TITLE: B-299954.3, Executive Protective Security Service, Inc., October 22, 2007
BNUMBER: B-299954.3
DATE: October 22, 2007
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B-299954.3, Executive Protective Security Service, Inc., October 22, 2007
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order. This redacted version has been approved for public release.
Decision
Matter of: Executive Protective Security Service, Inc.
File: B-299954.3
Date: October 22, 2007
David M. Thomas II, Esq., Balch & Bingham LLP, for the protester.
Holly A. Roth, Esq., McDermott Will & Emery, for Security Consultants
Group, Inc., an intervenor.
Audrey H. Liebross, Esq., Department of Homeland Security, for the agency.
Louis A. Chiarella, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest challenging agency's determination under the authority of the
Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C.
sect. 5150, regarding eligibility of firm selected to receive task order
is sustained where the agency unreasonably concluded that the firm was
doing business primarily in the designated set-aside location.
DECISION
Executive Protective Security Service, Inc. (EPSS) protests the issuance
of a task order to Security Consultants Group, Inc. (SCG) pursuant to
request for quotations (RFQ) No. HSFEHQ-07-Q-0039, issued by the Federal
Emergency Management Agency (FEMA), Department of Homeland Security (DHS),
for armed guard services for FEMA housing sites in the state of
Mississippi. EPSS argues that the agency's determination, pursuant to the
Robert T. Stafford Disaster Relief and Emergency Assistance Act, as
amended, 42 U.S.C. sect. 5121 et seq. (2000) (the Stafford Act), that SCG
was a firm doing business primarily in the state of Mississippi, and
therefore was eligible for selection, was unreasonable.
We sustain the protest.
BACKGROUND
The RFQ, issued on April 11, 2007, to holders of General Services
Administration (GSA) Federal Supply Schedule (FSS) contracts for guard
services, contemplated the issuance of a time-and-materials type task
order with fixed unit prices and quantities specified by the agency for a
2-month base period with nine 6-month options and one 3-month option. The
solicitation included a statement of work, instructions to vendors
regarding submission of quotations, and the evaluation factors for award.
The RFQ established four technical evaluation factors, in descending order
of importance--technical approach, management plan, personnel, and past
performance--as well as price. The technical factors, when combined, were
significantly more important than price. The agency would select the
vendor whose quotation represented the overall best value to the agency,
all factors considered. RFQ amend. 5, Instructions to Vendors, at 11-13.
Also, under the authority of the Stafford Act, the RFQ set aside the
procurement for firms residing or primarily doing business in Mississippi.
Id. at 1-2.
Six vendors, including EPSS and SCG, submitted quotations by the May 22
closing date. The agency conducted technical, price, and Stafford Act
eligibility evaluations of the vendors' quotations. The agency's final
evaluation ratings of the quotations submitted by EPSS and SCG were as
follows:
+---------------------------------------------------------------+
|Factor | EPSS | SCG |
|--------------------------+-------------------+----------------|
|Technical Approach | Unsatisfactory | Very Good |
|--------------------------+-------------------+----------------|
|Management Plan | Unsatisfactory | Very Good |
|--------------------------+-------------------+----------------|
|Personnel | Satisfactory | Very Good |
|--------------------------+-------------------+----------------|
|Past Performance | Neutral | Satisfactory |
|--------------------------+-------------------+----------------|
|Overall | Unsatisfactory | Very Good |
|--------------------------+-------------------+----------------|
|Stafford Act Eligible | Yes | Yes |
|--------------------------+-------------------+----------------|
|Price | $135,403,695 | $85,154,115 |
+---------------------------------------------------------------+
Agency Report (AR), Tab 9, Consensus Report, at 10; Tab 10, Consensus
Technical Report, at 3-16. The agency subsequently determined that SCG's
quotation, which was the only technically acceptable quotation submitted
by an eligible vendor, was reasonably priced and represented the best
value to the agency. [1] Id., Tab 8, Source Selection Decision, at 1. This
protest followed.
