When Making Inquiric hive All the Facts
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IN last week's issue of " The Commercial Motor " I emphasized the importance of inquirers giving me as much information as possible. I pointed out that the absence of some essential item involves further correspondence and that, quite often, when that does not educe the necessary information, it means that a lot of trouble is caused from which no good result is forthcoming. I illustrated my point by an example relating to goods haulage. Here is another case, also a recent i,nquiry, which is concerned with passenger transport.
The query related to a contract for the conveyance of schoolchildren in a rural district. All the information I
was given was that there are three vehicles, one a 20-seater bus running 28
miles per day and employed two hours each day; another, a 26-seater running 32 miles per day and for two hours each
day; and the third, a 32-seater running 52 miles per day and employed for 3/ hours each day. In all cases, the engagement is for 210 days per annum.
Aplin and Barrett, LtL, of Yeovil, has been an operator of Comer vehicles for many years, and here are shown Iwo of the company's Superpoise 4-5-tonners of this moht, which are employed on milk transport.
I should add that I had, prior to receiving the inquiry in detail, discussed it with a friend of the inquirer who had suggested that 9d to is. per mile might be a fair rate, and I had answered then, in the absence of any data and without my books, that my estimate of the rate would be in the region of from is 9d. to 2s. per mile. When I received the inquiry as set out above, I promptly wrote hack for further particulars and asked (a) what these buses are doing, if anything, during the remainder of the day when they are not engaged on this school contract; (b) assuming. as is likely that the buses are not doing anything, whether there is other work for the drivers to do, or if they have to be paid a full week's wages while doing no more work than is scheduled in the inquiry; (c) if the buses do any work at all during the remainder of the year. As so often happens I have had no reply.
It is obvious that, without this additional information, I am .unable to give a satisfactory answer, and, moreover, if I were to attempt to answer it without the information,' there would be the danger that I should recommend rates which would be either insufficient and involve the contractor in loss or, alternatively, be so high as to cause him to lose the contract, whereas, given a proper rate, he might get the contract and make a reasonable amount of profit.
One way of dealing with the inquiry is, of course, to take a number of variations and give the rates which would apply under each set of conditions. That, however, is outside the scope of correspondence, but it is possible to deal with it in an article, citing each possible set of conditions and giving the cost and rate for each.
In the first place, I propose to take the conditions to be literally as set out in the letter, making the assumption that the vehicles are used only for the work: set out in the inquiry and, further, that the drivers are paid directly for the work they do on this contract on the basis of the hours they work upon it and that, for the rest of the time, they are otherwise engaged and paid accordingly. I am going to assume that the wage paid to the driver works out at 2s. 6d. per hour and that the week comprises five days. .
First, to deal with the 20-seater, which I will assume cost 2800 new. The annual fixed expenses involved in the operation of a 20-seater bits under such conditions as these will be approximatelyas follow: Tax, 236; garage rent and rates, £20; insurance, £40; interest; 230; depreciation, 2100; establishment costs, £100; total, £326. Now,
that £326 is spreed over 210 clays of use, which means, in round figures, that the cost is E1 1 is. 6d. per day.
Dealing with the running costs, I shall take petrol and oil as costing 2/d. per mile; tyres, lid.; maintenance, id. That is a total of 5/d. per mile,. and 28 times 51d. is 12s. 10d. Add 5s. for driver's wages and we get 175. 10d, The total cost per day of this 20-seater bits is thus 22 9s. 4d. -roughly 50s.-and the actual cost per mile to the nearest halfpenny is Is. 9/d..
In the case ofthe 26-seater I will assume that i;. cost 21,000 when it was new. The corresponding annual fixed charges are; Tax, £48; rent and rates, 220; insurance, £45; -interest, £40; depreciation, £125; establishment costs, £125. The total is £403. This amount is spread over 210 days, which means that the cost per day for fixed charges alone is Al 18s. 2d.
The running cost of a 26-seater is 6c1.per mile and as it does 32 miles that IS 16s. Add 5s. again for wages, which is 21 Is., and that added to 21 18s. 2d. gives me 22 19s. 2d., say 23 per day. For that 23 the bus runs 32 miles and the net cost is thus is. 101d. p'er mile.
For the 32-seater, which I will assume cost £1,500 when new, the tax per annum is 257 12s.; garage rent, say, £20: insurance, £48; interest on capital outlay, £60; depreciation, £150; establishment costs, £140; total, £475 12s.; and that, for 210 days, is equivalent to £2 5s. 3d. per day. The hare running cost of a 32-seater I should' take as 61d.. per mile, and as it runs 52 miles per day we get £1 7s. ld, The vehicle is in use for 31 hours and I should assess the total wage cost as 10s. That brings the cost per day to £4 2s. 4d. and as the vehicle runs 52 miles for that expenditure the net cost to the owner is is, 7d. per Mile. It is probable that-the foregoing is as near as anything a summary of the actual conditions, and that the costs set out are, within a narrow margin, those which the operator is actually experiencing. I have, however, no definite assurance that the conditions are precisely as set out. It may be, for example, although I will admit that it is not very likely having in mind the locality and presentday restrictions on the use of petrol, that the operator is able to use this vehicle for other work during the rest of the year, and I tun going to assume, in actual fact, that he is so able to use it for a further 90 days. He may be carrying evacuees, soldiers, farm hands, harvest helpers and doing work of that sort. That makes a difference to his costs in this way. Instead of spreading his fixed charges over 210 days he Can now spread them over 300 days and the calculations must be modified accordingly. It should be noted that I am not concerned with the mileage he does on those 90 days; that figure will enter only into the calculation of what his costs are during those 90 days Nor is there any need for we to revise my figures for mileage costs in order to comply with these conditions. All that I do is to amend the incidence of the fixed charges.
