Opportunity Systems, Inc., No. 3367 (October 24, 1990)
Docket No. 90-8-29-101



                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                     WASHINGTON, D.C. 20416

                                

SIC APPEAL OF:                )
                              )
Opportunity Systems, Inc.          )
                              )
                              )
     Appellant                )    Docket No. SIC-90-8-29-101
                              )
Solicitation No. RFP90012   )
Department of Education       )
Washington, D.C.              )

                             DIGEST

A solicitation for the conduct of a survey of school districts to
identify potential civil rights problems should be classified
under SIC code 7379, to which a $12.5 million average annual
receipts size standard applies, if the predominant task involves
data processing rather than data collection.

                            DECISION

                        October 24, 1990

PHILLIPS, Administrative Judge, Presiding:

Jurisdiction

This appeal is resolved in accordance with 15 U.S.C. 632 and the
regulations published at 13 CFR Part 121.

Issue

Whether the solicitation should have been classified under
Standard Industrial Classification (SIC) code 7379, to which a
$12.5 million average annual receipts size standard applies, or
SIC code 8732, to which a $3.5 million average annual receipts
size standard applies.

Facts

On June 8, 1990, the Department of Education issued Solicitation
No. RFP-90-012 as a small business set aside under a 500-employee
size standard for a survey of public schools to be used to
identify potential civil rights problems. On June 11, 1990, the
size standard was amended to $3.5 million average annual receipts
but was amended again on August 17, 1990, to $12.5 million
average annual receipts. On the latter date the date for
submitting proposals was extended to September 14, 1990.

On August 29, 1990, the incumbent contractor, Opportunity
Systems, Inc. (OSI), filed a timely appeal contending error in
the Contracting Officer's failure to include a SIC code in the
solicitation along with the size standard and alleging that the
solicitation should have been classified under SIC code 8732,
"Commercial Economic, Sociological and Educational Research," to
which a $3.5 million average annual receipts size standard y
applies, rather than SIC code 7379, "Computer Related Services,
Not Elsewhere Classified," upon which it presumes the Contracting
Officer's ultimate selection of the $12.5 million average annual
receipts size standard was based. OSI points out that, under the
regulations codified at 13 CFR 121.902(b), a solicitation must be
classified according to its principal purpose and argues as
follows as that criterion applies to the present solicitation:

     Solicitation No. RFP90012 concerns performance of the
     Department of Education's biennial "Elementary and Secondary
     School Civil Rights Survey." The Solicitation's statement of
     work succently [sic] sets forth the services expected of the
     contractor:

          The contractor shall provide services from designing
          and printing forms, using specifications provided by
          OCR and approved by the Office of Management and
          Budget, to producing statistical tables, graphics and
          reports. The contractor shall conduct a mail survey of
          selected school districts throughout the United States
          for the 1990 Elementary and Secondary School Civil
          Rights Survey. The contractor shall also be responsible
          for mailing the survey instruments, collecting, editing
          and processing the data, and conducting analyses in
          accordance with the specifications enumerated in the
          Scope of Work and in the Department of Education
          Standards ADP Procedures Manual. The contractor shall
          also assist OCR in the design and development of the
          1992 survey.

Solicitation No. RFP-90-012, Attachment A at 3. As the
solicitation makes clear, the data collected and analyzed by the
contractor is used to help the Office of Civil Rights ("OCR")

     identify potential civil rights problems in public schools
     offering elementary and secondary programs, examine the
     status of civil rights in the nation and each state,
     determine changes in the data over the years in various
     aspects of civil rights, and provide technical assistance
     where needed.

Id. at l.

     An SIC code designation must consider the principal purpose
     of the procurement, with the service description contained
     in the solicitation among the primary considerations. 13
     C.F.R. _121.902(b). Here, the solicitation's primary purpose
     is to provide information to OCR from which it can identify
     potential civil rights problems in public schools. The
     contractor is expected to collect, organize, and analyze the
     necessary data. In short, the work required under solicita
     tion no. RFP90012 clearly constitutes research regarding
     educational and sociological issues....

With respect to SIC code 7379, OSI argues that computer services
play a merely subsidiary role in performance of the contract and
that the major portion of the work involves data collection, not
processing. OSI buttresses its argument that a $12.5 million
average annual receipts size standard is inappropriate by
referencing previous, allegedly similar solicitations that it
contends were classified otherwise. Specifically, OSI notes that
a previous solicitation, issued in 1986, regarding the Depart
ment's civil rights survey was classified under SIC code 7374,
"Computer Processing and Data Preparation and Processing
Services," to which a $7 million average annual receipts size
standard applies, and that the 1988 solicitation under which it
is presently performing as the incumbent contractor was classi
fied under SIC code 8732. It argues that the latter fact creates
a "strong presumption" under _121.902(b) in favor of the $3.5
million average annual receipts size standard.