DISCUSSION
EPSS challenges FEMA's determination that, for purposes of the Stafford
Act, SCG was a firm doing business primarily in the state of
Mississippi.[2] Among other things, the protester points to the fact that
SCG is a Tennessee company that did not establish a permanent office in
Mississippi until October 1, 2005--over 1 month after Hurricane Katrina
occurred--and argues that such "carpet bagging" is contrary to both the
spirit and purpose of the Stafford Act. Protest, July 16, 2007, at 5. EPSS
contends that had FEMA evaluated SCG's Stafford Act eligibility properly,
it would have found SCG ineligible for award here.[3]
Pursuant to the authority of section 307 of the Stafford Act, 42 U.S.C.
sect. 5150, amended by the Post Katrina Emergency Management Reform Act,
Pub. L. No. 109-295, sect. 694, 120 Stat. 1355 (2006), and the SAFE Port
Act, Pub. L. No. 109-347, sect. 611, 120 Stat. 1943 (2006), agencies may
provide a preference to or set aside disaster relief recovery contracts
for individuals or firms either residing or doing business primarily in
the designated location. In its entirety, the Stafford Act provision at
issue here states:
Use of Local Firms and Individuals
(a) Contracts or Agreements With Private Entities-
(1) In General -- In the expenditure of Federal funds for debris
clearance, distribution of supplies, reconstruction, and other major
disaster or emergency assistance activities which may be carried out
by contract or agreement with private organizations, firms, or
individuals, preferences shall be given, to the extent feasible and
practicable, to those organizations, firms, and individuals residing
or doing business primarily in the area affected by such major
disaster or emergency.
* * * * *
(3) Specific Geographic Area -- In carrying out this section, a
contract or agreement may be set aside for award based on a specific
geographic area.
(b) Implementation
* * * *
(3) Formation of Requirements -- The head of a Federal agency, as
feasible and practicable, shall formulate appropriate requirements to
facilitate compliance with this section.[4]
42 U.S.C. sect. 5150.
The RFQ here was limited to firms residing or primarily doing business in
Mississippi, and incorporated the clause at Federal Acquisition Regulation
(FAR) 52.226-3, "Disaster or Emergency Area Representation."[5] RFQ
amend. 5, at 66-67. Further, the solicitation provided vendors with
additional "guidance on what constitutes a firm residing or primarily
doing business in the State of Mississippi."[6] Id., Instructions to
Vendors, at 1-2. The RFQ stated that "[i]f these factors establish by a
preponderance of the evidence that the firm in question resides or
primarily does business in the State of Mississippi, then said firm shall
be categorized as such." Id. at 2.
SCG's quotation included the required volume addressing its Stafford Act
eligibility, setting forth its ties to the state of Mississippi and
containing a copy of its central contractor registry filing. AR, Tab 7,
SCG's Quotation, vol. III, Stafford Act Evidence, at 1-9. SCG's quotation
represented that the company, while incorporated and headquartered in
Tennessee, had, among other things, a Mississippi state business license
since June 2, 1997 and "privilege licenses" with various Mississippi
cities, continuously provided security guard services in Mississippi since
2001, and maintained a permanent office in Mississippi since October 1,
2005. Also, SCG attributed 24 percent of its fiscal year (FY) 2006 gross
revenues--the single largest source by state of the firm's revenues--to
work performed in Mississippi, and asserted that its 144 permanent
employees in Mississippi represented its largest security workforce in any
one state in which it does business.[7] Id.
The agency subsequently determined that SCG was Stafford Act eligible. AR,
Tab 12, Consensus Report, at 11. As set forth in its report to our Office,
FEMA contends that it reasonably concluded that SCG was Stafford Act
eligible because it was doing business primarily in Mississippi (FEMA
states that it did not find that SCG was a firm residing in Mississippi).
