Chinks in PMSC Armour?
Published on August 29, 2014 by David Rider
The collapse of GoAGT has led to renewed scrutiny of the marsec industry.
Chinks Appear in the Maritime Security Armour
An Op-Ed piece by Simon Biggs, ASKET Ltd.
Recently, we have seen the catastrophic failure of several larger and seemingly more robust private maritime security companies (PMSCs). PMSCs that have continued to promote their reliability and professionalism up until the day they collapsed, they will certainly not be the last as the industry goes through its greatest test to date.
Private maritime security companies grew exponentially as Somali piracy exploded out of control and, for a while, ruled the seas of the Indian Ocean and its littoral states, as shipping, cargo and insurance companies struggled to find ways to protect their ships, crews and cargoes.
These companies were, in most cases, built around military management teams many just out of the armed forces. Often, they were lacking any real commercial awareness or business acumen but able were able to use expeditionary flair and flexibility (learnt in the service) to pull off what no one else could!
The consultants (MSOs) they employed left the military in droves on a wave of promises of high day rates and ‘pop star wages’. At the height of the boom, the need for security was great as the shipping industry struggled to protect itself. This need became attractive for both the security companies and the MSOs employed to protect the vessels, as the money was good.
A PMSC only needed a few transits a month to start making good money. They could then reinvest the profits to buy more equipment and weapons and so commit to more transits. However, in many cases their lack of commercial knowhow saw them still failing to have a viable long term strategic plan.
Armed security became the fail safe for the insurance industry, whose premiums in the early days were still high. As more and more P&I clubs and larger insurance companies started to accept the use of armed security on a regular basis, the flood gates opened.
By the end of 2013 there were upwards of 240 companies of various sizes and standards vying for business. These mostly immature companies needed to inwardly invest in order to grow organically and keep up with industry standards. In a world of few contracts or long term agreements and a competitive spot market they have, in most cases, had to live from hand to mouth.
With the piracy situation in the Gulf of Aden and Indian Ocean waning at the present time, insurance premiums are at an all-time low and the price of security is being forced down by the demands of the industry. Furthermore, the security companies are undercutting each other fighting for transits. Consequently, we are starting to see chinks in the maritime security providers’ armour.
Behind the scenes, there is a groundswell of dissatisfaction amongst MSOs who are now expected to work for considerably reduced day rates. Additionally, they are often made to pay for courses, some unnecessary, some not legitimately recognized. Even after jumping through various hoops at their own expense, they are then not employed regularly enough to cover their outlay. Many security companies are employing sub-standard contractors to allow them to save from the bottom line, the risk being transferred to the contracting vessel.
Another major issue and one that often goes unnoticed is the underhand sharing of tasks between companies including the unlawful sharing of weapons and equipment. We have seen PMSCs take on a task knowing they cannot actually fulfil it themselves, relying on their ability to ’share’ it with another company.
Many PMSCs have tried to diversify into other sectors such as land based security, response, or oil and gas contracts, using their revenue they have invested money into other Business Development lines and pre-qualification processes, but with so many companies already experienced in these areas, contracts are not easy to bid for let alone win.
ASKET believes that we are likely to see a consolidation in PMSC numbers over the next 3-6 months. Some will be obliged to either merge with other companies or cut their losses and close. Or, as we have seen recently, go into receivership.
The shipping industry should be able to contract security without the risk of the service not being fulfilled, or the costs incurred by a badly managed service, where there are delays, fines or the risk of being held in port for non-compliance issues.
For nearly all Company Security Officers, finding the most appropriate maritime security provider, whilst meeting organisation needs can be a challenging, time consuming and sometimes confusing process.
Research suggests that when arranging maritime security, actual costs to the ship owner/manager of manpower and time range from between $1,600 and $2,000 per transit and annually depending on geographical location as much as an additional $10,000 and $20,000 to audit and monitor each PMSC.
At ASKET we have seen the opportunity to help clients address these time and cost issues. We are focused on delivering a truly independent, end-to-end brokerage and management service, which will address many of the challenges facing today’s CSO.
Our experienced brokers work faster and smarter to help clients improve resilience, manage capacity, save time and most importantly, reduce costs, underpinned by a robust Private Marine Security Company selection, vetting and monitoring process.
ASKET do all of this at no cost to our shipping clients, and we draw from a selection of PMSCs which are pre audited to ensure they have real quality and the ability to support the industry, now and into the future.
Naturally, our pool of PMSCs will have to remain competitive as each transit or contract is still subject to a bidding process and, by limiting our PMSC pool, we provide them with the potential for a steady flow business, which keeps them keen to be priced sensibly.
ASKET continues to monitor and review its suppliers on a regular basis and our pool will always have sufficient PMSCs at various tier levels to support all of our clients varying needs.
Editor’s Note: The opinions expressed in Op-Eds do not necessarily reflect the views held by MSR or its partner companies.