Executive Protective Security Service, Inc.
B-299954.3: Oct 22, 2007
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. ?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.
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.
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.
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
The RFQ, issued on
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:
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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. 
EPSS challenges FEMA's determination that, for purposes of the Stafford Act, SCG was a firm doing business primarily in the state of
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
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.
* * * *(3) Formation of Requirements -- The head of a Federal agency, as feasible and practicable, shall formulate appropriate requirements to facilitate compliance with this section.
42 U.S.C. sect. 5150.
The RFQ here was limited to firms residing or primarily doing business in
SCG's quotation included the required volume addressing its Stafford Act eligibility, setting forth its ties to the state of
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
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,
Based on our review of the record, we conclude that FEMA's determination that SCG was a firm doing business primarily in
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
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. 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. 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.
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
We conclude that the agency's determination that SCG was a firm doing business primarily in
The protest is sustained.
Gary L. Kepplinger
 The agency determined that three other vendors that had submitted quotations were not Stafford Act eligible, Contracting Officer's Statement,
 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,
 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
 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,
 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.
 The RFQ's guidance on what constitutes a firm residing or doing business primarily in
 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
 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,
 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.
 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).
 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
 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.