Mitch and Cody witness a disaster involving a parasailer and a boat. While heading for the rescue, they are again beaten to the scene by Bayguard, a new firm that specializes in privatizing lifeguards. When the rescue has been completed, Mitch is introduced to Alex Ryker, CEO of Bayguard. She tells Mitch that she plans on going up against him for the county contract as Baywatch's contract is about to expire. The next day, Alex shows the Chief a videotape of some of Bayguard's amazing rescues. She also shown the Chief a tape showcasing the Baywatch team apparently slacking off. Mitch objects, but the Chief thinks Alex's proposal warrants consideration. Later, Mitch tells his lifeguards to start acting like professionals, otherwise they will not have any jobs left by the end of the week.
Meanwhile, when April sees a man having a heart attack, she calls for backup and heads for the water. But Arnold, one of the Bayguards, detains her. This upsets Mitch who brings April to Bayguard for an apology from Alex. When Mitch and April arrive to Bayguard, they see Arnold paying off a stuntman. That stuntman turns out to be the parasailer who almost drowned. Mitch realizes the rescue was a fraud. After that, Cody fakes an argue with Mitch and starts working at Bayguard instead. Alex wants him as her new lieutenant.
Later Cody approaches the Bayguard mobile tower truck and climbs inside. From there he talks to Mitch over his cell phone, and by using Bayguard's lap top computer, he finds out that almost all of the lifeguards at Bayguard are on short-term contracts. When the summer starts, Alex will be left alone with a couple of wannabees protecting the beach. But Arnold arrives to the truck and Cody is busted. When April tells them that a diabetic boy named Teddy is missing, Baywatch and Bayguard must work together as a team. It turns out that Teddy is trapped in a storm drain. Mitch and Alex manages to get him out. Later, Mitch learns the Chief has hired Alex to be Baywatch's new administrative consultant. Bridget decides, after an opportunity presents itself, to stay at Baywatch rather than become a model.