SIC 7381
DETECTIVE, GUARD, AND ARMORED CAR SERVICES



This category covers establishments primarily engaged in providing detective, guard, and armored car services. Establishments primarily engaged in monitoring and maintaining security systems devices, such as burglar and fire alarms, are classified in SIC 7382: Security Systems Services.

NAICS Code(s)

561611 (Investigation Services)

561612 (Security Guards and Patrol Services)

561613 (Armored Car Services)

Industry Snapshot

The security and investigations industry is a $100 billion business worldwide that has been in existence for at least 125 years. In the United States, there are approximately 11,000 businesses that make up the $11 billion contract security industry. After years of relative obscurity, this industry was squarely in the spotlight after the events of September 11, 2001, bringing not just added attention but financing as well. The newly formed Office of Homeland Security is planning on bringing $37.7 billion to this sector, while insurance companies are forming standards for corporate security that must be adhered to in order to qualify for coverage. One estimate puts revenue expansion in this field at nearly 9 percent a year, and one earnings projection puts revenue for the security industry in 2004 at $158 billion worldwide. Noting the changing demand in the United States, more companies within this industry were shifting their focus in the early 2000s to terrorism and homeland security.

Organizations and individuals within the security industry provide products and services, including video-surveillance services and equipment, security guard services, armored car services, corporate investigations, biometric identification and devices, and concertina wire.

The industry has benefited from newer technology, including the Internet, but remains relatively primitive in terms of marketing its products and services, which are usually handled via word of mouth, direct mail, e-mail, print advertising, and industry conferences. Indeed, e-mail has become one of the most important new advertising vehicles and the ongoing focus of many companies.

Organization and Structure

Detective agencies provide investigative services. The area of investigation can vary widely, from uncovering corporate espionage to uncovering an unsavory episode in the background of a courtroom witness for the purpose of discrediting that witness. These enterprises range in size from small independent agencies to larger corporate businesses.

Business, industry, and government agencies all use guard services. Uniformed guards are hired to protect client property against theft, trespassing, vandalism, or to protect clients from physical harm. Some companies that provide guard services also provide security systems services (see SIC 7382: Security Systems Services ). There are more than twice as many security guards in the United States as police officers.

Approximately 150 armored car services exist in the United States, some of which are subsidiaries of large corporations and others that are independently operated and may belong to the Independent Armored Car Operators Association. In addition to providing armed transport of cash between banking locations (for example, between the Federal Reserve Bank and bank branches), armored car companies also have what they call commercial accounts. These include food stores, restaurants, fast-food chains, department stores, and, potentially, any business that needs to move large sums of cash off site to a bank. Many armored car companies also have a money room, where money is stored temporarily and where services such as auditing deposits and processing orders for change are performed for client banks. In some cases, the cash may even move from a retailer to a money room, and then straight to the Federal Reserve, bypassing the retailer's bank altogether.

The money-courier industry is largely unregulated. There are no federal regulations covering who may transport money or how. Although the top companies use armored vehicles and try to screen out employees with criminal records, other companies may use ordinary minivans and do little to screen employees. Law enforcement officials, as well as officials within the industry, have charged that the lack of a government regulated licensing process, one which would require a thorough background check of potential employees, has bred an industry in which robberies are all too frequently "inside jobs."

U.S. manufacturers, in an attempt to prevent theft and counterfeiting of their patented products and ideas, are turning to private investigation firms for undercover operations. In one case, a female private detective was hired to apprehend those responsible for the theft from two major U.S. companies of proprietary plans for industrial compressors. A spokesman for the American Society for Industrial Security (ASIS) estimated that theft of proprietary information costs U.S. and Canadian firms $20 billion each year. A survey of ASIS members revealed that theft of manufacturing process technology is on the rise. Another area of concern to U.S. industry is protection of pharmaceutical trade secrets.

An emerging field for private detective work is the investigation of environmental crime. This might involve tracing illegal industrial sewage discharge to the guilty party or conducting research to determine which companies had in the past disposed of toxic waste at a particular site. Another unfortunate field of opportunity for detective work is urban terrorism. This was the case in 1991 when Laidlaw Transit, in Seattle, Washington, received three letters warning that school buses operated by Laidlaw would be blown up on Friday the thirteenth. (Private investigators, working with the Seattle police, determined the threat to be a hoax.) Other developing areas include computer and communications crime detection and forensic accounting, in which a firm's books are examined for instances of in-house fraud.