On September 14, 1990, the Contracting Officer filed a response
to OSI's appeal requesting that this Office "uphold the Depart
ment's size standard of $12.5 million and clarify that the proper
SIC code is 7379." He argues as follows concerning the inappli
cability of SIC code 8732:

     The principal purpose of this procurement is data
     collection, preparation, data base development and/or
     modification, data input, programming, report generation,
     and requirements analysis. This requirement is divided into
     five distinct phases. Phase I is the design and production
     of the survey instrument. Phase II is the actual conduct of
     the survey. Phase III involves data preparation and editing
     and updating of the data base. Phase IV requires various
     computer generated analyses and reports. Phase V provides
     for analyses, diskette generation, and design development of
     a 1992 survey.

     OSI argues that the majority of the work will occur during
     the first [two] phases of performance, and "that computer
     services play a limited role in this aspect of performance,
     which constitutes the core work procured by the
     solicitation." The solicitation clearly establishes that the
     predominant tasks to be performed are computer service
     tasks. While it is true that computer services play a
     limited role in Phases I and II, the tasks specified under
     Phase I have already been or are in the process of being
     completed by the Department (See Attachment A, RFP 90012,
     Page 5). Phase II involves mailing the Government provided
     survey material, receipt of completed surveys, distribution
     of copies of responses, and follow up on nonrespondents. The
     management plan for this phase is to be provided to the
     contractor by the Department (See Attachment A, RFP 90012,
     Pages 510). The tasks in Phases I and II do not constitute
     the core level of effort required by this solicitation and
     they are not being performed in total by the contractor.
     Rather, they constitute only a minor portion of the
     solicitation requirement.

     The majority of the effort required under this solicitation
     will be in the database editing and testing, data entry and
     processing of the information provided in the survey
     documents, editing, and database analysis and report
     generation, which are performed in Phases III and IV (See
     Attachment A, RFP 90012, Pages 1021). In addition,
     approximately half of the requirements in Phase V are
     computer related services falling within SIC Code 7379 (See
     Attachment A, RFP 90012, Pages 2526).

     Contrary to OSI's allegation, these computer tasks do not
     merely play a subsidiary role, but rather, are the principal
     purpose of the contract. This is evidenced by the fact that
     all of the key personnel for this procurementthe Project
     Director/Senior Analyst, the Programmer/Computer Software
     Specialist, and the Data Technicianare required to have
     predominantly computer related experience:

          Project Director/Senior Analyst
          
          The project director must have demonstrated the ability
          to design, develop, and install surveybased
          information systems with significant data processing
          applications. He/she must have the ability to conduct
          data gathering activities, define information require
          ments, determine feasibility of proposed solutions, and
          propose economical and efficient solutions to system
          problems based on cost effectiveness and other factors.

                *     *    *   *    *    *     *

          ....The project director must have a minimum of seven
          years experience as an analyst programmer. At least two
          years must be as a project manager. The project
          director must have demonstrated significant and recent
          experience in the following areas: research and survey
          studies, management of a team designing survey
          information systems, SAS, and any highlevel language
          consistent with the methods used in processing the data
          in this contract.
     
     Similarly, the Programmer/Computer Software Specialist
     "...must be capable, under general supervision, of analyzing
     and defining program solutions and of developing programs
     for automated data processing within time and resource
     constraints. He/she must translate the details into a
     program of coded instructions used by the computer."
     Finally, the Data Technician "...must have demonstrated data
     handling and editing experience for both manual and
     automated systems. He/she must have experience in the
     receipt and preparation of data as well as experience in
     microcomputer and mainframe computer programmer [sic]" (see
     RFP 90012, Section L.4). The SBA has held that the nature
     of the services to be performed by key personnel are
     indicative of the appropriate SIC code. SIC ADpeal of:
     Resource Consultants. Inc., Docket No. SIC85812134, SBA
     No. 2275 (1985). Here, the key personnel are performing
     predominantly computer related activities, not research into
     educational and sociological issues.

     As noted above, the Contracting Officer has estimated that
     computer services tasks account for considerably more than
     50% of the work under this contract. OSI has presented no
     evidence to the contrary, other than its own belief, that
     the bulk of the work is in Phases I, II and III do not
     require computer services. In fact, a major portion of
     Phases I and II will be performed by the Department, and
     Phase III consists exclusively of computer services [sic].
     The SBA has held that, "Under such circumstances, precedent
     holds that the Office of Hearings and Appeals will defer to
     the Contracting Officer's Statement as to the allocation of
     costs or labor." See, e.g., SIC ADpeal of TECOM, No. 2053
     (1984); SIC ApDeal of Dyneteria. Inc., No. 1986 (1984)." SIC
     Appeal of: TECOM, Docket No. SIC9041137, No. 3282 (May 2,
     1990).

With respect to previous classifications of allegedly similar
solicitations, the Contracting Officer argues that the cover page
of the previous, 1988 solicitation submitted by OSI provides no
evidence that the services solicited there are similar to those
at issue in this appeal and that

     although the SBA regulations do provide that consideration
     may be given to previous classifications of the same or
     similar products or services, the SBA has held that, where
     the Statement of Work, the projected labor mix, and the
     evaluative factors establish clearly the SIC code
     designation, evidence of previous classifications is
     irrelevant. SIC Appeal of: Resource Consultants. Inc., [No.
     2275 (1985)].

