TRI/TESSCO, Inc., No. 3331 (August 16,1990) Docket No. SIC-90-6-18-61 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. 20416 SIC APPEAL OF: ) ) TRI/TESSCO, Inc. ) ) Appellant ) Docket No.SIC-90-6-18-61 ) Solicitation No. ) DAKF57-90-B-0086 ) Department of the Army ) Fort Lewis, Washington ) DIGEST A solicitation for the management and operation of an oil analysis laboratory is most appropriately classified under SIC code 8734, "Testing Laboratories," not SIC code 8711, "Engineering Services." DECISION August 16, 1990 PHILLIPS, Administrative Judge, Presiding: Jurisdiction This appeal is resolved in accordance with 15 U.S.C. 632 and 13 CFR 121. Issue Whether this solicitation for the management and operation of an oil analysis laboratory should be classified under Standard Industrial Classification (SIC) code 8734, "Testing" Laboratories," or SIC code 8711, "Engineering Services.'' Facts On July 19, 1990, the Department of the Army, Fort Lewis, Washington, issued Solicitation No. (RFP) DAKFˇ57ˇ90ˇBˇ0086 for services necessary to manage and operate the oil analysis laboratory at Fort Lewis. The solicitation was wholly set aside for small business under SIC code 8734, "Testing Laboratories," to which a $3.5 million average annual receipts size standard applies. August 20, 1990, was established as the date for receipt of proposals. Prior to, and in anticipation of, issuance of the solicitation, TRI/TESSCO, Inc. (TRI/TESSCO) filed an appeal challenging the SIC r code and size standard assigned to the solicitation and arguing that the proper SIC code should be 8711, "Engineering Services." The Small Business Administration has subdivided SIC code 8711 into three size standard categories: "Military and Aerospace Equipment and Military Weapons," to which a $13.5 million average annual receipts size standard applies, "Marine Engineering and Naval Architecture," to which a $9 million average annual receipts size standard applies, and "Other Engineering Services," to which a $2.5 million average annual receipts size standard applies. TRI/TESSCO does not identify the size standard it believes is most appropriate. However, information on its average annual receipts contained in its filing suggests that it is advocating the $13.5 million average annual receipts size standard associated with SIC code 8711. TRI/TESSCO argues as follows in support of its appeal: TRI/TESSCO currently operates the Army Oil Analysis Program at the Yuma Proving Grounds, AZ, and has repeatedly demonstrated that it is in the Army's best interest, both in performance and cost effectiveness, to have the procurement parameters set to at least SIC Code 8711.... The Army Oil Analysis Program is defined as; "Part of a DOD-wide effort to detect impending equipment component failures and lubricant condition through on-line and laboratory evaluation of oil samples." In order to support this, knowledge of the vehicles and equipment being used, and the conditions under which the oils are sampled is mandatory in order to recognize the appropriate results and make the necessary recommendations based on the engineering specifications of the hardware. To eliminate engineering services, which is the application and management of the pure sciences, including routine laboratory testing, would v be to rely on a simple reporting of results received from a test, without the larger considerations of those t engineering functions which include environments, ˇ stress, temperature, humidity, contaminants, etc., and their relationship to metals, plastics, composites, and adhesives. Since the results derived from this testing are provided to engineers to determine the actions to be taken regarding maintenance requirements, increasing wear trends, wear-metal concentrations, foreign contamination, fuel dilution, lubricant degradation, as well as the need for equipment redesign or materials development, it is significantly more productive if the individuals performing the testing have a greater understanding and/or extensive support from a pure science/engineering environment. In summary, changing the SIC code to 8711, would maintain the small business set-aside nature of the procurement, but would increase the level of competition, and increase the level of service the Army could receive, without increasing the cost incurred by the Army. High quality testing laboratory services can, in fact, be found in a company classified under SIC Code 8711, however, by classifying the procurement under SIC Code 8734, the competition is limited to those companies whose only capabilities are as a routine testing laboratory [sic]. In essence, the procurement should not be limited by the title of the SIC code. That Code 8711 is entitled "Engineering Services" should not preclude the Army from obtaining the best possible services at the most reasonable cost. On July 2, 1990, the Contracting Officer provided the following argument in support of her selection of SIC code 8734: The Appellant requests the size standard of 8711 to be applied