which in its basic meaning is
     testing....The classical definition of "test-tube" work is
     most commonly reserved for work associated with medical
     research such as established under SIC Code 8071 which is
     referenced under SIC Code 8734 as including
     "[E]establishments [sic] primarily engaged in performing
     clinical laboratory testing...."

The Contracting Officer rejects the SIC codes advocated by the
Appellant, arguing as follows:

     ...SIC 8732 focuses primarily on economic, sociological, and
     educational research as related to commercial interest; SIC
     8742 covers management consulting services which are clearly
     outside the SOW; and SIC 8748 also addresses business
     consulting services, covering a more general spectrum of
     work not addressed by SIC 8742.

In pertinent part, the solicitation states:

     The Contractor shall furnish all necessary facilities,
     materials, and personnel and shall perform all services
     necessary to: (1) develop the content for six 2-day regional
     workshops on public/private partnerships in the deployment
     of intelligent vehicle highway system (IVHS); (2) conduct
     the workshops for transportation
     professionals at all levels of the government and for
     potential private sector partners; and (3) provide a summary
     document to the FHWA upon completion of the last workshop.
     [Part I, Section B, page 2].

The "Scope of Work" states, inter alia, that

     Six workshops will be held throughout the country...The
     target audience will include individuals from FHWA field
     offices, State and local government officials who are
     involved in the decision making and technical processes that
     affect IVHS and enhanced traffic engineering implementation,
     and representatives of private sector firms that potentially
     may provide IVHS services.

     Each workshop will provide information on topics such as:

          - public/private roles in IVHS;
          - range of opportunities;
          - institutional issues;
          - procurement/contracting issues;
          - identified barriers;
          - funding/financial implications;
          - legal/liability issues;
          - data collection options; and
          - advanced highway engineering technologies.

     Three case studies shall be included in each workshop, each
     illustrating how different institutional issues related to
     private sector participation in IVHS have been handled....
     
     A handbook will be developed and distributed at each
     proposed workshop. It will examine the issues relating to
     IVHS and public/private partnerships....

(Solicitation, Section C, pages 2-3). According to the
solicitation, the handbook is required to cover procedural and
administrative aspects of the workshops, outline and detail the
text for each session, provide visual aids and a bibliography of
suggested readings, and "suggest options to institutional
issues." The handbook, as well as all other workshop
presentations, including the "final summary," will be subject to
approval by and reflect the comments of the Contracting Officer.
(Solicitation, pages 3-5).
The contractor's "tasks," set forth in the solicitation, are
noted above by the Appellant. The focus of the "content" or
subject matter for the handbook and workshops is reflected in
certain of these "tasks." Preparation of the handbook, "Task B,"
states:

     The handbook shall be developed to be a stand-alone
     document. It shall be designed so that the participants will
     have a valuable, user-oriented reference on the
     institutional issues related to IVHS and enhanced traffic
     engineering. It shall suggest options to institutional
     issues that may arise in implementing these technologies.

"Task C," involving organization of the workshops, directs that
the "format" open with "...a workshop overview with keynote
addresses by relevant IVHS personnel with an introduction to IVHS
and a brief synopsis of the April 1992 Rockville conference
'Public and Private Sector Roles in Intelligent Vehicle-Highway
Systems (IVHS) Deployment,"' followed by a session "...including
discussions with case study presentations covering the institu
tional issues that have impacted public/private partnerships and
IVHS deployment." "Task D," directs that "[e]ach case study shall
emphasize one particular institutional issue related to
public/private partnerships." (Solicitation, Section C, pages 3
5).

The procuring activity estimates the following "disciplines
and/or expertise" will be necessary and will require "staffing
hours" as follows: "Traffic Engineer/Principal Investigator," 250
hours; "Research/Technical Writer," 1435 hours; and
"Support/Clerical," 600 hours. (Solicitation, page 38).

Of the "Evaluation Criteria," the technical factor is considered
of equal importance to that of cost; and each of these is deemed
more important than past performance. In pertinent part, the
"technical" criteria include the following:

     1.   Technical competence and knowledge of the issues.

          a. Overall knowledge and familiarity with IVHS and enhanced
             traffic engineering implementation issues.
          
          b. Specific knowledge of public/private partnerships and
             institutional factors that may affect IVHS/enhanced traffic
             engineering implementation.

     2.   Responsiveness to the RFP as reflected in their proposal.

          a. Understanding and recognizing the critical institutional
             and technical issues involved in public/private partnerships
             as they relate to IVHS and enhanced traffic engineering.