In the case of the 20-seater, for example, in connection with which the fixed charges were given as 2326. I divide, not by 2/0, bht by 300, giving me the figure of £1 Is. 9d. per day as compared with £1 Ils. 6d. To that 21 Is. 9d. add 17s. 10d. as before for the running cost and driver's wages, giving a total of 21 19s. 7d.-say 22 per day. As the' vehicle runs 28 miles for that amount the cost is now only Is, 5d. per mile.
When a 26-seater is Used on the Job
Similarly, for the 26-seater, the 2903 total of fixed charges, divided by 300 days, gives me £1 Os. 10d, per day. Add £1 Is. for the running costs and driver's wages and I get £2 7s. 10d. as the total cost per day. For that the vehicle runs 32 miles, which is equivalent to Is. 6d. per mile, approximately.
So with the 32-seater, I divide 2975 12s. by 300, giving me 21 us. 8d. as the amount of fixed costs per day. Add 21 17s. Id_ for running costs and driver's wages and I get £3 8s. 9d. for 52 urkles, which is equivalent to Is. 9d. per mile, again approximately.
To take a third set of conditions, let us go back to our 210-day year again, but assume that, in between taking the children to school and bringing them hack again, the operator works in some other job during each day, This, I will admit, is extremely unlikely, but the figures are of interest and it is therefore worth while pursuing the subject in this way.
Obviously, I can make only a guess at the work which he is able to do with these vehicles and, therefore, to make the problem simple and to 'reduce the amount of calculation to a minimum I shall assume That he doubles the mileage in each day.
For our fixed charges per day we must come back to the original set of calculations because we have now only 210 days over which to spread the total annual charge. The running cost and the allowance for driver's wages is just double.
For the 20-seater, therefore, we have £1 us. 6d. to cover the fixed costs per day and 21 15s. ad. for running costs and driver's wages. The total is £3 7s. 2d. That amount, however, is not, as before, to be spread over 28 miles, but over 56, and, in those circumstances, the approximate cost per mile is Is. 2id.
So with the 26-seater. The daily fixed charge is I8s. 2d. and the expenditure on running costs and driver's wages 22 2s., making a total of £4 Os. 2d. For that amount 64 miles-not 32 miles-is run and the approximate cost per mile is thus Is. 3d.
In the case of the 32-seater the fixed charge remains as in the original example at 22 5s, 3d., but the running
costs and driver's wages are double, making £3 14s. 2d., so that the total cost per day for 104 miles of running is £5 19s. 5d. The cost per mile is thus about Is.
To take a set of conditions even more favourable to low running costs, but which are, I must admit, even more unlikely than any I have yet assumed, let me take it that the vehicles do this 210 days' contract but that on every day they double the mileage stated in the original inquiry by doing other work and that, for the further 90 days in the year, the vehicles are in use for any of the various purposes I have specified. That now means that we have a 300-day year and double the mileage set out in the original contract.
Taking. the 20-seater I have, for the daily allocation of fixed charges, the amounts set out in the second example, that is £1 is. 9d. For the running costs and driver's wages I have the amount set out in the third example, namely, 21 15s. 8d. The total is £2 17s. 5d., which is to be spread over 56 miles, giving me nearly Is. Old. as the cost per mile.
In the case of the 26-seater I have 21 6s. 10d. allocation of fixed charges as given in the second example, and 22 2s. for running costs and driver's wages as in the third example. The total is £3 8s. let, and for 64 miles that is equivalent to Is. id. cost per mile.
In the case of the 32-seater the .corresponding amounts are 21 us. 8d. fixed charges, £3 14s. 2d. running costs and driVer's wages, the total being 25 Ss. 10d.; the cost per mile is thus a shade over Is.
Wide Difference in Cost-per-mile
Now, in the foregoing four examples I have by no means covered all the possible alternatives, Moreover, in the variations I have taken I have not dealt with all the possibilities in the way of varying mileages and conditions. Nevertheless, for all that, I have the following wide differences in cost per mile. • For the 20-seater the cost per mile varies from a
minimum of Is. Oid. to Is. 90.; for the 26-seater it ranges from Is. Id. to Is. 100.; for the 32-seater it ranges from Is. to 1s. 7d.-a difference in the worst case of 75 per cent.
It should be emphasized, in conclusion, that the above figures are for costs only. Those are pot the rates which the operator must charge. In circumstances such as these, where so little work is done per year, it is my view that he is fully entitled to a profit equivalent to 25 per cent_ of his actual costs. That means to say that, for the 20-seater, his rate must be from Is. Sid. th 2s. 20., according to conditions; for the 26-seater from Is 41d. to 2s. 9€1., and for the 32-seater from Is. 3d. to 2s.
A point arises here which is of interest and that is that the rate for the 32-seater is less than for the 20and 26seater. That is due to the fact that the mileage covered per day by the largest vehicle is considerably more than it is in the case of the other two vehicles. I am interested, too, to note that my estimate of Is. 9d. to 2s., given verballY, and without reference to figures of any kind, was so wear the mark, having in mind the possible