Security and alarm firms hit hard by gas prices

As the price of fuel continues to increase across the country, security companies, particularly alarm dealers and private security firms, are struggling to compensate for lost revenue at the pump.

The solution for most of these companies has been to adjust their rates or make their customers pay an additional fuel surcharge in an effort to help offset the skyrocketing cost of doing business.

In certain cases, however, taking these types of money-saving measures have either not been effective enough or have forced customers to look elsewhere for their security services.

Greg Valdez, CEO and co-owner of CBI Security, a guard services firm based in Salt Lake City, Utah, said that he’s been forced to raise his rates on alarm companies, who use the company’s guards to respond to reported disturbances in the city.

Though they needed to charge $35 per alarm response to offset their fuel costs, Valdez said he didn’t feel right raising rates that high on his clients and adjusted the price to $25.

"All the client does it pass that off on their client, so we actually took 20 percent less and settled on $25," he said.

Before the recent fast-paced rise in fuel prices, said Valdez, the price of an alarm response would have fluctuated between $15 and $17.

Despite the increase, Valdez said that they have lost very few clients and that many of those who left came back shortly thereafter due to the quality of service they received.

Making vehicles changes to keep business moving

In an effort to keep the alarm patrol division running at CBI, Valdez said the company recently purchased four mopeds and three bicycles for officers to use, which should help reduce their monthly fuel bills. CBI has also purchased two motorcycles for their growing two-wheel division.

Prior to the spike in gas prices, Valdez said his company’s fuel bill averaged around $13,000 a month, but that has recently increased by more than 60 percent to an average of nearly $21,000 per month.

At some larger standing post sites, which are places where CBI guards work a full shift at one particular location, the company has implemented a carpooling van service to take employees to and from work.

"What that does is the employees pay a little, we supply the van, the driver and the gas, and some of the clients chip in as well," Valdez said. "That has really helped a lot; our employees have appreciated it."

There are still instances, however, that require guards to drive a vehicle which can carry the necessary emergency equipment when needed. For those types of situations, CBI security officers are driving Chevrolet Malibu’s, which not only can carry those needed supplies, but also get good fuel mileage.

Several years ago, Valdez said that they tried using hybrid vehicles for patrols, as well as what he calls "glorified electric golf carts" at stationary facilities. The vehicles and carts spent so much time charging, however, that according to Valdez, they were actually cost prohibitive and unreliable.

The CBI CEO also said that they own several "flex fuel" vehicles, which can run on either ethanol or regular unleaded gasoline. The problem is that fuel stations carrying ethanol are few and far between and the cars are now running predominantly on regular unleaded gasoline. Ethanol has consistently cost less than traditional petroleum-based gasoline.

Rising fuel costs has also affected how CBI recruits and retains new employees. While hourly salaries have increased to try and make employment at the company more lucrative, yearly raises have actually been less than what they would have, according to Valdez.

If gas prices continue to rise as they’re projected to, Valdez said that they will have no choice but to park their patrol service.

"Sadly enough, if the fuel costs go up another 50 cents, we will have to suspend our patrol service," he said. "I know that some of the larger alarm companies would say ‘Here, we’ll pay more,’ but the other ones wouldn’t and it just wouldn’t justify the costs to run for [only] a couple [alarm firms]. We’re hoping it doesn’t get to that point, but I have a feeling it’s going to. I can tell you this much, this company will not have a profit this year because of fuel."

The fuel crisis has also had a personal financial impact on Valdez, as well as CBI co-owner and Chief Financial Officer Adam Kerbs.

"We both have stopped taking payroll checks until we get through this crisis," Valdez said. "We haven’t received a check in about six months. So, we’ve been living off our savings just trying to weather the storm."

Hurting the alarm industry, too

Another segment of the security industry feeling the fuel pinch is alarm dealers. According to Sam Fiske, general manager of Smoky Mountain Systems, which primarily installs residential and commercial alarm systems in Florida, Georgia and North Carolina, fuel costs for his company have doubled over the last 18 months.

Fiske estimated that the company, which also installs phone and home automation systems, doles out between $45,000 and $50,000 a month filling up more than 50 different vehicles.

To offset these costs, Fiske said that they have started adding a fuel surcharge to each service ticket, but he indicated that they are looking into other methods of conserving gas.

"We have certainly researched GPS and some of the firms that are out there that help you evaluate routes that are being taken by your technicians. We are currently doing that internally; we’re grouping and zoning calls to be sure that we maximize penetration in areas that we’re in that we catch all the service and installation we possibly can why we’re in that immediate area," he said "In some cases postponing some non-emergency type service for a day or two until we can possibly get other calls in that area to better justify sending a truck and either one or two men into that area."