AR, Sept. 12, 2007, at 2. The agency acknowledges that its "doing business
primarily" determination regarding SCG was based entirely on the fact that
the vendor's current gross revenues and number of employees were higher in
Mississippi than in any other state.[8] The agency essentially interprets
"doing business primarily" to refer to the location where the single
largest amount--as opposed to a majority or even a predominant amount--of
a firm's work occurs. AR, Sept. 12, 2007, at 2.
EPSS argues that FEMA's interpretation of "doing business primarily" as
meaning the area where the largest single portion of a firm's work is
performed, regardless of how large a percentage that work represents
relative to the company's overall work, is inconsistent with the purpose
of the Stafford Act, which is to benefit truly local business concerns.
The protester argues by example that, if one accepts FEMA's interpretation
here, a business that has only 2.1 percent of its revenues from 1 state
but 1.998 percent of its revenues from each of the remaining 49 states,
would still be "doing business primarily" in the first state despite its
insignificant presence in that location. EPSS also points out the recent
nature of SCG's presence in the state: it is only work that the firm has
performed since Hurricane Katrina that now makes Mississippi the single
largest geographic source of this "foreign corporation's" revenues.
Comments, Sept. 12, 2007, at 1-2.
Based on our review of the record, we conclude that FEMA's determination
that SCG was a firm "doing business primarily" in Mississippi for purposes
of the Stafford Act was not reasonable. As noted above, the record
reflects that FEMA's determination here was based entirely on the fact
that SCG's gross revenues and number of employees in Mississippi were
higher there than in any other state. The agency does not challenge the
fact that a substantial majority of SCG's work (representing 76 percent of
its gross revenues and 84 percent of its employees) takes place in
locations other than Mississippi, nor does FEMA dispute that its
interpretation of "doing business primarily" could result in firms with
even smaller percentages of their overall business in the designated
set-aside area being found eligible. Rather, in support of its position,
FEMA contends that the Stafford Act, as well as the FAR, does not preclude
its interpretation here. AR, Sept. 12, 2007, at 2. For the reasons set
forth below, we find FEMA's interpretation of the Stafford Act here to be
unreasonable.
In matters concerning the interpretation of a statute, the goal is clear:
to determine and give effect to the intent of the enacting legislature.
Philbrook v. Glodgett, 421 U.S. 707, 713 (1975). In furtherance thereof,
the first question is whether the statutory language provides an
unambiguous expression of the intent of Congress. If it does, then the
matter ends there, for the unambiguous intent of Congress must be given
full effect. See, e.g., Connecticut National Bank v. Germain, 503 U.S.
249, 253-54 (1992). In this case, while the Stafford Act requires a
showing that an entity is either "residing or doing business primarily" in
the designated area, 42 U.S.C. sect. 5150, neither the language of the
statute nor the legislative history defines the terms "primarily" or
"doing business primarily."[9] Without specific statutory definitions to
guide our review, we look to the plain meaning of the words used in the
statute. See Mallard v. United States District Court for the Southern
District of Iowa, 490 U.S. 296, 301 (1989); State of California v.
Montrose Chem. Corp., 104 F.3d 1507, 1519 (9th Cir. 1997); GAO, Principles
of Federal Appropriations Law, vol. 1, at 2-89 (3d ed. 2004).
While not entirely without ambiguity, we think the ordinary and commonly
understood meaning of the phrase "doing business primarily" contemplates a
determination of where a firm does the majority of its business. See,
e.g., The American Heritage Dictionary of the English Language (4th Ed.
2004) ("primarily" means "chiefly" or "mainly"); Random House Unabridged
Dictionary (1997) ("primarily" means "essentially," "mostly," "chiefly,"
or "principally"); Merriam-Webster's Dictionary,
http://www.merriam-webster.com/dictionary/primarily ("primarily" means
"for the most part" or "chiefly"). Thus, FEMA's interpretation of the term
to mean that the single largest location of a firm's business activities
is determinative of where the firm is "doing business primarily,"
irrespective of the magnitude of the work in that area relative to the
firm's business overall, is not consistent with the ordinary and commonly
understood meaning of the term.
