United States Government Accountability Office 

Washington, DC 20548 

Comptroller General

of the United States

Decision 

Matter of: Eagle Home Medical Corporation 

File: B-402387 

Date: March 29, 2010 

Gerald H. Werfel, Esq., Pompan, Murray & Werfel, PLC, for the protester. 

Stephen F. Butera, Esq., Department of Veterans Affairs, and Sam Q. Lee, Esq., Small 

Business Administration, for the agencies. 

Paula A. Williams, Esq., and Sharon L. Larkin, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision. 

DIGEST 

Protest is sustained where agency failed to comply with the final decision of the 

Small Business Administration’s Office of Hearings and Appeals (OHA), in which the 

OHA reversed the North American Industry Classification System (NAICS) code 

assigned by the contracting officer and the contracting officer did not amend the 

solicitation to reflect the NAICS code that the OHA had determined was appropriate 

for this procurement, as required by applicable regulations. 

DECISION 

Eagle Home Medical Corporation (Eagle) of Roanoke Rapids, North Carolina, 

protests the Department of Veterans Affairs’ (VA) decision not to comply with a 

ruling by the Small Business Administration’s (SBA) Office of Hearings and Appeals 

(OHA) designating North American Industry Classification System (NAICS)1

code 532291, Home Health Equipment Rental, for request for proposals (RFP) 

No. VA-244-09-RP-0252 issued by the VA for home oxygen equipment rental and 

services. 

We sustain the protest. 

 

1

 The NAICS code scheme is used by the federal government to identify and classify 

specific categories of business activity that represents the lines of business a firm 

conducts. See Federal Acquisition Regulation (FAR) § 19.102; Rochester Optical Mfg 

Co., B-292247; B-292247.2, Aug. 6, 2003, 2003 CPD ¶ 138 at 2 n.2 
BACKGROUND 

The RFP, issued on August 19, 2009, as a small business set-aside, contemplates the 

award of a fixed-price, indefinite-quantity contract to provide home oxygen 

equipment rental and services to VA beneficiaries within defined geographic areas. 

As initially issued, the RFP assigned NAICS code 532291, Home Health Equipment 

Rental, which has a corresponding size standard of $7 million, to this procurement.2

 

The contracting officer subsequently determined that the NAICS code needed to be 

changed to NAICS code 339112, Surgical and Medical Instrument Manufacturing, 

with a size standard of 500 employees,3

 based upon the decision by the United States 

Court of Federal Claims in Rotech Healthcare, Inc. v. United States, 71 Fed. Cl. 393 

(2006), appeal dismissed, No. 2006-5121 (Fed. Cir. 2006). Contracting Officer’s 

Statement at 1. On November 16, amendment 4 to the solicitation was issued to 

establish NAICS code 339112 as applicable to the solicitation. RFP amend. 4 at 1. 

The RFP was later amended to extend the due date for receipt of proposals to 

December 23. RFP amend. 7 at 1. 

On November 27, Eagle filed an appeal with the OHA, arguing that the contracting 

officer’s designation of NAICS code 339112, Surgical and Medical Instrument 

Manufacturing, was unreasonable because this NAICS code does not best describe 

the principal purpose of the procurement. By decision dated December 11, the OHA 

granted Eagle’s NAICS code appeal and reversed the contracting officer’s decision to 

assign NAICS code 339112 to this procurement. 

As a threshold matter, the OHA determined that Rotech “is not relevant to 

this decision” because the court decided a different issue (whether the 

non-manufacturing rule applied to the procurement and not whether NAICS code 

339112 was designated in error) and the court’s decision was limited to the facts of 

the case before it. OHA Decision at 5. In deciding the merits, the OHA noted that the 

purpose of the NAICS code designation was to identify the NAICS code “that best 

describes the principal purpose” of the procurement. See 13 C.F.R. § 121.402(b) 

 

2

 NAICS code 532291, Home Health Care Rental, is defined as follows: “This U.S. 

industry comprises establishments primarily engaged in renting home-type health 

and invalid equipment, such as wheel chairs, hospital beds, oxygen tanks, walkers, 

and crutches.” OHA Decision at 4-5. 

3

 NAICS code 339112, Surgical and Medical Instrument Manufacturing, is defined as 

follows: “This U.S. industry comprises establishments primarily engaged in 

manufacturing medical, surgical, ophthalmic, and veterinary instruments and 

apparatus (except electrotherapeutic, electromedical and irradiation apparatus). 

Examples of products made by these establishments are syringes, hypodermic 

needles, anesthesia apparatus, blood transfusion equipment, catheters, surgical 

clamps, and medical thermometers.” OHA Decision at 4. 

