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Timestamp: 2019-04-18 18:29:07+00:00

Document:
*1 For Advanced Concepts Enterprises, Inc.
*1 On September 11, 2018, Advanced Concepts Enterprises, Inc. (Appellant), filed the instant appeal. Appellant asserts that the correct NAICS code for this procurement is 541513, Computer Facilities Management Services, which has a corresponding $27.5 million annual receipts size standard. For the reasons discussed infra, the appeal is denied.
*1 The U.S. Small Business Administration (SBA) Office of Hearings and Appeals (OHA) decides NAICS code appeals under the Small Business Act of 1958, 15 U.S.C. § 631 et seq., and 13 C.F.R. parts 121 and 134. Appellant filed the instant appeal within ten calendar days after issuance of the RFP, so the appeal is timely. Federal Acquisition Regulation (FAR) 19.303(c)(1); 13 C.F.R. §§ 121.1103(b)(1), 134.304(b). Accordingly, this matter is properly before OHA for decision.
*8 On September 24, 2018, the CO responded to the appeal. She argues her designation of NAICS code 541715 is correct.
*11 establishments primarily engaged in conducting research and experimental development (except nanotechnology and biotechnology research and experimental development) in the physical, engineering, and life sciences, such as agriculture, electronics, environmental, biology, botany, computers, chemistry, food, fisheries, forests, geology, health, mathematics, medicine, oceanography, pharmacy, physics, veterinary and other allied subjects.
*11 NAICS Manual at 476. The NAICS Manual defines “research” as “original investigation undertaken on a systematic basis to gain new knowledge”, and ““experimental development” as “the application of research findings or other scientific knowledge for the creation of new or significantly improved products or processes”. Id. at 475.
*12 “Research and Development” means laboratory or other physical research and development. It does not include economic, educational, engineering, operations, systems, or other nonphysical research; or computer programming, data processing, commercial and/or medical laboratory testing.
*12 13 C.F.R. § 121.201, n.11(a).
*12 “Research and Development” for guided missiles and space vehicles includes evaluations and simulation, and other services requiring thorough knowledge of complete missiles and spacecraft.
*12 13 C.F.R. § 121.201, n.11(d).
*12 establishments primarily engaged in providing on-site management and operation of clients' computer systems and/or data processing facilities. Establishments providing computer systems or data processing facilities support services are included in this industry.
*12 NAICS Manual, at 470. Index entries which refer to this NAICS code are: “Computer systems facilities (i.e., clients' facilities) management and operation services”; “Data processing facilities (i.e., clients' facilities) management and operation services”; “Facilities (i.e., clients' facilities) management and operation services, computer systems or data processing”; and ““Facilities (i.e., clients' facilities) support services, computer systems or data processing”. Id. at 716, 730, 753.
*12 Appellant has the burden of proving, by a preponderance of the evidence, all elements of its appeal. Specifically, Appellant must show that the CO's NAICS code designation is based upon a clear error of fact or law. 13 C.F.R. § 134.314; NAICS Appeal of Durodyne, Inc., SBA No. NAICS-4536, at 4 (2003). SBA regulations do not require the CO to select the perfect NAICS code. NAICS Appeal of Evanhoe & Assocs., LLC, SBA No. NAICS-5505, at 14 (2013). Rather, the CO must assign the NAICS code that best describes the principal purpose of the product or service being acquired in light of the industry descriptions in the NAICS Manual, the description in the solicitation, the relative value and importance of the components of the procurement making up the end item being procured, and the function of the goods or services being acquired. FAR 19.303(a)(2); 13 C.F.R. § 121.402(b). A procurement is usually classified according to the component that accounts for the greatest percentage of contract value. (Id.) OHA will not reverse a NAICS code designation “merely because OHA would have selected a different code.” NAICS Appeal of Eagle Home Med. Corp., SBA No. NAICS-5099, at 3 (2009).
*13 Having reviewed the RFP, the descriptions in the NAICS Manual, OHA's prior decisions, and the arguments of the parties, I conclude that the CO's NAICS code designation is correct.
*13 As discussed above, the NAICS Manual states that NAICS code 541715 is appropriate for procurements that involve “research and experimental development ... in the physical, engineering, and life sciences ....” Section II.D, supra. The NAICS Manual defines “research” as “original investigation undertaken on a systematic basis to gain new knowledge”, and “experimental development” as “the application of research findings or other scientific knowledge for the creation of new or significantly improved products or processes”. Id. Applying these provisions, OHA has long held that procurements classified under a research and development NAICS code “must be for research and development, and thus must look to creating new processes or products.” NAICS Appeal of Dayton T. Brown, Inc., SBA No. NAICS-5164, at 5 (2010) (emphasis in original).