Further, as detailed below, we think the legislative history of the
Stafford Act's procurement provision--which clearly indicates that the
congressional intent was to foster the use of local firms and individuals
in the affected area--both reinforces our view of the ordinary and
commonly understood meaning of the phrase here and does not support the
agency's interpretation of the statute.[10] Section 5150 of Title 42 was
first enacted, in substantially similar form, as section 204 of the
Disaster Relief Act of 1970. Pub. L. No. 91-606, 84 Stat. 1744, 1748. The
Senate Committee on Public Works, the committee that proposed the
language, crafted this provision to favor the use of local businesses to
perform debris clearance. The committee's report on the bill explained the
provision as follows:
Section 204 provides that in the expenditure of Federal funds, for
example, for debris clearance and reconstruction of public facilities,
preference is to be given to persons or firms who work or do business in
the disaster area. One outstanding feature of the aftermath of a great
disaster is the lack of ready cash. A Federal assistance program should
be designed to revitalize the community by infusions of cash through the
use of local people and business firms.
S. Rep. No. 91-1157, at 12 (1970) (emphasis added). Likewise, when the
statute here was recently amended, adding section 307(b)(3), the
Conference Report stated, "The Conferees note that in response to
Hurricane Katrina, Federal agencies tended to hire large contractors to
perform broad responsibilities over the entire disaster area, which made
it difficult for smaller, local firms to compete." H.R. Conf. Rep. No.
109-711, at 107 (2006) (emphasis added). As a final matter, we note that
the title of section 5150 of Title 42, quoted above, is "Use of Local
Firms and Individuals."
In our view, the legislative history of the Stafford Act makes clear that
the congressional intent here was to benefit local people and businesses
in disaster-affected areas. The legislative history also makes clear that
FEMA's interpretation of the phrase "doing business primarily" does not
give effect to this express congressional intent.[11] As mentioned above,
the agency's interpretation of "doing business primarily" would permit a
firm to qualify no matter how small a portion of its total work occurs in
the designated area, so long as it is greater than the amount of work
performed in any other single location. For example, consistent with the
protester's argument, if a company did 2.1 percent of its business in
Mississippi and 97.9 percent of its business in other states and/or
countries, but had no one other single location greater than or equal to
2.1 percent, then under FEMA's interpretation here the firm would be doing
business primarily in Mississippi. That a firm could still be determined
to be "doing business primarily" in a designated area even though it is
not doing a majority, or even a substantial portion, of its total work in
that area is, in our opinion, a reading of the Stafford Act inconsistent
with its congressional intent: to provide federal assistance to affected
communities in the aftermath of a disaster, via the award of contracts
(and the resulting "infusions of cash," S. Rep. No. 91-1157, supra) to
local businesses in the designated set-aside area.[12]
Here, as detailed above, SCG attributes but 24 percent of its current
gross revenues to work performed in Mississippi, with the remaining 76
percent of its revenues resulting from business it performs in 17 other
states and Canada. Similarly, SCG has less than 16 percent of its total
workforce in Mississippi, with the remaining 84 percent in locations
outside of the designated set-aside area. Quite simply, SCG has made a
business decision not to concentrate its work in any one particular state,
instead broadly diversifying the geographic locations in which it does
work. We think that it is simply not reasonable to conclude that the
Stafford Act's intent of "jump starting" communities affected by major
disasters by channeling funds to local businesses is properly served if
the statute is interpreted in a way as to deem eligible a firm with such a
minor presence in the designated area.
