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.