In 1997, detective, armored guard, and armored car services was a $14.5 billion industry. It remained an industry that enjoyed growth in the recent past; industry sales in the early 1990s were seven times what they were in 1956. Twenty years ago there was concern within the industry that the use of credit cards would eliminate the need for armored car services. These fears have yet to become a reality, though, and credit card companies have themselves become major users of armored car services. Transportation of food stamps has provided another growth area for the armored transport industry, as has the use of ATM machines. However, there are those who believe that all cash transactions eventually should be replaced by a federally operated electronic money system, which would eliminate many criminal activities. If such a system were to be implemented in the future, armored car companies could expect a drastic decline in demand for their services.

The industry may be approaching maturity, however; as banks consolidate and close branches, demand for armored car services is lessened. It has been speculated by Jim L. Dunbar, chief executive of Federal Armored Express, that in the future there will be increased emphasis on money-room services as a source of revenue for armored car companies. The industry has also attracted new entrants who are competing based on price. Some companies are able to offer price reductions by cutting back on such security precautions as well-fortified vehicles. And if the courier is insured to protect the client against loss or theft, the client may be persuaded by the cost savings offered to forego optimal security.

The demand for security guards, on the other hand, enjoyed steady, rapid growth through the 1990s. During the 1990s, the industry experienced average annual growth of 8 percent. Fueled by public perceptions of increasing crime, a growing schism between the haves and have-nots, the rise of gated communities, and an apparent willingness on the part of federal, state, and municipal authorities to leave public security to private firms, employment opportunities in the security guard industry were expected to grow rapidly in the coming decade.

The climate of fear that proved so hospitable to the security guard sector was heightened by the terrorist bombing in Oklahoma City in 1995. On the day after the bombing, the stock price of Wackenhut Corporation, America's third largest provider of security guards, jumped 20 percent. Though the panic was short-lived, demand for security guards continued to grow.

Guard companies, on the other hand, struggled during this period, facing what one analyst described as unacceptably high guard contract turnover. The reason for this was the conservatism and traditionalism of guard company management. Instead of assessing and reacting to changing levels in the customers' risk profile, most companies made operational changes only in response to customer criticism. By the mid-1990s, security firms began to take tentative steps to enhance the effectiveness, scope, and productivity of security officers with information-related technology. These technologies made it possible for a guard company to upgrade its customer service by tracking client asset changes and making the corresponding changes in guard services automatically. Online central information processing allowed direct management of the guard force, while three-dimensional modeling programs and high-speed portable equipment made it possible to create customized security plans on a daily basis rather than working from specifications that changed infrequently, if at all.

Current Conditions

Already one of the fastest growing sectors in the United States, the demand for security on all levels only continued to grow after the terrorist attacks of September 11, 2001. Spurred largely by the events of 9/11, growth came from a large number of businesses within the United States beefing up security. The trend toward outsourcing security services could be seen in organizations such as commercial offices, warehouses, and correctional facilities. This contributed to all sectors within this industry, showing healthy growth in 2001. Demand for private security rose 6.8 percent per year since 1996, reaching $33.55 billion in 2001, with guarding services taking the biggest share within that market at 35 percent in 2001. Guarding, a $10 billion business in 1996, grew to $11.7 billion in 2001, a 3.1 percent annual growth rate. Alarm monitoring brought in almost $11.1 billion in 2001, up from $6.9 billion in 1996, reflecting a 9.9 percent annual growth. Private investigations comprised the next largest sector in the private security industry, with $2.1 billion in 2001, up from nearly $2 billion in 1996. Private correctional facilities management showed the largest annual growth rate from 1996 to 2001, up 24.2 percent to reach approximately $2 billion in 2001. Armored transport stood at $2.1 billion in 2001; systems integration, $1.5 billion; security consulting, $910 million; and preemployment screening and other services, $2.3 billion.

Airport security was one sector that was the focus of much scrutiny and publicity in the months following 9/11. Employee screening and hiring processes became a major concern. Increased passenger screening after 9/11 increased costs to the U.S. government by nearly fourfold in the form of additional screening personnel, transition costs from private screeners to a federal environment, and increased wages and benefits. The Transportation Security Administration estimated it would pay some $211 million per month in passenger screening costs in 2002, up from the $55 million per month the airlines paid for the same services in 2000. Airport security was also on the verge of getting a high-tech upgrade as a result of terrorism. A number of intelligent security systems were being developed and proposed for use in passenger screening in airports nationwide.