RECOMMENDATION
We conclude that the agency's determination that SCG was a firm doing
business primarily in Mississippi, and therefore eligible to compete under
the RFQ, was unreasonable. Since SCG was the only firm found eligible
whose quotation also was considered technically acceptable, we recommend
that the agency cancel the RFQ and reissue it without the Stafford Act
set-aside. In the alternative, since the agency concluded that two of the
vendors (EPSS and another firm) were Stafford Act eligible, but found
their quotations technically unacceptable as submitted, the agency may
consider conducting discussions with those vendors, requesting and
evaluating revised quotations, and then relying on that revised evaluation
to make a new source selection under the RFQ. We also recommend that EPSS
be reimbursed the costs of filing and pursuing this protest, including
reasonable attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (2007). EPSS should
submit its certified claim for costs, detailing the time expended and cost
incurred, directly to the contracting agency within 60 days after receipt
of this decision. 4 C.F.R. sect. 21.8(f)(1).
The protest is sustained.
Gary L. Kepplinger
General Counsel
------------------------
[1] The agency determined that three other vendors that had submitted
quotations were not Stafford Act eligible, Contracting Officer's
Statement, Aug. 2, 2007, at 1, and the quotation of the remaining vendor,
found to be Stafford Act eligible, was considered technically
unacceptable. AR, Tab 9, Consensus Report, at 10.
[2] EPSS also originally protested that SCG could not perform the services
specified in the RFQ for the proposed price of $85,154,115, and that
FEMA's technical evaluation of EPSS's quotation was unreasonable. We
dismissed the first issue for failing to state a valid basis for protest,
GAO Facsimile to Parties, July 31, 2007, and the second issue as untimely,
as it was not part of an agency-level protest that EPSS filed with FEMA
and also was not filed with our Office within 10 days of when the basis of
protest was or should have been known. GAO Facsimile to Parties, Aug. 14,
2007.
[3] As a preliminary matter, we conclude that EPSS is an interested party
to pursue its protest here even though its quotation was found technically
unacceptable. In order for a protest to be considered by our Office, a
protester must be an interested party, which means that it must have a
direct economic interest in the resolution of a protest issue. 4 C.F.R.
sections 21.0(a)(1), 21.1(a) (2007); Cattlemen's Meat Co., B-296616,
Aug. 30, 2005, 2005 CPD para. 167 at 2 n.1. A protester is generally an
interested party to challenge the evaluation of the selected firm's
quotation where there is a reasonable possibility that the protester's
quotation would be in line for selection if its protest were sustained.
Joint Mgmt. & Tech. Servs., B-294229, B-294229.2, Sept. 22, 2004, 2004 CPD
para. 208 at 9. However, since SCG was determined to be the only eligible
vendor that had submitted an acceptable quotation, if the protest were
sustained, SCG would not be eligible for award and the agency would be
faced with resoliciting the requirement. Since EPSS would be eligible to
compete on such a resolicitation, EPSS is an interested party. See PDS
Consultants, Inc., B-297890, Apr. 4, 2006, 2006 CPD para. 59 at 2 n.2.
[4] For a description of the process by which the federal government
provides assistance generally under the Stafford Act, see AshBritt Inc.,
B-297889, B-297889.2, Mar. 20, 2006, 2006 CPD para. 48 at 3-4.
[5] The language of both the RFQ here and FAR clause 52.226-3 does not
precisely correspond to that of the Stafford Act provision itself.
Specifically, while the Stafford Act states in relevant part that
qualified firms are ones "doing business primarily" in the designated
set-aside location, both the FAR clause and the solicitation instead use
the phrase "primarily doing business." FAR clause 52.226-3; RFQ amend. 5,
Instructions to Vendors, at 1. For purposes of our decision, we refer
generally to the term "doing business primarily," as set forth in the
statute.
[6] The RFQ's guidance on what constitutes a firm residing or doing
business primarily in Louisiana consisted of a non-exclusive list of
factors to be considered by the agency that essentially restated the
criteria set forth in FAR clause 52.226-3. For example, the list included
location of the firm's permanent office, existing state licenses, and
record of past work in the designated area.
