Monday, February 20, 2012

Company Paid Millions of Non-Existent Money to Protect Buildings

Now this is a curious expenditure for a government that is talking about austerity -
...Vendtech-SGI, LLC, of McLean, VA, landed a contract worth more than $311.5 million to provide about 600 guards to protect approximately 200 different posts at more than 130 separate buildings in the states of Iowa, Kansas, Missouri and Nebraska, according to a DHS notice posted online on Feb. 14.

The same day, another firm, Master Security Company, LLC, of Hunt Valley, MD, was awarded a $43.1 million small business set-aside contract by the same DHS office to protect two facilities in Suitland, MD, and one each in Seabrook and Camp Springs, MD.

Both contracts were issued by the Federal Protective Service.

The award to Vendtech envisions approximately 1,000,000 hours of basic service, 100,000 hours of “temporary additional service” and 40,000 hours of emergency security services, says the DHS award notice.

The agency intended to award a one-year base contract, with four one-year options to Vendtech.

“The required class of security guard services is Guard II, and the Government requires a mix of fixed and roving posts assignments, providing interior and exterior coverage, with some posts requiring 24/7 coverage,” explains the DHS notice.
The Real Effect
I'll capitulate upfront that I know little of the details of such a posting, but I find the numbers to be absolutely captivating. Let's look at the math on this for a moment:

$311.5 million / 600 guards = $519,166.67 per guard. Let's be generous and say that each guard make $50 an hour, given a standard 40 hour workweek,  that equates to a salary of $104,000 a year. For a security guard. Is this Robocop? But let's go even further! Subtract your cost of $104,000 from your revenue of $519,166.67 and you have a profit of $415,166.67 or 80% of your revenue!

If we wanted to look at this just in hours, the cost comes out to $273.25 per hour of provided coverage!!!.

Now obviously this is all back of the envelope type stuff that doesn't take into account things such as overhead, pensions, things like that. But I am willing to venture up front that these guards are NOT making $50 and hour and the real cost is something more like $35 - $40. Roll the numbers around in your head for a while. Does this seem reasonable to you that a company should be making 500 - 800% markup on guarding buildings?

Personally to me, it's not even a question of if it should be making this kind of dough on our dime, but why, we the citizens, permit this? Perhaps an even more relevant question is - What is the government expecting that they are committing a half billion dollars to guarding buildings?

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