The Race to the Bottom on Security Contract Pricing

Price has always been a factor in the private security industry. Security companies compete for contracts, clients compare quotations and procurement teams are expected to demonstrate value for money. Competition itself is not the problem. The difficulty arises when the contract price becomes the overriding consideration, while the resources required to deliver the service receive less attention.

Across parts of the security sector, the pressure to submit competitive prices creates a difficult commercial environment. Companies are expected to provide licensed personnel, manage staffing, cover absences, maintain supervision and meet contractual requirements, while competing against providers offering increasingly tight rates.

The result can be a gap between what a security contract promises and what its budget realistically supports.

The cost of providing security

Manned guarding is a labour-intensive service. The hourly rate charged to a client has to account for considerably more than the officer’s basic pay.

Employers must consider wages, holiday entitlement, employer National Insurance contributions, pension contributions and other employment costs. There are also costs associated with recruitment, screening, training, uniforms, equipment, insurance, supervision and contract management.

The SIA’s research into recruitment and retention in the security guarding sector has previously identified increases in several of these costs, including vetting, uniforms, training, insurance, equipment and recruitment.

The National Living Wage for workers aged 21 and over increased to £12.71 per hour on 1 April 2026. This is the statutory minimum for eligible workers, not a recommended charge-out rate for a security officer. The employer’s total cost of providing that officer is higher once employment costs and the wider requirements of the contract are included.

A contract priced without properly accounting for these obligations can leave the provider with very little room to manage the service effectively.

When price outweighs quality

Research published by the International Security Ligue in 2026 examined nearly 40,000 public procurement tender records across Europe. Its findings reported that price carried an average weighting of 85% in guarding service procurement since 2018.

The research also found that 77% of the tenders examined did not include any of eight identified core quality indicators.

These figures relate to the European procurement research and should not be interpreted as UK-only statistics. However, they raise an important question for the wider security industry: how much consideration is being given to the quality of a security service when contracts are evaluated?

A low quotation may be commercially attractive, but the headline price does not necessarily explain how the provider intends to resource the contract. The proposed staffing model, supervision arrangements, relief cover, training and management support all affect what is ultimately delivered.

If these elements are not properly examined during procurement, the client may have limited visibility of the differences between competing proposals.

The pressure on security companies

For security providers, winning a contract at an unsustainable price can create problems from the outset.

The company still has to meet the agreed service requirements, pay its employees, manage staffing and respond to issues arising during delivery. If the original price leaves insufficient margin, there may be limited flexibility when costs increase or unexpected operational demands arise.

This can place pressure on staffing arrangements, management resources and the ability to maintain consistent service delivery.

The commercial consequences will vary between businesses and contracts. A larger provider may have the resources to absorb costs across a wider operation, while a smaller company may have less capacity to accommodate an underpriced contract. Neither size guarantees quality, but the financial structure of a contract matters.

There is also a risk in pursuing growth through contracts that generate substantial turnover but leave little financial return. Revenue alone does not demonstrate that a contract is commercially viable.

What should clients be comparing?

The responsibility does not rest solely with security companies. Organisations purchasing security services also have a role in determining how contracts are evaluated.

A meaningful comparison should look beyond the hourly rate. Buyers should understand the proposed staffing arrangements, officer pay, supervision, relief provision, training, screening and management structure. They should also establish how the provider intends to maintain the agreed service when employees are absent, demand changes or operational problems arise.

Public procurement rules already allow contracting authorities to assess tenders on more than price. Under the Procurement Act 2023, public contracts are awarded on the basis of the most advantageous tender. Government guidance makes clear that this does not mean contracts must be awarded to the lowest-priced bidder.

The legislation also allows a contracting authority to disregard a tender where it considers the price abnormally low for the performance of the contract.

The framework therefore provides scope to consider quality and delivery alongside cost. The challenge is ensuring that the evaluation process gives those factors meaningful consideration.

The long-term effect on the industry

The private security industry depends on businesses being able to deliver reliable services and employ people under conditions that meet their legal obligations. A procurement approach that places excessive emphasis on reducing the contract price risks overlooking the resources needed to achieve those outcomes.

That does not mean the most expensive provider will necessarily deliver the best service. Nor does it mean that a lower-priced quotation is automatically unrealistic. Efficient management, effective deployment and appropriate use of technology can all influence the cost of providing security.

The important distinction is between genuine efficiency and reducing the price without a credible plan for delivering the required service.

As the industry moves into 2027, with further regulatory developments and increased attention on business standards, the relationship between contract price and service quality deserves closer examination.

Security is often purchased as a contracted service, but its performance has consequences beyond the commercial agreement. The people deployed, the management supporting them and the standards maintained on site all contribute to the service a client actually receives.

If procurement decisions focus primarily on the lowest figure, the industry should not be surprised when the conversation about quality becomes increasingly difficult.