Security Management at the National Institute of Management: To Outsource or Insource? (A)

Abstract

The Dean, Ms. Swati Bhargava of Narmada Institute of Management (NIM), a reputed state funded higher educational institution suggested in April 2014 to the Administrative Officer (AO) Col. S R Rao, VSM (Retd) to conduct a comprehensive review of the security contracts (manpower agency) of NIM based on their experience with four different agencies in the last four years. She brought to the attention of the AO, a number of administrative and operational issues that were plaguing the manpower agency contract execution at NIM, and suggested to the AO to find an innovative and effective arrangement. The central issue in the case is to decide whether to insource or outsource security contract.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Appendix I: Salient features of the contract between NIM and a representative agency

  • The validity of the contract duration is explicitly mentioned in terms of beginning and end date.
  • The agency shall provide security service for the entire campus of 193.4 acres. Security of property, men and material, prevention of sabotage, access control, movement of personnel (employees, visitors, vendors, service providers, contract labour), materials movement (incoming and outgoing) are all the responsibility of the contracted agency. In addition, visitor gate pass, labour entry/exit and vehicle pass should be administered.
  • The agency would deposit 10% of the contract amount with NIM as bank guarantee.
  • The service provider shall prevent entry of unauthorised persons or vehicles or objects into the premises of NIM.
  • The service provider should provide at his own cost the guards on duty, appropriate neat and clean uniform and equipment, such as full shirt, belt, coat, cap, shoes, socks, name badge, identity cards, lathi (stick), licensed gun, whistle and winter clothes.
  • For all legal and other purposes, the service provider shall be the employer of the security guards. It is the sole responsibility and liability of the service provider to carry out the obligations arising out of various labour legislations applicable from time to time. The security provider should ensure that it deploys a stipulated percentage of ex-servicemen as security staff.
  • The service provider shall assume complete liability for whatsoever claims arise out of this engagement. NIM holds a total indemnity against all such claims.
  • Any deviation in the execution of the security contract with reference to specifications in the terms and conditions of the agreement would attract a penalty.
  • Termination of the agreement can be initiated by either party by giving a one month notice.
  • The service provider shall furnish (a) the names and addresses of all ex-servicemen engaged by it at NIM, (b) ESI and PF contribution, payment challans of all security staff on a monthly basis to NIM.

Appendix II: A proposal for providing security cover to the NIM campus 1

Background
  • NIM, through an open tendering process, had been engaging agencies for providing security cover to the campus. The lowest bidder was awarded the contract subject to fulfilling the terms and conditions laid down in the tender document.
  • To provide round-the-clock security (on a three shift basis), 130 security guard needed to be deployed on the campus. The monthly payment to the agency for this was approximately INR 13.50 lakhs including all obligations.
  • NIM had directly engaged the services of eight security Supervisors, and an Advisor (Security) to supplement the manpower deployment by the agency. The wage bill on account of this engagement was INR 7 lakhs per month.
  • Based on the previous experience with various security agencies and the challenges in executing the security agency contract, it was proposed that the current system of contracting out the service to an outside agency may be dispensed with.
  • Instead, with the available nucleus of an Advisor (Security) and the Security Supervisors directly hired by NIM, the overall security responsibility may be administrated by NIM. This would require recruiting qualified security guards directly by NIM based on market wages.
Manpower Requirement

The total security guards required at present was 152. This number would increase to 200 in the next two years when the new hostels, visiting faculty accommodation, administrative building and faculty accommodation which were under construction became operational.

Security Supervisors: Total requirement was 12. Eight were available. Four more were to be hired.

Security Guards and Ex-Servicemen Guards: 128 were required. As many ex-servicemen as available were to be hired. Approximately 60 ex-servicemen guards could be recruited through the Army Welfare Placement Organization (AWPO). The balance would have to be recruited from locally available manpower.

Lady Guards: 12 were required; they were to be hired locally.

Material Requirements
  • Materials such as 30 walkie-talkies, 2 hand held metal detectors, 2 under carriage mirrors, 4 pedal bicycles, 1 motor bike, 20 rechargeable torches, 30 helmets, 40 lathis, 20 rain coats, 10 hand held fibre shields needed to be purchased.
  • An annual budget towards providing 3 sets of uniform, 2 pairs of shoes and 2 pullovers for winter to each person, needed to be provisioned.
Financial implications
  • One-time Expenditure – INR 10 lakhs (Essential Store – INR 6 lakhs, Miscellaneous/Contingency – INR 4 lakhs)
  • Recurring Annual Expenditure – INR 3.2 crores (Wages -INR 3 crores, Uniform – INR 12 lakhs, Maintenance Store – INR 2 lakhs, Miscellaneous/Contingency – INR 6 lakhs)

Table 1: Security Services Organisational Structure at NIM
Figure

Source: Created by the case writers

Note

1. Prepared by AO for consideration and approval by Board of Governors of NIM

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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