By Ronald D. Heil, CPP
Hiring a low-bid security contractor is an invitation to poor service. Best-fit contracts ensure that a contractor will meet your needs
The young woman walked apprehensively through the dark, poorly lit underground municipal parking garage and, to her relief, located the garage manager. She asked him if he could arrange for someone to escort her to her car, a service the garage supplied in accordance with a local ordinance. The manager asked her to wait while he called the on-duty security officer. She pulled back in fear. She'd already seen the security guard, she said'and it was him she wanted protection from.
Why was there a security officer working there who inspired fear, rather than confidence, in patrons? The answer is simple, and alarmingly common: The security contract had been given to the low-bid contractor. Without enough money to hire quality personnel, the contractor had to take whoever would work for the low wage and meet the contractor's minimum employment requirements. That left the garage's patrons at risk.
Situations such as this real-life example based on my own experience are slowly bringing about a realization that there is a tangible price to pay for going with the cheapest security provider. You really do get what you pay for. Buyers must consider the level of service their company requires and select a service provider capable of meeting those requirements, even if the price is higher than the other offers on the table.
When purchasing material goods, a low-bid contract may be the most appropriate one. When buying office goods, for example, a buyer can set very specific criteria for those goods and purchase thousands of identical items in lots.
This process is vastly different from a contract for services, such as those for security forces. These contracts are frequently written for long periods, usually three years or more, making it difficult and usually costly to switch to a different provider if service is poor.
Contracts for a security force merit particular attention. Unlike most contract services that operate behind the scenes, such as custodial services, a contracted security officer is often in the public view and interacts with employees, customers, and visitors. The officer is, therefore, viewed as a representative of the client, and not just in the eyes of the public. As numerous lawsuits indicate, courts have found clients liable for the actions of contract security officers.
To win and maintain low-bid contracts, contractors must cut corners, such as reducing hourly wages for officers to the point where they cannot attract quality people. Cutting corners results in a cascading series of problems.
For instance, even if they happen to get a reasonably competent person to take the job, that person will not stay long enough to become proficient at it. That's because uncompetitive wages strongly affect the turnover rate (the rate at which personnel leave a particular employer and need to be replaced). For some contractors, the turnover rate is as high as 300 percent: That's the equivalent of replacing the whole work force three times in a year.
High turnover causes the contractor to lower recruiting standards to constantly fill vacancies. This results in lower quality personnel placed with the client. At the parking garage mentioned earlier, wages were so low that they were competing with local fast-food restaurants, which got the better personnel because they provided warm, indoor environments for workers, as well as easier work; the parking garage security officer was expected to patrol the unheated garage's distance of roughly two miles' twice each shift.
Wages that are set too low also result in a high rate of call offs, where an officer calls in sick at the last minute, which can lead to unsatisfactory fill-in situations.
Other practices of low-bid contractors that directly affect the quality of officers include: minimal training; little or no preemployment screening; limited supervisory visits; and few, if any, health, dental, and education benefits. It's important to remember that benefit packages are critical for retaining workers.
The Best-Fit Solution
Rather than letting the dollars determine who will deliver security services, the manager responsible should first assess the company's exact needs. If you hold that responsibility, you need to develop a detailed request for proposal (RFP). By assessing the bids that this RFP generates, you will best be able to determine which service provider offers the most cost-effective fit for your specific needs and thus the best-fit solution.
Contractor relationship. It helps if you first gain an understanding of the relationship that is created when you contract for guard services. Security officers are employees of the contractor, not the client. This may sound obvious, but the proximity of the client to the individual officers, combined with infrequent contact with contractor management, tends to blur this line. The client must keep in mind that it is hiring a contractor, not individual officers.
Contractors provide a service through their security officers, and after the contractor is selected, the client's involvement in security officer personnel issues should be minimal. The client must receive a stable level of service from the contractor regardless of which particular officers are posted. Supervision, training, and officer discipline should be carried out by the contractor.
It also follows that the contractor should establish compensation and benefit levels for each class of officer (full time, part time, supervisor, and so on), regardless of the contract the officer is on. These benefits should be at a level that is adequate to retain good personnel. Instead, what often happens is that the contractor develops custom officer-benefit packages for each client.
