Termination of contracts with private security providers and transitioning security delivery

A company may choose to terminate its contract with a private security provider for a variety of reasons, including cost, change in requirements or a failure of the security provider to fulfil its contractual obligations.

When a contracting company terminates a private security provider contract with a view to replacing it with another private security provider, both the termination of the existing contract and the transition to new security arrangements should be managed proactively. Failure to do so may expose the company and those associated with its operations (e.g. personnel, contractors, suppliers and/or other public or private security providers) to multiple risks.

Companies should consider contract termination from two angles: legal and operational. As with any contractual arrangement, a company should seek advice on its legal obligations relating to the termination of the private security provider contract. It is beyond the scope of this section to discuss legal issues (which, by nature, are jurisdiction- and contract-specific). Instead, the focus is on the operational issues relating to discontinuing a private security provider contract.

Among the more pertinent operational issues for a company to consider are:

• Licences: Licenses are required for a variety of items and services related to private security, including: the use, transport and on-site storage of weapons; specific firearms; and the delivery of private security services at the operating site. Such licences may be granted by both local and national authorities. The company should conduct a review to establish which licences and permits have been granted, who ‘owns’ them (for instance, whether weapons licensed for use on the site are licensed to specific individuals or licensed for general use by the private security provider), as well as if and how they can be transferred. It is possible that the exiting private security provider has secured licences in relation to the property unbeknownst to the company. In this instance, the company should contact the relevant authorities, as well as the exiting private security provider, to complete the inventory.
• Equipment: Apart from weapons, a private security provider will make use of other equipment and materials. It is important for the company to determine who owns the equipment and, where appropriate, to arrange for its transfer.
• Employees/consultants: In some cases, a company will be responsible for individual employees or contractors of the private security provider beyond the termination of the contract. Such responsibilities may include obligations to continue employment, pay for healthcare or provide insurance.
• Records: A company may have access to the private security provider’s records (e.g. personnel files, incident logs). Consideration should be given to retaining or transferring copies of this information, as appropriate.
• Systems: In many circumstances, the exiting private security provider will have access to the company’s operational systems (including information technology). Consideration should be given to closing this access and safeguarding confidential and sensitive data.
• Complaints: Companies should consider whether there are any outstanding complaints against the private security provider or its operatives. Priority should be given to managing these complaints.
• Public security: Private security providers typically play a role in managing relationships with police and military units. Companies should determine whether there is any memorandum of understanding in place with public security forces and, if so, whether it names the private security provider. Companies should also establish which individuals employed by the private security provider are responsible for these relationships with public security officials and, where necessary, how to transfer and institutionalise these relationships.
• Sub-contractors: Private security providers often sub-contract to other private security providers and outsource support functions such as vehicle maintenance. Companies should establish what sub-contractors exist, how they will be affected, which party is responsible for them and how any transfer of service delivery will be managed.
• Knowledge transfer: The outgoing private security provider is likely to have developed significant knowledge of relevant security issues surrounding company operations. Companies and their new private security providers should attempt to gain intelligence from the outgoing private security provider.

It is always prudent to consider issues of termination as part of the negotiation and drafting of the contract. The above are a sample of some of the practical issues that a company must consider prior to terminating a contract with a private security provider. Every situation is unique and each company must unwind all aspects of its existing contractual arrangements, effectively deconstructing the contract to identify what rights and responsibilities a company has to its private security provider and vice versa.

Of particular importance is the issue of coordination. It is critical that processes are coordinated in order to ensure that there is no gap in the provision of security services. The termination of a private security provider contract is not just a matter for a company’s security and legal departments; it also has an impact on other departments, including operations, human resources and communications.

Private security providers are often a source of significant local employment, and their operatives are the ‘face’ of a company—patrolling the perimeter of operations and interacting with external parties on a regular basis. Therefore, changing a private security provider will inevitably have an impact on a wide range of stakeholders, including local communities. It is important for a company to be proactive in the management of its community relations and, to the best extent possible, engage communities in terms of the termination and transition of the private security provider contract.

Where the private security provider itself instigates the termination of the contract, the company should conduct its own assessment of the reasons for such a termination. The company must be particularly vigilant to ensure that the private security provider has not chosen to terminate its contract as a result of material threats, abuses or other issues at the operating site and, moreover, whether it has not adequately informed the company of these concerns and issues.

The immediate termination of a private security provider contract may put a company and its operators at significant risk if it is not adequately managed. For this reason, it is advisable to conduct contingency planning for such an eventuality, taking into account the issues identified above.

In sum, the effective termination of a private security provider contract and subsequent management of the transfer to a new contractor will require coordination between departments and stakeholders. To protect a company from potential risks, these processes, in conjunction with the abovementioned operational issues, must be proactively managed.