Security & Guard Services
Expert Q&A: Why is Security Such a Maddening Expense?
We recently caught up with Robert Schreiner, Fine Tune’s Vice President of Security & Guard Services, on why security is such a challenging and maddening expense for procurement.
Q: What makes the Security & Guard Services category such a challenging expense to manage?
Most companies that need to hire contract security vendors have little or no in-house expertise in the field of security. This is understandable: those companies are focusing on their primary business mission and core competencies.
Unfortunately for them, security is an exceptionally complex environment with unique demands, risks, and pitfalls. Commercial security contracts can encompass everything from manned guarding to remote monitoring; access control to patrols; cameras to alarm systems; dispatch operations to executive protection—and that’s just to name a few.
Properly managing these contracts requires several considerations: Does the client need armed or unarmed service? What type of access control system will be most appropriate for their needs? What is the right balance between a manned presence and technological solution? Do they need risk management software?
Further, how will a guard force be supervised and managed, and how can a security vendor ensure consistent service across dispersed locations? Does the security plan address the client’s security concerns while remaining conscious of budget constraints?
Given the complexity of the security services landscape, a client lacking expertise in the field may be at the mercy of the vendors themselves to provide that expertise and offer guidance to build the security plan. This creates an inherent vulnerability for the client—making it difficult for them to objectively assess whether the plan they have is appropriate, the security spend is reasonable, the program is being correctly managed and accurately billed according to the contract(s).
Q: Security is a “scary expense” much like pest control in that companies are not thinking about cost savings or cost at all…in other words “security at any cost.” So, how should companies address this category?
The main reason security is a “scary expense” is that the need for security services is a direct response to a spectrum of real risks. The client needs to protect their facilities, personnel, data, intellectual property, physical property, processes, relationships, and even their brand identity and reputation. Some security risks pose an existential threat to the client’s business itself, creating a critical need for a security presence.
The key to developing a good security program is creating a comprehensive security approach that addresses all the legitimate risks to the client in a way that is commensurate but also affordable and manageable. No company has an unlimited security budget, so “security at any cost” is not a viable approach.
In fact, most companies have significant budget constraints, and any line item (like security spend) that does not directly produce revenue or support their core competencies must be critically evaluated. The challenge is that the business needs to protect itself while getting the “biggest bang” for their security buck.
Q: Can you discuss some common supplier practices which may negatively impact a client’s P&L?
The most common vendor practices that may negatively affect a client’s P&L could be broadly categorized as “billing beyond the contract.” This practice can take many forms, including:
- Billing at a higher officer level than is contractually stipulated. For example, a contract calls for 168 hours per week of service at an “entry-level Security Officer 1” rate, but the vendor bills 80 of those 168 weekly hours at a higher “Security Officer 2” rate.
- Billing supervisor rates when a supervisor fills in for an absent line officer. It is not uncommon for security supervisors to temporarily fill in for junior officers who are late or absent. However, when a supervisor stands post for a lower-level officer, that supervisor should be billed to the client at the regular officer’s rate, not the supervisor’s rate. Whether the supervisor gets paid at his or her regular rate is up to the vendor to decide, but the junior officer’s absence should not come at any additional expense to the client.
- Billing overtime rates for straight-time hours. In general, a client should only be billed overtime rates if the client explicitly requests extra services that directly cause the vendor’s personnel to work additional (overtime) hours. Unfortunately, it is common for security vendors to bill overtime to clients when the security vendor’s own staffing and scheduling challenges have caused officers to work overtime during regularly scheduled hours. In that case, the incurred overtime should be a vendor cost, not a client cost.
- Adding positions or services beyond the original scope of work. Sometimes a security vendor will bill for services or additional hours that were not defined in the contract. If written approval from authorized client representatives does not exist, those additional services or charges should not be billed to the client. Occasionally, in multi-location accounts, we see circumstances where a local client employee at a remote location has agreed with a security vendor to provide additional services at that facility.
- Non-labor costs. These include additional charges or markups on such items as vehicles, mileage, travel, guard tour systems, software portals, and even officer vacations and health insurance.
Q: What should a buyer organization do about these practices?
The key is proper oversight and ongoing management of the security program. Unfortunately, many clients of security vendors do not have the expertise, personnel, time, or bandwidth to continually monitor their security billing for potential problems or errors.
In this case, bringing on a third-party expense management firm with the required expertise and resources is key (shameless plug…Fine Tune!). They can assess the labor and non-labor billing, evaluate the structure and efficiency of the overall security program, and provide ongoing monthly management of the security spend. Identifying these vendor practices as they occur, stopping them immediately, and ensuring that the client is reimbursed for any overcharges can result in dramatic cost savings, as well as a more efficient and responsive security program.
Q: What industries do you see as having big opportunities to improve upon the security expense?
All industries can benefit from a more vigilant approach to their security spend. The biggest impacts may be realized in industries with higher security risks that depend upon larger security programs. Among these are: food production and distribution; healthcare and hospitals; industrial and manufacturing; logistics and distribution; pharmaceuticals and medical supply; and utilities/energy.
We also see potential savings opportunities in other sectors, such as hotels/hospitality; financial/banking; commercial property management; and many others.