Subcontracting in the Private Security Industry: Overview and Risks

The What and Why of Private Security Subcontracting

Subcontracting private security services is a business-to-business relationship where one security company outsources all or some of their services to another security firm.  Security companies may choose to outsource services for several reasons, such as:

Security and Investigation Licensing Requirements

Regulatory and licensing requirements vary from state to state in the U.S., and countries maintain their own specific laws which govern security and investigation services.  For example, Security Company A may have a national account with a large corporation to provide armed guarding services, but only hold licensing in certain states; in this case, Security Company A would be obligated to subcontract those armed guarding services to a number of other security companies that possess the appropriate state licensing.

Competitive Advantage in Delivering Specific Security Services

Sometimes companies subcontract private security services because they have an implementing partner that has particular expertise in the requested service area, and sometimes a company will secure a contract that is somewhat beyond the scope of their current capabilities.  For example, Security Company A may provide Threat and Security Vulnerability Assessments as an ancillary service, but decide to subcontract to a vendor who specializes in performing these services.  For international and domestic security and investigation services alike, local knowledge will provide a competitive advantage and factor into the decision to subcontract with a local security vendor.

Intermediaries by Design or by Demand

There are a number of private security companies and consultants who serve as security service intermediaries.  In this case, access between clients and security implementers is facilitated through personal and professional relationships.  Some intermediaries assume this role by design – that is, their business system is framed around acting as an intermediary from the start.  In other cases, as some security companies grow, they adopt this business practice because of their favorable position in the market, or because they begin to experience personnel capacity issues at the level of implementation.

Private Security Services that are Frequently Subcontracted

Subcontracting is incredibly beneficial for security companies and their clients, and it is essential for the industry to work the way that it does.  To summarize that point, a corporation, family office, or non-governmental organization (NGO) can pick up the phone, call their duty of care provider, and receive services in both Pittsburgh and Port-au-Prince because that provider subcontracts with other security companies.  Here are a few common types of security subcontracts:

• Armed executive protection.
• Security for large corporate events.
• Workplace violence and hostile termination services.
• Personnel recovery and repatriation.
• Threat and security vulnerability assessments.
• Intelligence and investigation services.
• Specialized training services.
• Armed and unarmed guarding.

The Risks of Private Security Subcontracting

While subcontracting is beneficial and, indeed, essential for the security industry, there are risks to both the client and the potential layers of companies involved in the process.  On the company side, even when there are legal agreements in place to ensure compliance, there is no guarantee that the subcontractor will not also subcontract the security services – this multi-layered service approach can reduce implementation efficacy because of quality control issues and reduced bill rates at each subcontract level.  Similar risks exist on the client side – at the level of implementation, whether it be an executive protection agent or armed guard, market factors will have an ultimate say in the quality of service that is being provided. 

In some parts of the world, the risks of subcontracting private security services extend beyond the traditional conception of pay rates and efficacy.  In places such as Ecuador, criminal actors have created their own private security companies to gain influence by subverting municipal security councils, and they have also leveraged legal frameworks around weapons importation to build arsenals.  In many parts of Africa, the distinction between protection-focused and military-style private security companies can be difficult to discern.  In both cases, subcontracting with these types of entities, even for entirely benign and legitimate purposes, can help enable the overall destabilization of precarious political environments.

Subcontracting in Private Security is Necessary, but There are Considerable Risks 

Security companies subcontract with other companies for a number of reasons, to include (1) in order to comply with security and investigation licensing requirements, (2) because another entity possesses a competitive advantage for specific security services, and (3) because that company has adopted a security service intermediary model.  Security services that are commonly subcontracted range from executive protection to surveillance and investigations, and there can be multiple layers of security subcontractors for the provision of relatively simple services.  While this approach is beneficial and entirely necessary, there are also many risks.  Rate reductions at each subcontract level and reduced quality control can mean that the final security services are sub-par, and, in some parts of the world, subcontracting private security companies can even have a destabilizing effect on the political environment.  When evaluating a private security company to partner with, clients should verify that their prospective service provider understands how the private security industry works so they can mitigate these risks.