Incore, Inc., No. 3860 (December 1, 1993)
Docket No. SIZ-93-10-4-110

                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.

SIZE APPEAL OF:                    )
                                   )
Incore, Inc.                       )
                                   )
     Appellant                     )
                                   )
Solicitation No.                   )  Docket No.  SIZ-93-10-4-110
DAHA01-93-R-0004                   )
Department of the Army and the     )
Air Force National Guard Bureau    )
Office of the U.S. Property and    )
  Fiscal Officer                   )
Montgomery, Alabama                )

                             DIGEST

When no viable basis for overturning the Regional Office
determination is articulated by the Appellant in its Notice of
Appeal, the appeal will be denied.

                            DECISION
                                
                        December 1, 1993

WHITE, Administrative Judge, Presiding:

Jurisdiction

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

Issue

Has a viable basis for overturning the Regional Office
determination been articulated by Incore, Inc. in its Notice of
Appeal?

Facts

On May 11, 1993, the Department of the Army and the Air Force
National Guard Bureau, Office of the U.S. Property and Fiscal
Officer, Montgomery, Alabama, issued the above-referenced
solicitation (RFP) for "Removal of Contaminated Soil and Removal
of Jet Fuel Tanks." This was a total small business set aside
with a size standard of $18.0 million or less in average annual
receipts under Standard Industrial Classification (SIC) code 8744
(Environmental Services). Pursuant to Amendment No. 1, proposals
were due on June 18, 1993.

By letter dated September 7, 1993, the Contracting Officer
advised the Dallas Regional Office of the Small Business
Administration (SBA) that he had received a size protest from H&M
Associates, Inc. (H&M) alleging that Incore, Inc. (Incore or
Appellant) 1/ is affiliated with CCC Group, Inc. (CCC), a large
business concern. In his referral letter to the Regional Office,
the Contracting Officer also stated that:

     (1)  The protest was timely 2/ [Footnote added.]
     
     (2)  This was a small business set-aside project, SIC 8744, $18
     million
     
     (3)  The contractor shall perform on site and with its own
     organization, work equivalent to at least 25 percent of the total
     amount of work to be performed under the contract.

After advising Incore of the protest filed by H&M, and receiving
its response thereto, the Regional Office issued a formal size
determination on September 17, 1993. Pertinent portions of this
determination state as follows:

     In responding to the solicitation, Incore submitted a
     proposal which called for a "team approach" with the CCC
     Group, Inc. and EmTech Environmental Services, a large
     construction company and a large environmental firm.... All
     of this information [submitted with
     Incore's proposal] is indicative of the fact that Incore
     does not have the experience nor the qualifications to plan
     or conduct a project involving remediation services of this
     nature.
     
                *    *     *    *    *   *     *
     
     From this information [Incore's breakdown of labor costs] it
     is obvious that Incore is under the misconception that it is
     only required to perform 25% of the cost of personnel
     allocable to this contract. Such would be true if this were
     a contract with responsibilities classified to one of the
     Specialty Trade contractor fields in Major Group 17 of the
     SIC codes. SIC code 8744, however, is a service function.
     Solicitations issued under that SIC code as small business
     set-asides require that the prime contractor perform at
     least 50 percent of the cost expended for personnel on its
     own workforce. It is obvious that Incore cannot and does not
     intend to comply with this requirement.
     
     This office finds that the relationship between Incore and
     its "team members" rises to the level of affiliation under
     the ostensible subcontractor regulation at 13 CFR
     121.401(1)(4) and that the arrangement constitutes a joint
     venture for purposes of this solicitation. Further, it finds
     that Incore is not in compliance with the limitations on
     subcontracting provision of FAR Clause 52.219-14 in that it
     will not perform the mandatory 50 percent of costs expended
     for labor on its own personnel.

                 *    *    *    *     *   *    *

     This office determines that Incore is affiliated with both
     the CCC Group and EmTech for the purposes of determining its
     size status for the subject solicitation. This determination
     is contract specific and does not have any application to
     the size of Incore for purposes of its response under future
     solicitations nor does it require the firm to obtain
     recertification from SBA before self-certifying as a small
     business under this size standard in responding to such
     future procurement actions. While the receipts of Incore, by
     itself, do not exceed the applicable size standard of
     $18.0 million, when aggregated with those of CCC and EmTech,
     they do exceed this standard. Therefore, this office holds
     that Incore is other than small for purposes of this
     procurement.
          
Incore filed a timely Notice of Appeal with this Office on
September 30, 1993. 3/ The stated basis for this appeal is as
follows:

     1.  The (SIC) Code 8744 is not representative of the work to be
     performed for the referenced project.... Furthermore, the work to
     be performed is that of construction special trade contractors
     and not that of a service contractor.... 4/ [Footnote added.]
     
     2.  There is a discrepancy between the (SIC) Code listed and the
     Size Standard listed.... The Size Standard classified is $3.5
     million or $13.5 million depending on service work to be
     performed and not the $18 million standard listed in the Commerce
     Business Daily. 5/ [Footnote added.] [Emphasis in original.]
     