[7] SCG's quotation included tables detailing its FY 2006 gross revenues
sources and current security guard workforces on a state-by-state basis.
For example, SCG stated that the sources of its gross revenues, by
percentage, were as follows: Arkansas (1.5); Florida (4); Georgia (1);
Kansas (1); Mississippi (24); Montana (3); New York (3); North Carolina
(5.5); North Dakota (1); Oklahoma (8); Rhode Island (4); South Carolina
(5); South Dakota (1); Tennessee (7); Texas (19); West Virginia (8);
Illinois (2); and Montreal, Canada (2). AR, Tab 7, SCG's Quotation,
vol. III, Stafford Act Evidence, at 4. We note that SCG's quotation
represented in one instance that the firm currently employed 144 permanent
employees in Mississippi, and in a second instance stated that it
currently provided approximately 138 security guard officers in
Mississippi. Id. at 3-4. Notwithstanding this discrepancy, in comparison
to its total represented number of employees, no more than 16 percent of
SCG's security guard workforce was located in Mississippi (144/917 = .157,
or 138/911 = .151).
[8] In a statement filed with FEMA's report to our Office, the contracting
officer stated that, in accordance with the non-exclusive list of factors
provided in FAR clause 52.226-3, she reviewed all evidence submitted by
SCG to determine if the firm was residing or primarily doing business in
Mississippi, including that the vendor held a DHS contract for armed
security guard services in Mississippi, had established a permanent office
in Mississippi on October 1, 2005, and held a Mississippi state business
license since 1997 (as well as the sources of SCG's gross revenues and
locations of its employee workforce). Contracting Officer's Statement,
July 29, 2007, at 1. The agency makes clear, however, that its
determination that SCG was Stafford Act eligible was based on the "doing
business primarily" prong, as evidenced by the fact that the firm's gross
revenues and number of employees were higher in Mississippi than in any
other state. AR, Sept. 12, 2007, at 2.
[9] Similarly, while the FAR establishes a non-exclusive list of factors
to be considered as part of an agency's determination regarding whether a
firm is eligible under either prong of the Stafford Act, it does not
define the term "doing business primarily." See FAR sect. 2.101,
Subpart 26.2, clause 52.226-3.
[10] Analysis of legislative history is useful to illuminate congressional
intent and to confirm a statute's plain meaning. Conroy v. Aniskoff, 507
U.S. 511, 514, 516 (1993) (although it found the statute to be
"unambiguous, unequivocal, and unlimited," the Court examined legislative
history to confirm that its reading of the statute was not absurd,
illogical, or contrary to congressional intent).
[11] While FEMA also argues that its interpretation of the Stafford Act is
entitled to deference, AR, Sept. 25, 2007, at 4, it is only when,
employing the traditional tools of statutory construction, the
congressional intent on the precise question at issue cannot be
ascertained that an agency's interpretation is entitled to any degree of
deference. Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 843 n.9 (1984). Moreover, deference is not appropriate with
respect to an agency's interpretation, as here, of a statute of general
applicability, particularly since FEMA's interpretation is not the result
of a rulemaking process or formal adjudication. See United States v. Mead
Corp., 533 U.S. 569, 572 (1966); Adams v. SEC, 287 F.3d 183, 190 (D.C.
Cir. 2002); Contractor's Sand & Gravel v. Federal Mine Safety & Health
Comm'n, 199 F.3d 1335, 1339 (D.C. Cir. 2000).
[12] The FAR Council is now considering a change to the FAR that would
define "doing business primarily" to refer to the area where a majority of
a firm's gross revenues are earned and a majority of its employees are
located. See Federal Acquisition Circular 2005-21/FAR Case 2006-014, Local
Community Recovery Act of 2006, Sept. 17, 2007, at 4 (draft). Accordingly,
by letter of today, we are providing the FAR Council with a copy of our
decision here.