Contract review is tedious, particularly when it comes to going through all the fine print with a security guard provider. This can be especially problematic if your interaction (like mine) with contract guard agencies is for supplemental work only and not as a key component of your program. For today's extremely busy CSO--and that's all the CSOs I know--there is little time for such painstaking work. But it's crucial. Consider the following three scenarios:
Scenario one: I contacted our legal department and asked them to review a contract guard agreement. Legal asked how critical this was, because they were working on leases, licensing arrangements, workers' compensation issues, and SOX and SEC regulations--all things they clearly considered priorities. I asked them to review the contract as soon as possible, and received it back three months later.
Scenario two: Members of my team contacted our legal team and ended up in voice mail, where they left a message that they had an immediate need to employ a contract guard agency and needed the terms and conditions reviewed right away. They repeated their request a day later, this time sending the contract to the department's primary paralegal to speed up the process. A week later, they heard back from one of our attorneys, who asked when they needed the contract back.
Scenario three: My team contacted a local guard provider that indicated it could have guards onsite the same day and didn't need a contract.
Given scenarios one and two, it might be tempting to avoid the whole hassle and skip to scenario three. But you should always secure a contract--regardless of the scope of services, the number of coverage hours and the duration of the engagement. Why? Simply put, contracts define expectations of service and protections, should something go wrong. A former CSO I know innocently engaged a service to cover a simple eight-hour assignment on very short notice. The guard assigned to the job ended up illegally detaining a customer, which led to a lawsuit that had to be worked out in court because there was no contract to protect his company from mistakes made by the contractor.
Your contract checklist
No contract means buyer beware. The CSO's mission of protection should include protection against negligence and damages arising out of the provision of security services. I did some research and worked out some ways CSOs and their staffs can avoid common pitfalls with contract guard services.
1. Check the agency's license. The contract guard agency should always provide you a copy of its license to conduct business. Contact the appropriate state agency to validate the license. You could also secure a Dun & Bradstreet report through your credit/finance department to ensure the solvency of the organization, or take other steps consistent with your company's policy for vetting new vendors.
2. Request a certificate of liability insurance. It is important that you know, understand and communicate your company's requirements for all contractors with respect to general liability, excess liability, workers' compensation and employers' liability. For example, a good policy is to have your vendor include you as an additional insured on its policy, which allows you to file a claim directly against the vendor's insurance policy. Your risk management team should provide these requirements to you. They must be nonnegotiable.
3. Include a defense and indemnification clause. Also known as "hold harmless" language, this protects your company from lawsuits and claims generated because of the negligence of a guard company. For example, take the scenario above, where a guard company employee illegally detains a customer. Odds are good that that customer is going to file a lawsuit, and you can be sure he will name your company as a defendant. The argument that your company "didn't do anything wrong" will not matter. Without a written contract that contains "hold harmless" language, your company could waste money and countless hours defending itself from the claim.
The "hold harmless" clause prevents your company from having to defend and pay for claims where your company was not negligent. More specifically, this language does two things. First, the defense language ensures that the contract guard company picks up the legal defense cost you generate in defending your company from a claim caused by the negligence of the security guard. Second, the indemnification language ensures that the guard company is responsible for paying out any financial rewards due the injured party.
4. Require that the guards meet your standards. The guards assigned to your property should meet your basic background qualifications, and they must be required to provide physical evidence of a valid individual security guard license in those states mandating such licensing. In addition, it is recommended that you mandate timing (for example, quarterly or semiannually) for ongoing background checks and license verifications for longer-term contracts. Other checks, such as a national sex offenders check, can be considered when possible and depending on assignment.
5. Beware of subcontractors. Never underestimate this possibility--especially when dealing with an agency that claims to be nationwide but in fact simply subcontracts out across the country. If you allow the contract guard provider to hire subcontractors, then you must ensure and define the terms.
Preferably, all the terms you require of the primary agency must be extended to its subcontractor. Also, it is important to demand in writing that any subcontractor must specialize or give proof of experience in your particular industry. For instance, if you contract with a provider for guards in a retail environment and that provider subcontracts with an agency specializing in commercial business, then this mix could be ineffective or worse. In addition, the company you have a contract with that subcontracts work will ask for "hold harmless" and additional insured language in its contract with its subcontractor. Therefore, you should specify language in your contract that you be named as an additional insured by the subcontractor.
6. Consider specifying wages, rates and benefits. You get what you pay for, period. Specify the range of hourly rates you want the guards to be paid, and then compare that with the proposed billing rate. A former contract guard agency owner tells me that a fair billing rate places the wage rate at around 65 percent of the billing rate. Also, you should understand whether the agency provides benefits to its security officers. Companies that provide benefits tend to have better security officers and better retention.
7. Include a cancellation clause. A 30-day clause in a contract is typical, but make sure the clause applies to both you and the agency. This protects you from an agency walking away and leaving you unprotected.
Of course, those are just some of the more critical components. Others may be just as important, such as scope of service and security officer responsibilities, vehicle usage, uniforms, recruiting and training, and supervision. However, at least now you can take some immediate steps to ensure that you protect your company.
Getting the legal help you need
As far as securing contracts with good terms, as I see it you have a few options. The best option is to have an attorney from your in-house legal department assigned to support your department. Then, as contracts need to be reviewed, that attorney can ensure that the proper terms are structured into the contract--and you won't get stuck waiting for days or weeks for someone to return your calls.
This isn't always possible, though, so a second option is to use an outside counsel approved by your legal department. The counsel needs to be vetted and should have a working knowledge of the security industry. The counsel can be placed on retainer or operate on a project-to-project basis.
This is what I'm attempting to do. Currently, I am negotiating terms with an outside counsel, including retainer fees and the scope of services covered. Also, we are negotiating fee terms for services that may exceed the retainer to lock in an acceptable rate. Once this is complete, the full package will be sent to our in-house counsel for review.
If this isn't an option for you, then you and your team can at least create a template of terms and conditions that can be presented to the contract guard agency. This template must be reviewed and approved by your legal department, and it will become the basis for negotiation and your requests for proposals. It must be clear to the contract guard agencies which terms are nonnegotiable.
Whatever the case, it is important to plan strategically when it comes to contract guard services. To avoid last-minute engagements that typically force you into less favorable terms, you can identify and negotiate in advance with contract guard agencies for on-demand services. You may pay a little more, but the contract will be structured to protect your organization.
Sure, it may be easier just to sign on the dotted line. But if contracts are not executed correctly, it does a disservice to you and your company. Worse, the arrangement could end up harming the very company you are entrusted to protect. Let's face it, do you think your CEO is going to accept the excuse that you exposed the company to liability because the legal department was too busy? I don't think so.
Undercover is written anonymously by a real CSO. Send feedback to email@example.com.
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.