Fiske added that the company is also combining two technicians to a vehicle when possible to help cut down on fuel costs. He said that they primarily use the Ford E-250 and Chevrolet 2500 service vans for installs, which when loaded down, are estimated to get between 10 and 11 miles per gallon.

They have yet to find a type of hybrid service vehicle marketed in their area that meets their required specifications. Being that many of their service calls are in mountainous regions, Fiske said that they require vehicles which not only can take the stresses of driving on high-elevation mountain roads but also can handle the weight of numerous tools and parts.

Though some of their technicians are on call 24 hours a day, seven days a week due to the fact that they provide service to various hospitals and emergency response agencies, Fiske said that Smoky Mountain Systems is exploring the option of changing their schedules from five eight-hour days to four 10-hour days. As of yet, no decision has been made to change the work schedule.

As their fuel bill increases, Fiske said that they will have to keep passing off the difference to their customers.

"We’ve absorbed about all the increases that we can absorb internally and we’re going to have to continue to pass it on to the consumer. Just as the grocery stores reflect the price of food and vegetables for transportation bills," he said. "We are seeing it billed to us as we are in turn having to bill it to others."

According to Fiske, Smoky Mountain Systems has seen an overall reduction in business, but he attributes that mainly to the overall downturn in the economy rather than as a result of any added fuel surcharge.

With costs come fraud

While neither Valdez nor Fiske says they have experienced problems with their employees improperly using gas cards, an executive with one of the largest, nationwide alarm and electronic systems installers, who asked that he and his company remain anonymous, said that they have not been as fortunate.

The business, which has a fleet of 2,600 service vehicles, has had numerous problems with technicians attempting to take advantage of the current situation by filling their own cars or their relatives’ cars up at the company’s expense.

The source estimated that about 10 percent of their total fuel bill, which is currently running around $2.2 million per month, could be attributed to theft by employees.

Restrictions have now been placed upon the company’s technicians to try to curb the losses incurred by fraud.

"We limit the number of times a day that (technicians) can pump gas, we limit the total single dollar amount that they can do or the single number of gallons they can pump because we know there is waste out there," he said.

Our source said that the company also uses exception reporting to manage fuel expenses. The exception reporting is configured such that if an employee fills up at an unusual time of day, the company will know and subsequently be able to track that person’s activities to determine if the purchase was fraudulent.

One employee was bold enough to pump 70 gallons of gas during one transaction, according to the executive.

"When we pulled him in to talk to him, his excuse was he wanted to take his girlfriend to dinner that night and didn’t have money to take her, so he figured he would give people a good deal on gas for cash," he said

While fuel thefts have taken their toll, the business has also been hampered by the fact that they’re locked into certain contracts, which don’t allow them to add a fuel surcharge to customers.

Looking forward, the installing company executive said that he felt the key to reducing both fuel consumption and loss is through the implementation of GPS systems that will allow them not only to keep track of employees, but also help them get the most out of their service routes.

Taking advantage of GPS

According to Matt Naish, director of sales for Contigo, GPS systems not only help companies manage their routes better and cut down on theft, they also keep fleet managers abreast of employees who speed and leave their vehicles needlessly idling, both of which contribute to fuel consumption.

For those companies looking to install a GPS system, Naish said they can expect to pay under $500 for a device for each fleet vehicle and around $30 to $35 per month per vehicle for monitoring services.

Naish said that businesses typically start seeing a return on their investment in just a few months.

"As the prices come down on GPS technology along with the price of gas going up, it is becoming very quickly more economical to do the GPS tracking. It pays for itself sooner," our unnamed source said. "I think we’re going to have to get where we can manage our routing better because the amount of driving we have to do will stay the same. The only way we can reduce the amount of miles we’re driving is to do a better job routing."

Finding a solution

As most security firms and alarm dealers look for internal ways to shave costs associated with fuel, some are asking Congress to step in and provide them with some relief.

"We as a society are making adjustments… we’re paying the price, yet it’s almost like they don’t hear us up on Capitol Hill," Valdez said. "We’re frustrated over it… I don’t think they care. With the amount of taxes we pay something needs to be done, its frustrating."

Despite the calls for help from business owners like Valdez, the outlook on gas prices continues to be grim.

According to a short-term energy report released this week by the Energy Information Association, the price of regular unleaded gasoline, which is currently hovering around a national average of $4.11 a gallon, is expected to remain over $4 a gallon until the fourth quarter of 2009.