Some clients may be sold on the idea that a custom benefit package will help retain quality security officers for their contract. However, in these cases the client frequently ends up paying for extensive security officer benefits with no guarantee that all officers on the contract, especially fill-ins, are receiving the benefits that the client is paying for.
Selecting a contractor that is the best fit requires a more exhaustive selection process than just seeking the low-bid provider, but the extra effort will have a long-term benefit. The client must commit to the process and allow adequate time to methodically carry it out. This may mean starting as early as four months before the selected contractor will be expected to begin work. Because of the time and level of detail required, some companies find it beneficial to engage an experienced independent consultant to direct and manage the process.
Needs assessment. Before an RFP can be created, you must first know exactly what you're looking for. Some companies start by interviewing employees and even customers who have interacted with the current security force to determine specific issues that should be addressed in the new contract. What isn't working on the current contract and what is?
You also need to establish clear benchmarks for what the security force is expected to accomplish, and how that might affect who gets a contract. For example, a high level of deterrence may require guards to have a "hard" look and a low level of interaction with employees and customers; or, a security force might need a high level of customer service skills, which may require security officers who have more developed people skills.
Other considerations are the environment that the officers must work in (indoors or outdoors, office or warehouse environment, patrol or static post), what equipment you want the contractor to supply (such as radios and vehicles), whether the job requires the officer to be armed or meet some minimum physical requirements, and whether the on-site force is large enough to require full-time supervisory personnel.
RFP. Establishing requirements and expectations for a contractor in a well-defined request for proposal is a critical step. The RFP must establish specific needs of the client such as:
- Number of posts
- Hours per post
- Post conditions
- Days per week and holidays that each post should be staffed
- Type of uniform required
The RFP must identify differences in duties between posts. It should also set a minimum experience level (and corresponding compensation) for each post. That information should be included in the post-information section.
Additional services. In addition to laying out the desired level of officer qualifications and the duties they will be expected to perform, the RFP should discuss other aspects of the contract. For example, most contractors offer ancillary services, such as providing background checks or installing guard-tour systems. At a minimum, the RFP should ask what additional services are available from the contractor.
The RFP must also explain what the client wants from the contractor with regard to management of security officers, such as creating levels of supervision, resolving no-show situations, and responding to client complaints.
Further, there must be a clear identification of responsibility for equipping security officers with items such as notebooks, tour recording systems, communication systems, flashlights, identification cards, and computers as needed.
Company data. Keeping in mind that the goal of this process is to hire a contractor that has the overall capability to deliver the service the company needs (the best-fit contractor) and not just a loosely connected conglomeration of security officers, the company must also solicit information that will help it assess the quality of the contractor. This information can include the turnover rate for security officers, benefits and training offered to employees, the extent of the preemployment screening conducted, and references from similarly sized clients in the local area.
Limiting references to the local area is critical due to the recent flurry of acquisitions and mergers in the industry. Today's branch office of a nationally reputable contractor may be yesterday's fly-by-night operation, and it will be several years before the local operation meets the standards of the national parent company.
Metrics. Finally, the RFP must communicate the ongoing expectations for performance during the life of the contract. Performance indicators, or metrics, should be established to track contractor compliance with requirements established in the RFP. Potential candidates for performance indicators include:
- No-show rate
- Missed guard tours
- Missed supervisory visits
- Customer complaints
- Violations of procedure
- Violations of dress and appearance standards
To put teeth in the performance indicators, the results should be tied to specific outcomes such as financial rewards or penalties for the contractor.
Notifying contractors. The next step is to develop a list of contractors interested in participating in the process. Depending on the relevant internal procurement rules, this can be achieved by various methods, including via a direct mail announcement to potential contractors, via public announcements through the print media or Web sites, or via recommendations from independent consultants.
Regardless of the solicitation method used, a very brief description of the scope of the contract should be included with an invitation for interested contractors to express their interest and submit their contact information.
Multiphase process. Because the best-fit selection process requires much more time to evaluate contractors and their proposals, a multiphased selection process is necessary for larger or more complicated contracts. It's advisable to go through this even with smaller contracts. The multiphased approach lets the company filter out contractors who do not meet minimum qualifications. This spares the contractor and the client from spending valuable time continuing with a bid process that, for them, has no chance of succeeding.