Another post-9/11 trend in security was the shift to better trained personnel and, accordingly, higher wages for those better qualified. Security firms were replacing entry-level guards with former military or police personnel, while sometimes doubling pay in hopes of better services and improved profit margins.

Growth within this industry was expected to continue in the next few years, with a predicted 29 percent annual growth rate generating an estimated $15 billion by 2004. There were concerns that with such high demand, the supply of qualified personnel—required in some cases to carry firearms—was somewhat limited. Other problems the industry must address include the lack of uniform training requirements, standardized background checks, and government negligence. Indeed, the lack of regulations in some states currently allow convicted felons to become security guards and private detectives.

Research and Technology

Technology is an important part of the security industry, with new products and services being developed as new technologies arise. More advanced products available to the industry in the early 2000s included audio listening devices and electronic countersurveillance devices, robot guards, "intelligent" fences, handheld guard tour scanners, explosion detection devices, and electronic key management systems.

Industry Leaders

Borg-Warner Corp. (BWC) was formed in 1928 through the merger of four firms engaged in the manufacture of auto parts. Throughout subsequent years, this Chicago-based firm diversified into other areas such as chemicals, industrial equipment, air conditioning, and with the purchase of Baker Industries in 1978, protective services. After being bought out by Merrill Lynch Capital Partners in 1987, BWC divested itself of all operations except for the automotive and protective services businesses. Principal subsidiaries in the protective services group, in addition to Baker Industries, which provided a wide range of protective services, included Wells Fargo Guard Services, providing detective and guard services to institutional and residential clients; Burns International Security Services, providing security guard and investigative services to industrial and institutional clients throughout the United States, Canada, the United Kingdom, and Columbia; and Wells Fargo Armored Service Corp., providing armored car service as well as ATM servicing and cash services.

Burns underwent a restructuring that resulted in a change of name to Burns International Services Corporation, which, in turn, was the result of combining Wells Fargo Guard Services and Burns International Security Services.

The country's first detective agency was established in 1850 by Allan Pinkerton, an immigrant from Scotland. Pinkerton's had clients in the United States, Canada, Mexico, and the United Kingdom. In 1999, about 85 percent of revenues came from security guard services. Pinkerton's guards were used by hospitals, governmental units, special events promoters, and other industrial, commercial, financial, and retail customers to provide security, access control, traffic control, theft prevention, and related services. Pinkerton's also offered design and consulting services, conducting on-site analyses and making recommendations to design or improve systems. Pinkerton's enjoyed strong name recognition; capitalizing on this, Sun Coast Merchandise Corp. licensed the Pinkerton's name in 1992 to apply to a line of emergency lighting—Pinkerton Home Security & Safety Products.

By 2000, both Burns International and Pinkerton's were purchased by Securitas, a Swedish firm that is Europe's largest security company, which merged the two U.S. security companies. In July 2003, Pinkerton's and Burns International officially become Securitas Security Services USA. Securitas USA is now the largest security company in the United States.

The Pittston Company was created by the Alleghany Corporation (which operated the Erie Railroad and Pennsylvania Coal Company) in 1930 as a means of dodging antitrust regulations in the U.S. coal market. (Pittston leased mines from the Erie Railroad and sold the coal through its own distributors.) Alleghany again faced the antitrust issue when it purchased the New York Central Railroad in 1954. This time, the solution for Alleghany was to divest itself of Pittston, leaving the latter an independent company. In 1956, Pittston, which had already diversified into trucking and warehousing, diversified further with its purchase of a 22 percent interest in the Chicago-based security transportation company, Brink's, Inc. Brink's was founded in Chicago in 1859 as a delivery company and began making payroll deliveries in 1891. By 1956, it was the world's largest company providing armored car services. In 1962, Pittston completed its purchase of Brink's, but in 1976 Alleghany's legacy of antitrust confrontation fell upon Pittston: a federal grand jury indicted Brink's with antitrust violations. The charges cost the armored car company millions in settlements, the last of which was $2.7 million paid in 1980 to 12 Federal Reserve banks. In spite of this, Brink's grew during the 1980s even as Pittston's older oil and ware-housing operations were sold off. In 1998, the Pittston Brink's Group employed 41,800 people and had sales of approximately $1.45 billion. Pittston changed its name to The Brink's Company in 2003 and had 2002 sales of $3.77 billion and employed 50,000 people.

