Hidden Reserve
Page 47
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By JANUS
BIDDERS who have failed with List I may haye strong views on the rejection by the Disposal Board of all tenders for a high proportion of the trans3ort units offered; but some of the comment from 3utside the ranks of prospective hauliers congratulates be Board on not being hoodwinked. It is surmised that he majority of bidders was hoping to get the vehicles 3f British Road Services at bargain prices, leaving the burden of any toss to fall upon the transport levy. This interpretation will at any rate commend itself to he Socialists.
The general criticism from hauliers has been that the vehicles first offered were those B.R.S. could most easily spare, and that many of the units did not correspond to the actual or likely requirements of any buyer. In one town, for example, a single large unit might be offered where the demand was for a number of small ones. In other cases, excellent premises were coupled with wretched vehicles.
To get at the truth is not a simple task. As the submission of a tender costs nothing, it was highly likely that some of the bids would be derisory. It was even more likely that they would be futile. Sir Malcolm Trustram Eve made it plain at the Outset that price would be the main, if not the only, factor governing the acceptance or rejection of tenders, and that there was a reserve figure below which the Board would not permit the sale of a transport unit. What he would not reveal was the method or formula used in arriving at this minimum.
Rival Bidders
In a straightforward auction, secrecy over the reserve price is understandable. When the rival bidders know it, they may be reluctant to offer much in excess. This may have been the reason why the Board did not disclose the figure they had in mind. If so, the tactics do not appear to have worked particularly well. Far more satisfactory tenders might have been received had the prospective buyers known the limit below which it would be useless for them to go.
Without doubt, a large number of them regarded the first list as the raw material for an experiment. They bid well below their top price in order to see how the Board would react. Had the Board been willing to give them some clue as to the lower limit, the speculators could have cut their manceuvre and really got down to business at once. They probably have a greater respect now for the business acumen of the Board, also a better idea of the sort of price likely to succeed.
This applies even more to the various finance companies, syndicates and consultants known to be interested. They have made good use of their opportunities to compare tenders, successful or otherwise. If they make the details widely known, there will, of course, be no point in the continued reluctance of the Board to announce their own guiding statistics. It is more probable that the people who can speak from experience will say nothing. Their disclosures might lead the Board, if they were still bent on secrecy, to change the formula, thus making the prophets look ridiculous and their calculations of no avail.
Although this is not likely, it is a possibility not altogether to be discounted. In any case, whoever has the knowledge will mar his own chances by publishing it. He is in the magic circle, and has the fun of watching the audience wonder how the trick is done.
None of these considerations need prevent the Board from at least dropping a few hints. They want the bids to be as high as possible, and would surely encourage this by stating the minimum that would interest them. They would also like the tenderers to start on equal terms, but this will become more and more unlikely as the safes progress and information about bids offered and prices paid is obtained in various and perhaps devious ways by certain tenderers or their representatives, and by officials of B.R.S. who might themselves have plans to acquire a transport unit. Knowledge that the Board persist in trying to keep secret will more often come the way of the large than the small buyer, and to some small degree may frustrate the provision in the 1953 Act that the man with limited resources should not be placed at a disadvantage.
Market Study
The Board must have used fairly simple methods in arriving at what they regard as the appropriate reserve price. The condition of most of the premises is not much different from their condition when acquired, and the price paid for them at that time is known. The value of vehicles depreciates much more quickly, and in many cases it would not help much to know what compensation the former owners received for them. A careful study of the market may provide a theoretical replacement price for every type and make and age of vehicle, but the practical application must be limited. Two vehicles of the same type and vintage may be in different condition. One may have several years of useful life before it, the other be fit only for scrap.
The valuation at which the Board arrive after examining the evidence of the experts must therefore depend upon several factors, but there seems no good reason for keeping it secret The prospective buyer will more often than not have the vehicles valued himself. If his own expert's calculations are on a different basis from that adopted by the Board, the valuation is worthless to him. He might just as well think of a number and bid that.
The value of a special A licence can only be a guess. Many bidders have already found that the £70 per ton of carrying capacity laid down in the 1947 Act as the price of severance is not always enough to pay the price of denationalization. Hece is surely a point on which the Board could state their policy. If they think the minimum should be £80, or even £100, why cannot they say so'?
There will be controversy over whatever figures the Board choose to announce. The Socialists will say they are too low, and the buyers too much. Almost certainly, however, at some stage or another, the prices paid will become known, and the argument may as well take place now as then. Units put back on the shelf will lose rather than gain value as the date approaches for the repeal of the 25-mile limit. Quick sales will be helped by letting the bidder have the clearest idea possible of what he has to beat.