Prequalification. After compiling the list of potential bidders, the next step in the multiphase process is the prequalification. Contractors should be prequalified before they can compete in the full selection process. Each interested contractor is given a prequalification questionnaire designed to elicit information that will be used to determine its overall quality and capabilities.
Based on evaluations of the completed prequalification questionnaires, typically six to eight contractors are selected to continue in the selection process. The author's experience has shown that the range of six to eight provides a large enough pool of participating contractors to allow for a valid competition while keeping the number of proposals that you will have to evaluate at a reasonable number.
Preproposal conference. The prequalified contractors are then presented the full RFP and a preproposal conference is conducted. This step is essential. The conference can benefit both the contractors and the client in clarifying points of the RFP, the eventual contract requirements, and the selection process itself, thus saving valuable time and effort and helping to avoid protests after the final selection. Issues arising out of the conference may necessitate issuing amendments to the RFP.
Proposal format. The format and order of the proposal elements need to be strictly mandated, because evaluation of the submitted proposals can be extremely time consuming if they are not uniform.
Contractors view the bidding as an opportunity to showcase their companies and capabilities, so proposal packages are frequently several inches thick and consist of the actual proposal response along with brightly colored marketing materials. Without a strictly mandated format, information that you consider vital to the selection process may be buried deep inside any one of the enclosed documents and, once found, may be in marketing language that can be vague or downright deceptive.
Scoresheet. No proposal ever exactly meets the elements of the contract as required by the RFP, which makes a fair comparison between contractors very difficult. The author recommends the use of a scoresheet to focus on the selection criteria most important to the hiring company. That will help you avoid getting bogged down in reviewing extraneous information. (For more on what's included in a scoresheet, see the box on page 58.) A single scoresheet can be used to evaluate the prequalification packages, and it can later be expanded to be used to evaluate the proposals.
Presentations. You may want to ask contractors that score the highest in the proposal-evaluation phase to make oral presentations. This step is especially useful if the evaluation process produces a near tie among several contractors.
Presentations provide the contractors another chance to showcase their strengths and provide the client the opportunity for additional clarification of proposals. Clients should require that the actual account representative who would be assigned to their contract be a part of the contractor's presentation team. If oral presentations are planned or contemplated, it's important that additional time be built into the selection process to accommodate them.
A formal announcement of the selected contractor, pending final contract negotiations, completes the selection process.
This exhaustive screening and selection process will tempt some companies to pick and choose techniques from this process to narrow the field to a select few qualified contractors and then still make a final selection based on the lowest bid. Abandoning the process at this point defeats the whole purpose.
In one case in which the author served as a consultant, the client followed the selection process for most of the way, but the company decided to skip the final evaluation of proposals and instead conduct a real-time bidding war online between the contractors. The client was very happy with the low price that resulted. But a review of the final written proposal revealed that the winning contractor had cut many hard requirements of the RFP'including almost all supervisory posts' to make the lower bid achievable.
After-action interviews with other involved contractors revealed they had also been cutting service to reduce price as the online bids got lower. Estimates to return missing requirements to the winner's proposal exceeded $300,000 a year, approximately 10 percent of the value of the entire contract.
Because the client wanted nevertheless to continue working with this particular contractor, the company chose to reenter into negotiations with the winning contractor. The final contract cost ended up being much higher than the original winning bid, and the contract took nearly a year to finalize.
Mind-set. In a few cases, such as with some government entities, completing a contract by low bid is mandated in law. However, typically it is institutional bias, particularly in the case of purchasing departments, that pushes toward low bid. Other times it is simply ignorance that an organization is not limited to low-bid selection for service contracts, usually due to lack of experience.
For example, in one case that my security consulting firm worked on, a large metropolitan library system sought a security contractor. The selection process had to be delayed for several months while a debate took place over whether a bid that was not the lowest could be accepted. The library's legal counsel, a city attorney general, was enlisted to research city contracting law.
