Are you concerned about the security of your premises, preventing break-ins and protecting your employees, customers, clients and vendors? Whether you are trying to decide between investing in an in-house security staff or turning over the non-core business function to an outside security firm, there are several things you should keep in mind when building your case for senior management buy-in for either option. First and foremost, every organization must weigh the potential costs for establishing an in-house security team or outsourcing the job to a third party.
Let’s say, for example, ABC Construction is building 300 new mansion homes at a cost of $1.5 million per house. The project manager is naturally concerned about the safety and security of the property, equipment and homeowners, and is looking for ways to keep assets protected. The crime statistics for the address of the property show high rates of property crimes, especially vandalism, burglary and trespassing.
After conducting a basic risk analysis, it is determined that the property is high-risk and the cost of a potential theft would be significant in heavy equipment loss given that the average cost of each piece of equipment is $150,000. The countermeasure proposed to mitigate the risk is to hire a security firm to patrol the property around the clock. The cost to perform the function in-house is over $700,000 annually while the cost to outsource the security function is $250,000 annually, resulting in a total net savings $450,000.
On the surface, it would seem like the decision to outsource security to a third party would be a no brainer given the cost savings. But just turning over a function as vital as security to the lowest bidder without conducting the proper due diligence would be ill-advised and potentially negligent.
Determining the Risk Level of a Facility or Property
The only valid method to determine the risk to a facility or property is to have a comprehensive risk assessment conducted by a qualified security risk management professional. The crimes committed on the property and in the adjacent neighborhood have significant impact on the reasonable and appropriate countermeasures to be employed at a facility or property. The risk assessment is a significant defense document in the event of litigation.
A "high risk" facility can be described as such based on the following considerations:
- A facility that is open to the public with no access control.
- A multi-occupancy facility that contains several stores, shops, or offices.
- A location with a prior history of numerous reports of criminal activity within or on the property.
- A location that sells or produces a high value items, such as a jewelry store, gun shop, marijuana store, etc.
- A location that has previously contracted with armed security officers for a justifiable reason.
- A location at or near where homeless and other undesirable individuals are known to loiter.
The normal completion timetable for conducting and reporting the risk assessment is dependent upon the type and size of the facility, the level of cooperation of the facility management, time to obtain records, and related activities. Experience has shown that the assessment of the average facility requires a minimum of 40 hours. The average professional has a business rate of $100 to $125 per hour plus expenses.
Expensing the risk assessment cost requires a business decision. The assessment cost can be a turn-off for those who do not realize the value of the assessment. If the guard services company requires a risk assessment before providing services and expects the client to pay the entire cost of the assessment, the client will go to another vendor because of the cost. Even if the client signs a contract with the risk assessment requirement prior to receiving services, the client may void the contract unless there is a specific contract provision that precludes voiding the contract after the risk assessment.
It is suggested that the security vendor and the client share the cost of the assessment on an equitable basis. If the facility is determined to be "high-risk," the security vendor can increase the hourly billing rate for reimbursement of assessment cost. An hourly billing rate should not be finalized until completion of the assessment and the identification of reasonable and appropriate security measures. Prior to the finalization of the billing rate, a provisional billing rate could be identified and subject to revision upon completion of the assessment.
Combatting Negligent Security Claims
Negligent security claims may result when there is a violation of the premises liability laws that specifies that personnel should be safe and secure within their work and business environment. There is no guarantee of absolute safety and security, but the security measures employed must be reasonable and appropriate to counter probable criminal risks. Court decisions have held that the business owner can outsource the performance of security duties but cannot be relieved of responsibility for safety and security.
The types of problems that could result in a negligent security claim include:
- Failure to conduct a risk assessment to identify potential risks.
- Failure to have an adequate security operation.
- Failure to properly supervise and manage in-house and contract security operations.
- Failure to have qualified and properly trained security officers.
- Failure to have documented safety and security policies and procedures.
- Failure to enforce safety and security policies and procedures.
- Failure to have an adequate and appropriate background investigation protocol.
- Failure to have an appropriate activity and incident reporting program.
Return on Investment
Like an insurance policy, there is no definitive way to predict a tangible return on your financial investment. The intangible return comes from an increase in employee and customer moral due to an increased feeling of safety and security. The real return on your investment comes if the business becomes the defendant in a negligent security claim. Having conducted a risk assessment and developed reasonable and appropriate countermeasures will be a significant benefit in litigation.
Value can also come from both tangible and intangible factors. Tangible factors include the financial or other measurable benefits that customers get from using contract guard service, transfer of recruitment cost, transfer of employee benefits cost, transfer of training and retraining cost, just to name a few. As an end-user of security services, it is important to understand that the lowest price may not always signify the greatest value and that there are some benefits that are more important than price. The costs of high-risk security guard services are driven by valued-added services and benefits, not by price.
Not All Security Firms are Created Equal
The choice between a proprietary (in-house) guard force or contract guard services is one of quality control of personnel, loyalty, and reliability versus flexibility and cost. There are several advantages for a company to hire its own security staff in house. Some of the advantages include: selecting, training, and supervising your own security staff. Hiring you own security staff also creates a more direct relationship between the company and security personnel in comparison to bringing in contract security guards. In addition, security personnel hired directly have been known to be more reliable.
The professional quality of security personnel and cost of some contract security guard firms varies for many reasons which affect the quality of services they provide. Some contract security firms do not have experienced security professionals who possess the appropriate client business skills and knowledge of client industry. Many security guard firms also do not have reasonable and appropriate training programs which could increase potential liability for their clients.
A highly qualified, licensed, insured, experienced high-risk security guard firm is worth their cost; an essential to handling myriad potential problems a business owner may face, as well as reducing potential negligent security litigation. For example, using a high-risk security service firm with armed security officers significantly elevates the potential risk for the business owner. It is highly recommend that you consult an attorney before hiring a service provider to protect your facility or property.
Additionally, a mature, well-trained, highly qualified and experienced security officer is required when there is a need for a firearm for protection of property and individuals. Situations may arise where a “shoot-don’t shoot” response is necessary on an immediate basis. Additional costs for using a high-risk security firm come from additional insurance, fair market value of security professionals, weapons licensing costs and advanced firearms training. The use of a high-risk security firm with armed security officers may also give the public the impression that the facility or property is dangerous.
About the Author:
Grayling D. Livingston is the founder and president of Get A Security Quote (GASQ), a search for hire, lead generation, and sales support-type service that support contract security firms, to include security consulting, sales and marketing activity. GASQ work with end-users of contract security services who don’t want to own (or own) a full-time security staff and are looking for the best value for their money and expect the services to match the fees or services. For more information, visit www.gasq.us.