     3.  There is a discrepancy between the (SIC) Code used and the
     specifications. The (SIC) Code mandates that at least 50% of
     the cost of contract performance incurred for labor must be
     expended by the contractor performing the work yet the
     specifications clearly state that "the contractor shall
     perform on the site, and with its own organization, work
     equivalent to at least 25% of the total amount of work to be
     performed under the contract." 6/ [Footnote added.]
     
     4.  A permanent injunction, effective June 23, 1993, has been
     issued by the U.S. District Court of Washington, D.C. against the
     use of (SIC) Code 8744....

On September 30, 1993, the date Incore's appeal was filed with
this Office, the procuring agency awarded the contract for this
procurement to H&M, the firm that had filed the initial size
protest against Incore.

Discussion

In this case, the Regional Office determined that Incore was
affiliated with CCC and EmTech under the ostensible subcontractor
rule codified at 13 CFR 121.401(1)(4), and that their combined
receipts exceeded the $18.0 million size standard assigned to
this solicitation by the Contracting Officer. The Regional Office
also determined that the Appellant was not in compliance with the
limitations on subcontracting provision of 48 CFR 52.219-14 in
that it would not perform at least 50 percent of the cost of
contract performance with its own personnel. The Regional Office
further noted that this determination was contract specific and,
accordingly, would not affect the Appellant's right to bid on
future procurements.

on appeal, the Appellant argues that SIC code 8744 is not the
appropriate SIC code for this procurement, as the work to be
performed is that of construction special trade contractors;
appears to argue that there is no $18.0 million size standard
under SIC code 8744; notes the ambiguity in the solicitation
concerning the percentage of work to be performed by the
contractor; and states that the District Court issued a permanent
injunction against the use of SIC code 8744 on June 23, 1993.
However, the Appellant does not challenge the Regional Office
determination that it is affiliated with CCC and EmTech under the
ostensible subcontractor rule, or that their combined receipts
would exceed $18.0 million. 7/ Furthermore, and more importantly,
assuming arguendo that this solicitation should have been
classified under construction special trade contractors, SIC code
Major Group 17, as the Appellant contends, the Appellant still
would not qualify for contract award, since the special trade
size standard is only $7.0 million and the Appellant's reported
average annual receipts alone exceed this amount. Thus, the
Appellant has, in essence, articulated no viable basis for
overturning the Regional Office determination. Accordingly, this
appeal must be denied.

Conclusion

For the reasons stated herein, this appeal is DENIED.

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

                         
                         ___________________________________
                         Elwin H. White (Presiding)
                         Administrative Judge
                         
                         
                         ____________________________________
                         Jane E. Phillips (Concurring)
                         Administrative Judge
                         
                         
                         _____________________________________
                         G. Stephen Wright (Concurring)
                         Administrative Judge

_______________

     1/ Both H&M and Incore are offerors on this procurement.
     2/ The record does not appear to contain the requisite dates
for an independent verification by this Office that the protest
was timely filed. However, since the resolution of this issue
would not affect the outcome of this proceeding, we will dispose
of this case without further delay.
     3/ According to the record, Incore received the September
17, 1993 Regional Office determination on September 23, 1993.
Therefore, Incore's Notice of Appeal was timely filed within five
working days. 13 CFR 121.1705(a)(2).
     4/ All SIC codes for Construction special trade contractors,
SIC code Major Group 17, have a size standard of $7.0 million or
less in average annual receipts. The SBA Form 355 submitted by
the Appellant reflects that the Appellant's average annual
receipts alone exceed this amount.
     5/ On January 13, 1993, SBA published an interim final
rule in the Federal Register, 58 FR 4074, that established a size
standard of $18.0 million or less in average annual receipts
for environmental services under SIC code 8744. However,
SBA published a Notice in the Federal Register on August 9,
1993 (54 Federal Register 42355) which stated that the U.S.
District Court for the District of Columbia, on June 23,
1993, had vacated the $18.0 million size standard for
Environmental Services under SIC code 8744, and that it was
no longer in effect. The Notice also stated that it
"applies immediately to all procurement requirements
involving environmental services, including all those for
which solicitations have been issued but award has not been
made."
     6/ Section I, Subsection 88, of the solicitation contains
the limitations on subcontracting clause pertaining to small
business set asides codified at 48 CFR 52.219-14. In addition,
Section I, Subsection 98, of the solicitation contains the
"performance of work" clause codified at 48 CFR 52.236-1, which
specifies that the contractor shall perform 25 percent of this
work. However, pursuant to 48 CFR 36.501(b), the latter clause is
not to be used in solicitations set aside for small business
concerns, such as that at issue here. This resulted in the
"discrepancy" noted by the Appellant.
     7/ Even if the Appellant is in compliance with the
Limitations on Subcontracting Clause in the solicitation, this
does not preclude a finding that the prime contractor is
affiliated with its subcontractor under the ostensible
subcontractor rule. Size Appeal of Mathews Construction Company,
No. 3592 (March 17, 1992).