Government Uses Wrong NAICS Code Where RFP is for Admin Services, Not Engineering Services
SBA Office of Hearing and Appeals (“OHA”) held that Government assigned wrong NAICS code because the contract is for administrative support services, not engineering services.
The RFP was based on NAICS code 541330, “Engineering Services, under the Military and Aerospace Equipment and Military Weapons (MAE&MW) Exception,” with a corresponding $38.5 million annual receipts. The Tolliver Group, Inc. (“Contractor”) complained that this NAICS designation is wrong because the Performance Work Statement (”PWS”) did not require the Contractor "to design, develop, or build anything." Instead, the PWS requires assistance with performance analysis, business process design and workforce training.
The Contractor argued that, because the services are administrative in nature, the NAICS designation should be NAICS code 541611, “Administrative Management and General Management Consulting Services,” with a corresponding $15 million annual receipts size standard.
OHA held that neither the NAICS Manual, nor applicable regulations, describe what services fall under the MAE&MW exception under NAICS code 541330. OHA then turned to its own case law and stated that this exception requires that the RFP involve the procurement of weapons, or the design and manufacture and development of weapons:
Nevertheless, merely because a procurement is for the military, does not justify use of the MAE&MW exception. Military agencies procure a host of services and supplies, most of which are not engineering services.
The key issue in a case where the question is the applicability of the MAE&MW exception is whether those services are in support of military or aerospace weapons or equipment.
The instant procurement is not for weapons, or the design and manufacture and development of weapons, but for the assistance in the marketing of weapons to foreign governments.
Further, it is important to remember the exception is part of the Engineering Services code, and therefore in order to be designated under this exception, a procurement designated under it must involve professional engineering services with a military or aerospace application, “applying physical laws and principles of engineering.” NAICS Manual, at 746.
A review of the detailed requirements establishes the great majority of the work required here is not engineering. Human resource support management does not qualify as engineering. Neither is the financial and systems analysis required under resource management support. These deal with budgeting tasks and managing FMS administration. Neither task includes engineering of weapons systems. The program management includes research on customer requirements, and tracking FMS assets. These are all administrative tasks, not engineering. The same is true of the cost estimating and budget activities.
The SBA OHA opinion sheds light on application of the MAE&MW exception under NAICS code 541330. Specifically, the RFP must be for the procurement, design, manufacture or development of weapons. If not, the exception does not apply. Further, to fall under a NAICS code for engineering services the work must involve the application of physical laws and principles of engineering.
TOLLIVER GROUP, INC., APPELLANT, SBA No. NAICS-5705, 2016 (S.B.A.), 2016 WL 197153 (January 11, 2016)