The Wackenhut Corporation, founded in 1954 by ex-F.B.I. agent George R. Wackenhut, is another leading U.S.-based security company. It provides a broad range of security services at home and abroad, including executive protection and security for embassies and international airlines. The company's primary business is in uniformed security guard services, but Wackenhut is also involved in the business of private investigations, as well as activities under other SIC classifications such as correctional facilities management, classified in SIC 8744: Facilities Support Management Services and security systems implementation, classified in SIC 7382: Security Systems Services. In July of 1993, Wackenhut acquired United Kingdom-based International Maritime Services, Ltd., a company that provided security systems to the maritime industry. Wackenhut had sales of approximately $2.8 billion in 2002, a 12 percent increase from 2001, and employed 57,000 people.

Another leading firm providing investigative services is Kroll Associates. J. Kroll Associates was formed in the early 1970s by Jules Kroll to offer companies a service that would audit their purchasing process to prevent devious practices by the company's employees, such as receiving kickbacks or charging payments to fictitious suppliers. Kroll's services have expanded considerably since then. During the 1980s, Kroll's company provided investigative services to Wall Street financial institutions, such as tracing money through foreign banks, analyzing the credit of a principal in a takeover deal, determining the true financial value of a targeted acquisition, and detecting illegal insider trading. Kroll also provided services to U.S. and foreign governments. For example, Kroll assisted in the Federal Deposit Insurance Corporation's investigation of the savings and loan scandal and was asked in 1992 by the Republic of Russia to locate money believed to have been taken out of the country by directors of state-run enterprises who feared the advent of privatization.

In 1997, J. Kroll Associates merged with another firm to become The Kroll-O'Gara Company. The new venture expanded the company's capabilities; in addition to Kroll's range of services, the new firm conducts personnel background checks and provides both (security) driver and security training. A Kroll-O'Gara subsidiary modifies vehicles for private, corporate, military, and government clients. Another subsidiary, Laboratory Specialists of America, provided employee drug-testing. By 2003, the company became known simply as Kroll and posted 2002 sales of $289.2 million with 2,359 employees.

Workforce

As of 2001, there were an estimated one million people employed in the private security industry. Anyone can hang out a sign and claim to be a detective, and there appears to be no single career route that one follows to become a private eye, although a prior career in law enforcement is common. Anthony Pellicano, who has made a name for himself by providing detective services to Hollywood stars, is a high school dropout and former bill collector for Spiegel; Jules Kroll, on the other hand, has a law degree from Georgetown Law School and worked for the Manhattan District Attorney's office. Kroll operatives include a former security chief for IBM, a former CIA station chief, a former Green Beret and international crime and terrorism expert for Rand Corporation, and a former New York City Police Commissioner. The company has 40 investigators, 10 of whom are women. Kroll also uses the services of behavioral researchers and independent private investigators, many of the latter being ex-police officers.

Hiring practices for many in this industry came under scrutiny after 9/11. Crimes committed by security guards—some convicted felons—that have been publicized was another reason screening employees in this sector came under fire in the early 2000s. There are at least 10 states that completely lack any regulations in the area of security guard services, with some candidates even being hired before a background check for a criminal record is performed.

Further Reading

Armour, Stephanie. "In Guards We Trust, But Should We?" USA Today , 3 December 2001.

Bailin, Paul. "Gazing Into Security's Future." Security Management , November 2000.

"Business Finding That Good Security Is No Longer Optional." New York Times , 17 October 2001.

"Cost of Airport Security Soaring." USA Today , 11 April 2002.

Greene, Marvin V. "Thriving On Disaster: Security Companies Surge." Investment News , 5 November 2001.

Hoover's Company Capsules. Austin, TX: Hoover's Inc., 2003. Available from http://www.hoovers.com .

Linnett, Richard. "Marketing of Safety Enters Mainstream." Advertising Age , 23 September 2002.

Perez, Evan. "Demand for Security Still Promises Profit—Continuing Fears Mean the Sector Can Expect Sound, Long-Range Growth." Wall Street Journal , 9 April 2002.

"Private Security Demand Growing." Research Alert , 17 May 2002.

Sutton, Oliver. "Big Brother Will Be Watching You." Interavia Business & Technology , January 2002.



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