Let’s Get Stimulus Right This Time

When I sat down in late October to write this article, I knew it would be read after the election. Regardless of the outcome, I wanted to express my strong belief that, with regard to the security industry, “Yes, we did build it!” and how and why that’s relevant today.

That now famous phrase pertains to the security industry in how individual entrepreneurs and family owned businesses formed during the 1950s, ’60s, ’70s and ’80s to create an industry of products and services to meet the increasing demand for solutions to enhance the effectiveness and efficiency of human resources. This occurred during a time with far less government regulation, thereby enabling small businesses to be formed and grow, armed with only a few thousand dollars of seed money, a “can-do work ethic” and (most importantly) a dedication to earn the respect and trust of their customers.

The net result of the rapid increase in government programs and regulation on small businesses during the past 20 years — coupled with the specification of electronic security solutions as “core requirement” for most new commercial and residential construction, and the convergence of many of those systems with IT and cyber — has led to the prominence of big companies within our industry. Inevitable or not, that’s the new reality.

Even though our industry is now dominated by companies in excess of $100 million in annual revenues, we still see that personal relationships as a “trusted advisor” are critical to success. This should not come as a surprise to anyone as security is about reduction in risk. That is why the phrase “people do business with people they trust” is more applicable to our industry than many others, and also why the culture of the early entrepreneurs in our industry is as essential today as it was 50 years ago.

As stated in my column here last February, there are many recent examples of large, very expensive security projects that failed to meet the buyer’s expectations. Many (probably most) were competed and awarded as construction projects that placed insufficient value on past performance and references to illustrate a proven track record of commitment to success. The principles of the early entrepreneurs were not materially valued in the award of most of these projects and the results reflect it.

The most effective way of ensuring that those principles are valued in the procurement process is by not separating contracts for equipment, installation and maintenance of a system. The benefits of following that discipline of procuring combined contracts for equipment, installation and maintenance is maximum protection from negative logistical and economic consequences of inexperience, while still achieving “best value” through competition.  Separate procurements for equipment, installation and maintenance may appear to provide a path to savings, but the capital savings are usually exceeded by increased operating expenses. Increasing the functional success of security system deployments at reduced costs requires us to harness the wealth of experience and capabilities in our industry through a process driven by the insistence on results.

With the East Coast reeling from Hurricane Sandy, we should all recognize the opportunity to harden our infrastructure in ways to ensure effective results. Calls by politicians to “not just rebuild but rebuild better” will only be realized if we target spending for functional results, including more buried utilities, redundancy and effective security systems. That will require government capital and incentives, and clear, rational, attainable standards to enable the private sector to effectively respond. There also needs to be consequences for failure to comply. CFATS stands as an example that unfunded mandates without teeth create more bureaucracy than results.           

Jim Henry is Executive Vice President of KRATOS|HBE.

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