Gelco Space, No. 2978 (October 13, 1988) Docket No. SIC-88-8-31-137 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. 20416 SIC APPEAL OF: ) ) Gelco Space, ) ) Appellant ) ) Docket No. SIC-88-8-31-137 Solicitation No. ) DACA63-88-B-0226 ) Department of the Army ) Corps of Engineers ) Fort Worth District, Texas ) DIGEST The correct Standard Industrial Classification code for a solicitation for procurement of a modular office building, including site preparation and utilities, is 1542. DECISION October 13, 1988 ANDRETTA, Administrative Judge, Presiding: Jurisdiction This appeal of a procurement classification is decided pursuant to the Small Business Act of 1958, 15 U.S.C. secs. 632 et seq., and the regulations codified at 13 CFR Part 121. Issue What is the correct Standard Industrial Classification code for the procurement of a modular office building, to be manufactured off site and moved on site, including provision of utilities, concrete block foundations and entry and exit walks? Facts On August 22, 1988, the Fort Worth District of the Army Corps of Engineers issued the above-cited solicitation for procurement of a modular office building at Fort Polk, Louisiana. The solicitation notice required offers to be received in Fort Worth by September 20, 1988. The procurement was set aside for small business and classified under Standard Industrial Classification (SIC) code 1542 (Building Construction - General Contractors - Nonresidential Buildings, Other than Industrial Buildings and Warehouses). This classification bears a size standard of $17 million, which means, to be eligible for award of the contract, a firm and any affiliates may not have combined average annual receipts for the preceding three fiscal years in excess of $17 million. The solicitation requires the prospective contractor to perform on site and to do work equivalent to at least 15 percent of the contract value. On August 24, 1988, Gelco Space filed an appeal of the classification. Gelco claims that the Contracting Officer's classification of the procurement under construction code 1542 is erroneous; that the procurement should be classified as a supply action under classification code 2452 (Millwork, Veneer, Plywood, and Structural Wood Members - Prefabricated Wood Buildings and Components). This classification bears a size standard of 500 employees, meaning that, to be eligible for award of the contract, a firm and any affiliates may not have employed more than an average of 500 persons in any of the 12 months preceding self certification. Gelco's rationale is stated as follows: 1. Modular buildings are fabricated and manufactured in factories, in both stock and custom designs. Modular buildings are built to be moveable and are properly identified as items of supply.... The buildings retain this moveable capability, even after years at a particular location. For this reason, modular buildings are classed as personal property, and are taxed, titled, regulated and licensed as such by Federal agencies (I.R.S. and D.O.T.), and by State and local authorities. Acquisition of a supply item that is personal property should not be accomplished by a construction action. FAR Part 36, Para. 36.102, states: "Construction does not include the manufacture, production, furnishing, construction, alteration, repair, processing, or assembly of vessels, aircraft, or other kinds of personal property." (Emphasis added) The General Services Administration (GSA) recognizes the nature of modular buildings and has awarded Gelco Space a Basic Ordering Agreement, Control No. 40, as an optional means for U.S. Government contracting authorities to acquire modular buildings through a supply action. 2. By design, modular buildings are fabricated as completely as possible in the factory to minimize sitework. As a result, the cost of acquiring the modular building constitutes the dominant portion of a contract in all but the most unusual cases. FAR Part 19, Para. 19.102 (c), is the appropriate reference. For those who confuse the need for sitework with construction action, FAR Part 19, Para. 19.102 (d), is the reference. Gelco Space estimates that the cost of a modular building represents as much as 80% of total contract value in most cases. For the foregoing reasons, Gelco Space believes that U.S. Government contracting authorities should acquire modular buildings by a supply action, with the appropriate manufacturing SIC code, size standard and applicable labor law reference. The solicitation specifications state that the procurement is to be of a modular office building for use as an office facility at Fort Polk, that it should be "complete in place, including foundation, utility connections, sewage system, storm drainage, access walks and steps/ramps. . ." The technical specifications require certain strengths of materials, thickness of insulation, type of vinyl tile or carpet, and the like. They address the interior and exterior walls, finishes, support members, doors, frames, toilet facilities, lighting, electrical system, accessories, and other building components and characteristics. They do not include a requirement for retained mobility. The Contracting Officer did not respond to the appeal. Discussion Standard Industrial Classification code 1542, which was assigned to the procurement by the Contracting Officer, is described in the Standard Industrial Classification Manual (Office of Management and Budget, 1987 ed.) (Manual) as follows (not all of the examples given are included below): 1542 General Contractors-Nonresidential Buildings, Other Than Industrial Buildings and Warehouses General contractors primarily engaged in the construction (including new work, additions, alterations, remodeling, and repair) of nonresidential buildings, other than industrial buildings and warehouses. Included are nonresidential buildings, such as commercial, institutional, religious, and amusement and recreational buildings. General contractors primarily engaged in the construction of industrial buildings and warehouses are classified in Industry 1541. Administration building construction - general contractors Auditorium construction - general contractors Bank building construction - general contractors Building alterations, nonresidential: except industrial and warehouse - general contractors Building construction, nonresidential: except industrial and warehouses - general contractors Church, synagogue, and related building construction -general contractors Civic center construction - general contractors Designing and erecting, combined: commercial - general contractors Dome construction - general contractors Farm building construction, except residential - general contractors Fire station construction - general contractors Hospital construction - general contractors Museum construction - general contractors Office building construction general contractors Passenger and freight terminal building construction - general Post office construction - general contractors Prefabricated building erection, nonresidential: except industrial and warehouses - general contractors Remodeling buildings, nonresidential: except industrial and warehouses - general contractors School building construction - general contractors Shopping center construction - general contractors Stadium construction - general contractors Store construction - general contractors The Manual describes classification 2452, which is advocated by Gelco, as follows: 2452 Prefabricated Wood Buildings and Components Establishments primarily engaged in manufacturing prefabricated wood buildings, sections, and panels. Establishments primarily engaged in fabricating buildings on the site of construction are classified in Division C, Construction Buildings, prefabricated and portable: wood Chicken coops, prefabricated: wood Corn cribs, prefabricated: wood Farm buildings, prefabricated or portable wood Floors, prefabricated: wood Geodesic domes, prefabricated: wood Houses, portable: prefabricated wood - except mobile homes Log cabins, prefabricated: wood Marinas, prefabricated: wood Panels for prefabricated wood buildings Sauna rooms, prefabricated: wood Sections for prefabricated wood buildings While classification code 1542 appears to be mostly concerned with the construction of large buildings, the examples include "prefabricated building erection," which is the requirement of this solicitation. In contrast, classification code 2452 contemplates the manufacture of prefabricated buildings, not their erection on site, including incidental construction. Thus, we conclude that the Contracting Officer's classification of the solicitation under code 1542 is correct. See SIC Appeal of International Shelter Systems, Inc., No. 2824 January 22, 1988). Conclusion Since Standard Industrial Classification code 1542 includes the erection of prefabricated buildings, it is the correct code for classification of a solicitation requiring the provision of a modular office building, including incidental site preparation and accommodation. The appeal is DENIED. This constitutes the final decision of the Small Business Administration. See 13 CFR 121.11(t), (u), and (v). _________________________________ Robert A. Andretta (Presiding) Administrative Judge _________________________________ Joseph K. Riotto (Concurring) Administrative Judge _________________________________ Benjamin G. Usher (Concurring) Administrative Judge