|
During an L.P.C., Ltd. consulting operation involving qualifying security bidders for a Michigan client, it was found that one national company had neglected to figure Michigan's bizarre Single Business Tax into its formula and that if awarded the contract, it would operate the 2,000 hour a week account at a loss. A problem that can result in such a situation is the lack of enthusiasm by local management. Often the wages, bonuses or profit sharing these individuals receive is tied to the profits of their individual offices. Being required to accept an account they know will be detrimental to their personal income often irrationally results in a resentment against the client. Some national company executives, of course, are pleased when local management points out flaws in their calculations. Surprisingly others are pompous enough to ignore local input and stick to their flawed formulas, showing as much interest in the bottom line as a government bureaucrat.
Some security firms may entertain a cost plus agreement. An 8% to 11% profit would be often be reasonable in a situation such as this. There can be plusses and minuses with these programs. The primary downside is the lack of incentive for the contractor to remain cost conscious, since increased costs will result in increased profit.
Since cash flow problems exist in all service oriented businesses, some cash heavy client companies may find it advantageous to negotiate a discount based on payment of invoices upon presentation--or even weekly or monthly prepayment based on estimates. In many cases this can prove beneficial to all parties.
Most security firms charge a premium rate--usually time and a half for hours actually worked--on six to eight holidays. A premium for last minute temporary increases in security or other unusual changes in coverage not caused by the contract service is reasonable and should be expected by the client. Usually increased temporary service requested with at least 48 hours notice should be billed at the regular rate. It often makes sense for the client to keep a close eye on these situations if they occur frequently. In one case a small business called for increased service on weekends every Friday for over a year, paying a 50% premium for this service each week. In that case, the contract service recommended that the company just go ahead and schedule the service for every weekend, but retain the option to cancel it at the last minute. The client, inexplicably, chose to decline this cost saving offer.
It should be clearly understood that the client company should never be responsible for paying premium or overtime rates due to the contract service's officer's overtime caused by sickness, vacations, or deficiencies in the contractor's scheduling.
______________________________
|
|