for this acquisition. While this code may be applicable to a particular acquisition for oil analysis where research and development or professional engineering is required, the Fort Lewis acquisition does not involve R&D or require engineering services. Redesign and or material development are decided by the major commands who are responsible for the Oil Anflysis Program. Material Readiness Support Activity (MRSA), in conjunction with TankˇAutomotive Command (TACOM), Troop Support Command (TROSCOM) and Aviation Support Command (AVSCOM) direct the operations and set the standards for the Army's Oil Analysis Laboratorie. Therefore, SIC 8734, Testing Laboratories, was ˇ determined appropriate for this solicitation. The statement of work in the solicitation identifies the tasks to be performed by the successful contractor as follows: Scope of Work. The Contractor shall provide all services outlined in this contract to manage and operate the Oil Analysis Laboratory. These services shall be performed in accordance with applicable Department of the Army regulations, technical manuals, bulletins, and pamphlets. The Contractor shall perform analyses and evaluations of oil samples from aeronautical and nonaeronautical equipment of the Active Army, U.S. Army Reserve, National Guard and other Department of Defense DOD) customers designed by the USAMC Material Readiness Support Activity (MRSA), Lexington, Kentucky. Other services required include, but are not limited to: providing results to customers, maintaining documentation, operating the Standard Data System computer and preparing reports "Oil Analysis" is defined in the solicitation as follows: Oil Analysis. A method of detecting impending equipment component failures and determining lubricant condition through on-line and laboratory evaluation of oil and grease samples. It includes proper application of spectrometric, microscopic, ferrographic, and physical property analysis techniques. Discussion Pursuant to 13 CFR 121.902, the SIC code designation to be applied to a solicitation "is that which best describes the principal purpose of the procurement." The solicitation at issue requires the contractor to perform on-line and laboratory evaluation of oil and grease samples, to provide the results as requested, and to prepare reports. In the discharge of these functions, contractor personnel must perform spectrometric, microscopic, ferrographic and physical property analyses. */ SIC code 8734, selected by the Contracting Officer, is defined, along with classification examples, in the Standard Industrial Classification Manual, 1987 edition, as follows: Testing Laboratories Establishments primarily engaged in providing testing services. Establishments primarily engaged in performing clinical laboratory testing for the medical profession are classified in industry 8071. Assaying services Automobile proving and testing grounds Calibration and certification (testing) Dosimetry, radiation Film badge service (radiation detection) Food testing services Forensic laboratories Hydrostatic testing laboratories Laboratories, product testing: not manufacturing auxiliaries Metallurgical testing laboratories Pollution testing, except automobile emissions testing Product testing services Radiation dosimetry laboratories Radiographing welded joints on pipes and fittings Seed testing laboratories Testing laboratories, except clinical Veterinary testing laboratories X-ray inspection service, industrial This is clearly an on-point description of the activities to be performed under the solicitation, which involves mere testing of oil and grease samples. TRI/TESSCO's contention that SIC code 8711 is more appropriate is without merit. SIC code 8711, "Engineering Services," is described in the SIC Manual as its name implies: "Establishments primarily engaged in providing professional engineering services." Because a solicitation must be classified according to its principal purpose, TRI/TESSCO's contentions that this solicitation should be classified under SIC code 8711 because testing results "are provided to engineers" or because the contractor should not merely report results "without the larger considerations of those engineering functions" are irrelevant. So too, its contention that the size standard should be increased to augment competition is extraneous to the proper classification of a solicitation for set aside purposes. Conclusion The Contracting Officer's classification of the solicitation under SIC code 8734 is AFFIRMED; 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 (Presiding) Administrative Judge _______________________________ Michael S. Cole (Concurring) Administrative Judge _______________________________ Elwin H. White (Concurring) Administrative Judge ______________ */ Solicitations issued on or after January 1, 1990, are regulated by 13 CFR Part 121, published in 54 Fed. Reg. 52634, et seq, on December 21, 1989, effective January 1, 1990, and amendments in effect on or before the date the solicitation was issued.