Page 2 B-402387 
(2009); FAR § 19.102(b)(1). The OHA then determined, with regard to the 

procurement here, that 

[t]he RFP requires the successful contractor, at the VA’s 

direction, to install oxygen equipment (whether provided by 

the VA or the contractor) in the homes of VA beneficiaries. 

The contractor must use licensed [respiratory therapists] to set 

up the equipment and train beneficiaries . . . . In addition, the 

contractor must maintain the equipment, conduct safety 

inspections, and make safety assessments required in the 

contract. . . . The RFP’s requirements mean the contractor 

must deliver both supplies and services. . . . I find the principal 

purpose of the RFP is to provide home oxygen services to the 

VA’s beneficiaries, not to provide equipment to them. . . . [I]t is 

the services required by the [statement of work] that give the 

various oxygen devices (including supporting equipment) 

value for VA beneficiaries. That is, the equipment would be 

virtually useless to the beneficiaries without the accompanying 

services. Thus, the services form the principal purpose of the 

RFP. 

* * * * * 

The NAICS code [339112, Surgical and Medical Instrument 

Manufacturing,] has nothing to do with the provision of Home 

Oxygen Equipment Rental and Services for the VA as 

described in the RFP. Instead NAICS code 339112 is about the 

Manufacture of Medical, Surgical, Ophthalmic, and Veterinary 

Instruments and Apparatus. Moreover, the [solicitation] 

references none of the devices identified in the NAICS Manual, 

except for cannulas. Even if there was some congruency 

between the devices required by the RFP and those 

encompassed by NAICS code 339112, NAICS code 339112 

would, at best, still only touch upon part of what the RFP 

requires and not its principal purpose, which is to provide 

home oxygen to VA beneficiaries in a professional and safe 

manner. 

OHA Decision at 5. The OHA concluded that NAICS code 532291 “covers all services 

necessary to make the home health care equipment functional” and determined that 

the appropriate code for this procurement is NAICS code 532291, Home Health 

Equipment Rental. Id. at 6. 

The OHA’s decision was received by the VA prior to the extended due date for 

receipt of proposals. The VA disagreed with the OHA’s decision and decided not to 

Page 3 B-402387 
amend the solicitation. This protest followed. The SBA has submitted its views 

regarding the protest to our Office and the parties. 

DISCUSSION 

Eagle and the SBA contend that the VA violated the Small Business Act and its 

implementing regulations when the agency decided to ignore the OHA’s final 

decision, which determined that NAICS code 532291, Home Health Equipment 

Rental, is the proper code for this procurement. We agree.4

The Small Business Act, as amended, vests the authority to establish and approve 

small business size standards exclusively with the SBA. 15 U.S.C. § 632(a)(2) (2006). 

Under the Act’s implementing regulations, once the SBA has defined or approved 

size standards for small businesses, federal agencies generally are bound to follow 

the SBA’s determinations. 13 C.F.R. § 121.403; see also FAR § 19.102. The 

regulations state that the contracting officer should assign the NAICS code which 

“best describes the principal purpose of the product or service being acquired.” 

13 C.F.R. § 121.402(b). However, NAICS code designations made by authorized 

contracting officers may be appealed to the OHA and any formal NAICS code 

designations made by the OHA are binding on the parties. 13 C.F.R. §§ 121.402(c), 

121.403, 121.1102; FAR § 19.303(a), (c). In this regard, the SBA regulations governing 

a NAICS code appeal provide that the OHA’s decision is final and becomes effective 

on issuance. 13 C.F.R. § 134.316(b). Furthermore, 

If [the] OHA’s decision is received by the contracting officer 

before the date offers are due, the solicitation must be 

amended if the contracting officer’s designation of the NAICS 

code is reversed. 

Id. § 121.1103(b)(5); see also FAR § 19.303(c)(5). 

As noted above, the OHA decision reversing the contracting officer’s NAICS code 

determination was received by the VA prior to the due date for receipt of proposals, 

but the VA decided not to amend the RFP to modify the NAICS code. The VA 

contends that its decision not to amend the solicitation is governed by Rotech

Healthcare, Inc. v. United States, supra, a decision of the United States Court of 

Federal Claims discussing these types of home oxygen procurements. The VA states 

that the OHA decision impermissibly disregarded the applicability of the Rotech

 

4

 Although our Office does not have jurisdiction to determine the appropriate NAICS 

code for this procurement, 4 C.F.R. § 21.5(b)(1); 13 C.F.R. § 121.1102, we do have 

jurisdiction to review the protest challenge here, which is whether the agency 

violated procurement laws and regulations in failing to follow the OHA’s decision 

determining the NAICS code applicable to this RFP. 