After weeks of research and some lively arguments with the city's contracting department, the latter finally had to admit that there was provision in the law for "personal service contracts" to be entered into based on criteria other than low bid. The issue should have been settled, but as is often the case, institutional bias also had to be overcome.
After a contractor was selected based on its ability to meet the library's security needs- a "best-fit" contract-the selection process and price had to be justified to the library's board of directors, and some board members were definitely biased toward the lowest price. As the consultant on the project, I was brought in to explain the selection process to the board. I emphasized the meticulousness that went into the final selection, and pointed out the expected benefits of the quality- control provisions designed into the new contract.
Additionally, the security manager enlisted the aid of several chief librarians of outlying branches who spoke to the board about the criticality of the security force to the continued safety of the libraries' patrons and staff, particularly in high-crime areas. In the end, the board accepted a new contract with personnel costs that were fully 20 percent more than the existing contract.
Results. The best-fit approach is about getting better results because needs have driven the process. In the case of the metropolitan library just discussed, for example, the client says there has been an improvement in the security service with the new vendor on board. One example is in mandatory visits by the account manager to officers at the branches, a requirement of the RFP (and, incidentally, one of the drivers of the higher price).
To ensure that these supervisory visits happen as required, a guard-tour recording system is in place. The library reports that the account manager, rather than the library's head of security, is finding and fixing guard-force problems thanks to the extra level of supervision that the contract requires.
Consultants. The selection process for a security officer contractor should be a team effort involving the security staff, purchasing department, and legal department. Some companies also find it valuable to hire a qualified independent consultant to manage the selection process or lead the selection team.
A contractor's marketing and sales teams may well be writing hundreds of proposals a year. An experienced consultant can level the experience playing field for the client, guide the client around the pitfalls of the process, develop a comprehensive RFP and prequalification questionnaire, evaluate proposals, and relieve the client of the minutiae related to the entire selection process. In most cases, this can be done for less than 1 percent of the cost of the entire contract.
A properly conducted selection process, approached positively by both sides, will result in a win-win for the client and the contractor. For the client, the right contract will result in superior service. For contractors, competing on quality and service instead of pure low bid will reduce personnel costs through lower turnover and supervision requirements, and in general improve the reputation of the contractor and the security officer industry as a whole.
When comparing contractor responses to a request for proposal, a scorecard can be a handy tool to see and compare the strengths and weaknesses of each response. The author recommends creating a matrix that rates important areas on a scale from one to six. These can include the following items, but the scorecard should be customized to meet your organization's specific wants and needs:
- How security officers will be supervised
- Type of training given to officers
- Type of background checks and preemployment screening conducted on officers
- Whether drug screenings are conducted on officers
- Whether psychological or personality testing is conducted
- Average years of experience of officers
- Benefits offered to officers
- Turnover rate
- Types/hours of shifts worked
- Background of officers
- Value-added services offered by the contractor
A company's contracted security officer is often in the public view and interacts with employees, customers, and visitors. The officer is, therefore, viewed as a representative of that company, and not just in the eyes of the public; courts have found companies liable for the actions of contracted security officers. Given the importance of guard services, companies should be wary of hiring personnel via the lowest-bid contract.
When forced to do business via low-bid contracts, contractors adopt personnel practices that are the source of the very problems that cause the most problems for client companies. Chief among these is reducing hourly wages for officers to the point at which they do not attract quality people, which results in a cascading series of problems.
For instance, uncompetitive wages strongly affect the turnover rate (the rate at which personnel leave a particular employer and need to be replaced).
The recommended solution starts with an understanding of the employer-employee relationship. Then, the purchaser of the security service should establish its needs carefully, create a detailed request for proposal (RFP), and select the offer that best fits the needs identified.
RFPs should lay out the specific services the client wants, including the number of posts, the days per week and holidays that each post must be staffed, and the type of uniform required. The company should also consider any additional services offered by the contractor.
To accurately compare the contractors' proposals, it's important to use a scoresheet that rates the factors of most importance to the hiring company. Companies unfamiliar with the process may want to hire a security consultants to help them through it.
Ronald D. Heil, CPP, CSC (Certified Security Consultant), serves as director of consulting for SecuraComm Consulting Inc., in Pittsburgh, Pennsylvania. He is a member of ASIS International.