Caveat emptor (let the buyer beware)-Owner estimates and other follies associated with purchasing security solutions


Have you run the numbers?

Have you run the numbers?

Due to the often abstract manner in which security is applied to an enterprise’s assets, determining standards and associated costs is typically quite challenging for even the most experienced of companies and their procurement departments. Furthermore, the final sense or achievement of security is unlikely to be the result of any one department or service and dependent on numerous supporting elements, some from within the company and some externally, to result in the desired objective. It is therefore puzzling as to why a company that does not produce or commercially distribute security products and services would believe they were proficient in determining the financial cost of such services and if they were to apply a margin of error; believe that they were within a mere 10-20% of the provider’s price.

Companies regularly direct their internal departments to determine fair-market-value for their prescribed security demands. Some companies also engage the services of consultants with alleged expertise to assist in this process. Where the plan fails is from the very outset with the majority not even having any first hand experience in running such commercial services, let alone within the terms and conditions set by the company. This excites and frustrates service providers as it presents a headache to educate the company or and opportunity to profit from their hubris or ignorance. Further amplified in developing markets where less scrupulous vendors abound or operate unregulated.

At the pinnacle of this phenomena are those companies that apply a technical and commercial selection criteria. Their first stage presents grossly limiting criteria such as minimum 3 years operating within that sector, prior sector experience, specified office locations, set employee number and so on. This all but removes any possibility of competition within markets outside of the most developed of countries. The second stage then hinges on all the errors accumulated by the company and their advisors to determine what they would charge or see as fair value for such services; with a small margin for error. Quite likely they will also then select the lowest tender.

For companies that want to maximize their budgets, get true value for money or not suffer from ex-post ransom (cheap bids that manipulate the company after the successful contracting to drive the initial price up for fear of re-tendering costs and processes due to potential service failure) or winner’s remorse (you get your service at a bargain price at auction, only to discover that you could have purchased cheaper or better quality items if only you have been better prepared) they should consider the following options:

  1. Get better advice! Only use vendors or individuals that have supplied the same or very similar commercial services continuously without incident/failure.

  2. Develop a specific model for security purchasing. Factor in all the demands, including the required peace of mind or loss mitigation, then work towards a price range relative to the location and industry for such desired quality. Don’t assume your threat assessment and treatment solution approach is accurate either.

  3. Work in a collaborative solutions outcome approach with your providers, not a carrot and stick or contempt approach. If you choose wisely, seek a win-win outcome, listen to advice and modify your initial concepts to include those of the providers and you will get a much better sense of the costs and limitations and avoid surprises/disappointments later on. After all they will be protecting your most precious assets once you commit to a solution.

Caveat emptor applies equally to the foolish and the wise. The difference being that the wise have either read the instructions first or the fool learns from experience, most likely bad.

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About Tony Ridley
Travel health, safety, security and risk management expert.

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