*13 However, in Footnote 11(d), the regulation provides that research and development for guided missiles and space vehicles includes “evaluations and simulation, and other services requiring thorough knowledge of missiles and spacecraft.” Therefore, research and development for guided missiles and space vehicles includes evaluations and simulation, and other unspecified services requiring thorough knowledge of complete missiles and spacecraft. The categorization of procurements as research and development is therefore not as strict as it is in other disciplines. In the complex world of missiles and spacecraft, research and development may be viewed more expansively than in traditional disciplines. NAICS Appeal of Millennium Engineering and Integration Co., SBA No. NAICS-5309, at 11-12 (2011). Thus, an RFP which requires evaluations and simulations involving missiles and similar devices, as well as a thorough knowledge of these technologies, may be designated under the NAICS 541715, under the Guided Missiles and Space Vehicles exception. NAICS Appeal of DCS Corp., SBA No. NAICS-5703, at 4 (2016); see also NAICS Appeal of Inklings Media Co., SBA No. NAICS-4850, at 6 (2007); NAICS Appeal of IT Research Corp., SBA No. NAICS-4499, at 4 (2002).
*13 Here, the ARC is an RDT&E facility to support the BMDS HWIL testing. The BMDS is an extraordinarily complicated and sophisticated undertaking, compared to “hitting a bullet with a bullet.” The lab assets include the hardware and software necessary for guided missiles and space vehicles. This contract will expand these systems to include new sensors and tactical systems ARC designs, and development to integrate new programs into the BMDS. The contractor will be servicing the necessary modeling and simulation equipment. The RFP states “A thorough knowledge of the BMDS” is required to perform this contract and to manage these assets. Therefore, this RFP explicitly requires services involving evaluations and simulation of missiles, requiring a thorough knowledge of missiles, and thus fits into the description of the NAICS exception in Footnote 11(d).
*14 The contractor is required to develop new tools and processes to respond to changes required by the results of testing. The contractor will participate in the system design activities to implement improvements to CI/CAT, asset management and all of MDA's data flow. CLIN 0006 — Network Design represents the largest portion of this contract, with 41% of FTEs to be worked. This CLIN includes research and development of the software which will be an integral part of the essential simulations to support the BMDS. The contractor's work will include original investigation, or research, to obtain necessary knowledge to develop the AoA for hardware and software solutions necessary to support the CI/CAT. I conclude the CO was correct in characterizing this CLIN as research and development.
*14 CLIN 0004 — Test Support requires the contractor to collect data for MDA test events. This constitutes original investigation, or research, and is necessary for the support of MDA. The contractor must further use this research to develop software and systems to support the tests and simulations for BMDS. Footnote 11(d) characterizes evaluations and simulation as part of research and development. Again, I conclude this portion of the PWS supports a research and development designation.
*14 CLIN 0003 — Cybersecurity requires the contractor not merely to control access to ARC's information systems, but also to implement a cybersecurity program for all the networks. The contractor must continually monitor changes to cybersecurity requirements, identify requirements not met, and develop new processes and procedures to deal with those requirements. It is worth noting here that cybersecurity is a relatively new industry, in which new threats and vulnerabilities are constantly emerging. Therefore, once investigated and created, new cyber tools, standards, processes and method must be continually refined, tested and improved. OHA has found that a procurement for cyber warfighting capabilities was properly designated as a Research and Development procurement, because the new cyber tools must be created in the first instance, even if the procurement did not specifically call for laboratory research. NAICS Appeal of Technology Security Assoc., Inc., SBA No. NAICS-5950, at 12 (2018). Here, I find that CLIN 0003 supports a research and development designation.
*14 I therefore conclude that this RFP requires the contractor to engage in original investigation, or research to obtain the necessary knowledge to develop the software and hardware to support the testing and simulation of the BMDS program, and it requires the contractor have a thorough knowledge of the program to perform the procurement. Accordingly, I find that CO properly designated this RFP under NAICS code 541715, Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology), under the Guided Missiles and Space Vehicles exception, with a corresponding 1,250 employee size standard, and that Appellant has failed to meet its burden of establishing that the CO's designation was based upon clear error of fact or law.
*15 Because Appellant has not established that NAICS code 541715 is clearly erroneous for this RFP, it is unnecessary to consider the NAICS code Appellant advocates. OHA will not assign a different NAICS code to a procurement unless the CO's NAICS code classification is shown to be clearly erroneous. NAICS Appeal of Technology Security Assoc., Inc., SBA No. NAICS-5950, at 14 (2018). Even if I were to do so, Appellant's choice is not supported by the record here. Appellant relies upon cases such as NAICS Appeal of Delphi Research, Inc., SBA No. NAICS-5377 (2012), aff'd sub nom. Arcata Assoc. v. U.S. 110 Fed. Cl. 290 (2013) in support of its argument that this procurement is only for IT services. But in Delphi Research, the procurement merely called for the operation and maintenance of existing computer systems. This RFP requires a great deal more than that. It requires the contractor not only to manage ARC's IT network, but also to work as an integral part of the testing and simulation that are part of the research and development of the BMDS.
*15 Appellant has the burden of proving that the CO committed a clear error of fact or law in designating NAICS code 541715 for this procurement and has failed to meet its burden. For that reason, I AFFIRM the CO's NAICS code designation and find the appropriate NAICS code for this procurement is 541715, Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology), under the Guided Missiles and Space Vehicles exception, with a corresponding 1,250 employee size standard, and I DENY the instant appeal.
*15 This is the final decision of the Small Business Administration. See 13 C.F.R. § 134.316(d).
RFP Amendment 0002, issued October 16, 2018, revised the PWS, among other things. References are to the conformed copy.

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