Air Force stands behind industry code

IG dispute with the service about NetCents coding clouds its small-business set-aside

The Air Force and the Defense Department inspector general are at odds over an audit report that found the service is treating small businesses unfairly under the Network-Centric Solutions (NetCents) contract. The IG concluded that the Air Force chose an inappropriate industry code for the $9 billion contract.

The choice of industry code affects the criteria for small-business set-asides on federal contracts. Under the industry code for “computer systems design and related services,” companies cannot have annual revenues of more than $23 million. However, under the code for “wired telecommunications carrier,” the small-business standard is based on the number of employees, which is no more than 1,500.

The IG said the Air Force’s choice of industry code for “wired telecommunications carrier” under the North American Industry Classification System is not appropriate for NetCents tasks. The NAICS designation “computer systems design and related services” would be more appropriate, the IG said.

Four businesses with revenue of $40 million to $171 million a year now can compete for task orders under the contract’s small-business set-aside. The IG report identified those companies as Centech Group, Multimax, NCI and Telos.

“It looks like they used a definition that qualified larger businesses to compete,” said Greg Giaquinto, an industry analyst at Forecast International. “It appears they wanted a justification to include a bigger pool of small businesses to choose from.”

But Air Force officials denied any such motivation. The service chose the proper industry code for the contract, said David Tillotson, the service’s deputy chief information officer.

“The work to be achieved under the contract leads to the selection of the industry code, and the small-business threshold follows from that,” Tillotson said. “The choice of industry code was coordinated with the Small Business Administration and the Air Force director for small businesses. The four small-business contractors have won over 50 percent of the work under the contract.”
Some industry analysts say the NetCents controversy could be a sign of growing pains for net-centric programs.

“You see the same on the industry side in the network-centric area,” said Phil Finnegan, an analyst at Teal Group. “There have been a lot of performance problems because it is on the cutting edge, and that makes things difficult.”
Tillotson said he is satisfied with NetCents’ performance. “We are meeting our objective of achieving a rapid response to new work orders.”

Tillotson added that he agreed with the IG’s conclusion that several contract clauses designed to prevent the compromise of sensitive information were absent from the original NetCents contracts, but he denied those omissions were consequential.

With regard to the omission of a contract clause requiring information assurance certification for all systems, Tillotson said “systems have to be IA-certified through the Air Force CIO with or without the clause. It helps to have it in the contract, but the risk is relatively low.”

NetCents is a billion-dollar multiple-award, indefinite-delivery, indefinite-quantity Air Force contract that provides networking equipment and systems engineering, installation, integration, operations, and maintenance support to the Air Force, DOD and other federal agencies.

Buxbaum in a freelancer writer in Bethesda, Md.

About the Author

Peter Buxbaum is a special contributor to Defense Systems.

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