Page 4 B-402387 
decision in which the Court found two solicitations for home oxygen and related 

services to be procurements primarily for supplies; thus, the agency insists, the home 

oxygen procurement here should be solicited under a NAICS code for supplies and 

not the NAICS code identified by the OHA. 

In our view, the situation here is distinguishable from Rotech. The Rotech decision 

was limited to the question of whether the proposed awards would violate the 

statutory non-manufacturer rule set forth in the Small Business Act.5

 The court in 

Rotech did not address the issue of what NAICS code should apply to these types of 

procurements. In fact, the court specifically noted that the protester did not 

challenge the NAICS codes assigned to the procurements, and it noted the 

protester’s argument that NAICS code determinations were “irrelevant” to the issue 

before the court. Rotech Healthcare, Inc. v. United States, supra, at 29, 31, 35, 57. 

In considering whether the non-manufacturer rule applied to the two solicitations at 

issue, the court recognized that the procurements for home oxygen involved both 

supplies and services, and the court concluded that the non-manufacturer rule 

applies to mixed contracts and not just to contracts solely for supplies. Id. at 53. 

The court expressed its view that the solicitations before the court involved 

primarily supplies, based in part on the agency’s failure to provide any evidence or 

argument demonstrating the importance of the services aspect of the solicitations. 

Id. at 61. The court noted, also, that the SBA had not previously addressed in its 

decisions the issue of the applicability of the current non-manufacturing rule to these 

types of procurement. Id. at 49. Furthermore, the applicability of the 

non-manufacturing rule to the protested solicitations had not been presented to 

the OHA. 

 

In this case, a timely NAICS code appeal was filed with the OHA, and the OHA 

determined that the NAICS code that “best describes” this particular procurement 

was NAICS code 532291, Home Health Equipment Rental. OHA Decision at 5-6; 

13 C.F.R. § 121.402(b). The OHA based its determination on reviewing the 

solicitation requirements in light of the NAICS code descriptions in the NAICS code 

manual. OHA Decision at 4-5. The OHA was also presented with substantial 

evidence in the form of analysis and a study (which was not provided to the court in 

Rotech) that showed that the primary purpose of the procurement here was to 

 

5

 The Act’s non-manufacturer rule provides that the offer of a non-manufacturer 

small business concern under a small business set-aside for “any procurement 

contract for the supply of a product” can be considered, provided, among other 

things, that the small business concern represents that it will supply the product of a 

domestic small business manufacturer or processor, or a waiver of this requirement 

is granted by the SBA. 15 U.S.C. § 637(a)(17); see also 13 C.F.R. § 121.406. 

Page 5 B-402387 
Page 6 B-402387 

provide home oxygen services in support of the home oxygen equipment.6 Id. at 3, 5. 

We find that the VA was required to comply with the decision of the OHA, which has 

been granted the authority to make binding NAICS code determinations. Moreover, 

given that the Rotech court was not presented with the issue of reviewing the NAICS 

code and did not reach that issue in its decision, we find the VA’s decision to rely on 

Rotech as controlling, while ignoring the decision of the OHA, to be unreasonable. 

In summary, we find on this record that the OHA decision has conclusively resolved 

the NAICS code appeal filed by Eagle and the OHA’s decision which is applicable to 

this procurement, indicates that the solicitation should be amended consistent with 

its determination. As noted above, the VA has not advanced any countervailing 

reasons for why not amending the solicitation would be appropriate, other than its 

belief that the Rotech decision is controlling. We therefore conclude that the VA 

should have amended the solicitation when it received the OHA decision reversing 

the contracting officer’s designation of NAICS code 339112 as the proper code for 

this procurement, inasmuch as the OHA decision is binding upon the agency. See

13 C.F.R. § 121.403; § 121.1102. 

We recommend that the VA amend the RFP in a manner consistent with the OHA 

decision that NAICS code 532291, Home Health Equipment Rental, with a size 

standard of $7 million, is applicable to this procurement. We also recommend that 

Eagle be reimbursed the costs of filing and pursuing its protest, including reasonable 

attorneys’ fees. 4 C.F.R. § 21.8(d)(1). The protester’s certified claim for such costs, 

detailing the time expended and costs incurred, must be submitted directly to the 

agency within 60 days of receiving this decision. 4 C.F.R. § 21.8(f)(1). 

The protest is sustained. 

Lynn H. Gibson 

Acting General Counsel 

 

6

 The OHA also considered the Rotech decision, but found it inapplicable inasmuch 

as the court was not addressing the NAICS code issue and the decision was limited 

to the facts before that court.