                      *    *     *    *   *

     3.   Available resources to complete the contract requirements
          satisfactorily and in a timely manner.

          a. Experience and background of the senior and key staff in
             activities related to IVHS, enhanced traffic engineering,
             and public/private partnerships required for successful
             completion of the contract....

(Solicitation, pages 45-46).
Discussion

The governing regulation provides, in pertinent part:

      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, the relative value and
     importance of each of the components in the procurement (if
     in fact there is more than one component which makes up the
     end item being procured) and the function of the goods or
     services being purchased. 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 service procured, and
     to evaluations on which industry classification would best
     serve the purposes of the Small Business Act. Generally, a
     procurement will be classified according to the component
     which accounts for the greatest percentage of the contract
     value. A contracting officer must have a good reason to
     classify a procurement in a way that is inconsistent with
     this general rule.

The classification selected by the Contracting Officer for the
subject solicitation is described in the SIC Manual as follows:

     8731 Commercial Physical and Biological Research
     
     Establishments primarily engaged in commercial physical and
     biological research and development on a contract or fee
     basis. Noncommercial research establishments funded by
     endowments, grants, or contributions are classified in
     Industry 8733. Separate establishments of aircraft, guided
     missile, or spacecraft manufacturers primarily engaged in
     research and development on these products are classified in
     Manufacturing, Major Group 37.
     
Listed in the SIC Manual under SIC code 8731 are the following
illustrative services:

     Agricultural research, commercial
     Biological research, commercial
     Chemical laboratories, commercial research: except
       testing
     Engineering laboratories, commercial research: except
       testing
     Food research, commercial
     Industrial laboratories, commercial research: except
       testing
     Physical research, commercial
     Research and development, physical and biological:
       commercial

As noted by the Appellant, this SIC code is further defined in 13
CFR 121.601, footnote 18, which states, in pertinent part:

     Research and Development, as defined in the SIC Manual,
     means laboratory or other physical research and development
     on a contractor fee basis. Research and development for
     purposes of size determinations does not include the
     following: economic, educational, engineering, operations,
     systems, or other nonphysical research....

We find the research required by the subject solicitation to be
"nonphysical," and expressly excluded from classification under
SIC code 8731. Moreover, it is secondary research, not the basic
research contemplated under SIC code 8731. Thus, we find SIC code
8731 inappropriate here. Compare, also, SIC Appeal of The Cadmus
Group. Inc., No. 3315 (1990); SIC Appeal of Jack Faucett
Associates, No. 2672 (1987).

The Contracting Officer estimates that 62.8 percent of the labor
hours will be those of the "Researcher/Technical Writer," thus,
demonstrating the predominance of research in this procurement.
The record before us does not contain countervailing evidence
which would warrant our disregarding the Contracting Officer's
contention on this point. Consequently, we accept the position
that "research" is the predominent component in this procurement.
In light of our rejection of SIC code 8731, noted above, we look
to SIC code 8732, advocated by the Appellant, described as
follows:

     8732 Commercial Economic, Sociological. and Educational
     Research
     
     Establishments primarily engaged in performing commercial
     business, marketing, opinion, and other economic,
     sociological, and educational research on a contract or fee
     basis. Noncommercial economic, sociological, and educational
     research establishments funded from endowments, grants, or
     contributions are classified in Industry 8733.
     
Illustrative services listed in the SIC Manual under SIC code
8732 are:

     Business economists, commercial
     Business research, commercial
     Economic research, commercial
     Educational research, commercial
     Market research, commercial
     Opinion research, commercial
     Research: economic, sociological, and educational-commercial

Based upon our review, described above, we find that classifica
tion under SIC code 8732, which carries a size standard of $3.5
million in average annual receipts, is most appropriate here.

Conclusion

For the reasons stated above, the subject solicitation should be
classified under SIC code 8732, with a size standard of $3.5
million in average annual receipts, and the Contracting Officer's
designation is REVERSED; the appeal is GRANTED.

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


                         ___________________________________
                         Michael S. Cole (Presiding)
                         Administrative Judge
                         
                         
                         ___________________________________
                         Jane E. Phillips (Concurring)
                         Administrative Judge
                         
                         
                         ____________________________________
                         Elwin H. White (Concurring)
                         Administrative Judge


_______________

     1/   This is now designated footnote 18 to 13 CFR 121.601
under the current, applicable regulations.
     2/ No allegation is presented by the Contracting Officer
challenging the Appellant's standing to appeal; nor would such
argument prevail. See SIC Appeal of Field Support Services Inc.,
No. 3680 (1992).