The Contracting Officer states that he selected SIC code 7379,
rather than SIC code 7374, which was assigned to the 1986
solicitation, because

     the actual processing of the data would be performed through
     a Government furnished computer facility (See Amendment no.
     3, RFP 90012, Clause H.18) and did not include the data
     processing consulting, database development and maintenance,
     requirements analysis and diskette conversion and production
     services required under the solicitation, which are
     encompassed by SIC Code 7379.

Discussion

The standards for determining the proper SIC code and size
standard for a solicitation are set forth in 13 CFR 121.902(b) as
follows:

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.

SIC code 7374 is described as follows in the 1987 edition of the
Standard Industrial Classification Manual, published by the
Office of Management and Budget:

     Computer Processing and Data Preparation and Processing
     Services Establishments primarily engaged in providing
     computer processing and data preparation services. The
     service may consist of complete processing and preparation
     of reports from data supplied by the customer or a
     specialized service, such as data entry or making data
     processing equipment available on an hourly or timesharing
     basis.

          Calculating service, computer
          Computer time-sharing
          Data entry service
          Data processing services
          Data verification service
          Keypunch service
          Leasing of computer time
          Optical scanning data service
          Rental of computer time
          Service bureaus, computer
          Tabulating service, computer

SIC code 7379 is described in the Manual as follows:

     Computer Related Services Not Elsewhere Classified
     
     Establishments primarily engaged in supplying computer
     related services, not elsewhere classified. Computer
     consultants operating on a contract or fee basis are
     classified in this industry. Establishments primarily
     engaged in producing prepackaged software are classified in
     Industry 7372; and those engaged in offering data processing
     courses or training in computer programming and in computer
     and computer peripheral equipment operation, repair, and
     maintenance are classified in Industry 8243.

          Computer consultants
          Data base developers
          Data processing consultants
          Disk and diskette conversion services
          Disk and diskette recertification services
          Requirements analysis computer hardware
          Tape recertification service

SIC code 8732 is described in the Manual as follows:

     Commercial Economic. Sociological. and Education 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.

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

OSI contends that a majority of the work to be performed under
the solicitation will occur during the first two phases, i.e.,
that data collection, rather than data processing, constitutes
the principal purpose of the solicitation. In contrast, the
Contracting Officer argues that "a major portion of Phases I and
II will be performed by the Department" and that

     [t]he majority of the effort required under this
     solicitation will be in the database editing and  testing,
     data entry and processing of the information provided in the
     survey documents, editing, and database analysis and report
     generation, which are performed in Phases III and IV..

He adds that "approximately half of the requirements in Phase V
are computer related services," concluding that "computer ser
vices tasks account for considerably more than 50% of the work
under [the] contract." Review of the solicitation leads us to
agree.

Under Phase I the contractor is required physically to produce
the survey instrument. Its content, however, is provided by OCR.
Conduct of the survey under Phase II includes the provision of
assistance to public school and district respondents and follow
up with schools and districts that fail to respond to the survey.
Clearly, neither phase involves computer services to any signi
ficant degree. However, Phases III and IV, almost exclusively,
involve computer related services. The contractor is responsible
for all data preparation, entry and editing as well as all
reports and analyses based thereon. Design of the 1992 survey
instrument under Phase V will be accomplished with the aid of OCR
and includes an analysis of future software and hardware require
ments. The conclusion from these facts that the predominant
activities are computer related is buttressed by the expertise
requirements for key employees, which demonstrate substantial
emphasis on computer-related experience. Under such
circumstances, it is not probative what size standards were
assigned to previous solicitations concerning the survey, only
that this survey predominantly involves computer-related
services, which would make its classification under educational
research inappropriate.

We agree that SIC code 7374 implies use of the contractor's own
facilities to perform under the contract. This solicitation,
however, provides for the use of the Department's computer
facilities. Furthermore, SIC code 7374 contemplates far less
comprehensive services than those sought under this solicitation.
Here, the contractor has substantial responsibility for
collecting the data, whereas, under SIC code 7374, the "data [is]
supplied by the customer." Hence assignment of SIC code 7379 is
more appropriate for this solicitation.

Conclusion

The proper SIC code for the solicitation is SIC code 7379,
"Computer Related Services, Not Elsewhere Classified," to which a
$12.5 million average annual receipts size standard applies. In
consequence, the appeal is DENIED.

This constitutes the final decision of the Small Business
Administration. See 13 CFR 121.1720(a), (b) and (c).
                         
                         
                         
                         _______________________________
                         Jane E. Phillips residing)
                         Administrative Judge
                         
                         
                         _______________________________
                         Gloria E. Blazsik (Concurring)
                         Administrative Judge t
                         
                         
                         ________________________________
                         G. Stephen Wright (Concurring)
                         Administrative Judge