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MORE ON MILITARY HIRE AND APPROPRIATE RATES

24th August 1940, Page 20
24th August 1940
Page 20
Page 21
Page 20, 24th August 1940 — MORE ON MILITARY HIRE AND APPROPRIATE RATES
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Which of the following most accurately describes the problem?

Some Curious Problems Confronting Operators When Dealing With the Hire of Coaches to the War Office are Here Discussed

Solving the Problems of the Carrier

IN last week's issue I dealt with the problem of the hire, to the War Office, of goods vehicles of 24 tons unladen weight. I came to the conclusion that the rate per day should be a minimum of 30s. and that £2 per day could be justified.

The former figure is calculated on the assumption that the operator is to be paid on the basis of a small percentage plus his actual costs, the latter in the belief that he is entitled to such a sum as will compensate him for the loss of profit which he would have earned had the vehicle remained in his possession. I emphasized the need for provision in any such contract of hire of a stipulation as to the period when payments should be made, and that there should be due notice given of the intention to terminate the contract.

The basis of that article was an actual example selected from the many inquiries which have reached me on the subject of military hire. Here is another, this time relating to the problem of the hire of four 32-seater coaches. There are, at least, two rather peculiar and not altogether reassuring features about this transaction as it was proposed, and as I was :asked to advise upon it. In this instance, the impressment was carried out by a Government contractor.

Has such a contractor the power to impress? I must confess that I do not really know. The power which may be exerted by all kinds of men nowadays is, indeed, varied and startling.

• War Office Prefers to Deal Direct • This, however, I do know. The War Office has specifically stated that it prefers to deal direct, In cases where there appears to be any doubt as to the authority of any individual professing to enter into a contract on behalf of the War Office, those who are approached should communicate with the authorities. It is also a fact that the Government itself, at least in so far as munition contracts are concerned, has practically forbidden the employment of intermediaries.

My first reaction to this inquiry was, therefore, to suggest that my inquirer got into direct touch with the Government department on behalf of which this contractor claimed to be acting, to confirm he had that authority and, in any event, to ascertain the terms which were being paid.

That, at any rate, is the procedure which is generally advisable. There are particular cases where, perhaps, it is unnecessary. For example, when the intermediary concerned is well known to the operator. There is the further possibility that the terms and conditions may be so reasonable as to make it worth while to take up the business without further delay or inquiry.

In this particular instance, it was obvious that neither of these conditions prevailed. The so-called Government contractor was practically unknown, and the terms of the contract, as proposed, were vague and, in my estimation, quite unacceptable.

• Details of an Unsatisfactory Offer •

The offer was £1 5s. per day per coach When working or £5 per week when working or not. It was further indicated that there was no possibility of stating the extent to which the vehicles actually would be employed. It might be at the rate of one day per month or even less, or as much as seven days per week. Drivers were not to be supplied by the vehicle owner, and no means of checking the number of days the vehicle worked, or the mileage covered, were available.

Actually, the wording has no real meaning and, in order to save time and to deal with it quickly, I put upon it what seemed to be the only possible construction. I assumed that the operator was to be paid £5 per week for the bare hire of each vehicle, and that he was to receive, according to this contract. £1 5s. per day when the vehicle was actually used, Also, that during the periods when the RI 5s. per day was in operation, the £5 per week ceased to apply.

That is to say, the two rates were not to be concurrent but entirely separate in their application. In a further letter an attempt was made to clarify the matter. It did that to some extent, but showed the position to be much worse than was apparent from the first communication.

I was told then that the contractor had actually been trying for some time to hire these vehicles for Government work at something like the rates proposed. Finding himself unsuccessful, he eventually had attached notices to the vehicles and stated that they were to be taken within a few hours. He repeated the terms and quite openly stated that the quotations were separate and independent, that the operator was to accept either £5 per week, subject to no

additions whatever, or that he was to accept 21 5s. per day when the vehicles were used.

The vehicles were, nevertheless, to he out of his possession all the time and he was told, quite bluntly, that it might mean that some weeks he would be paid for one day's work in the week, whilst other weeks he might get nothing at all.

, These conditions were absolutely iniquitous, and I 'strongly advised the operator not to accept them or to agree to the impressment until he had made contact with the Government department Concerned. -Needless to say, I pointed out also that the terms themselves were totally inadequate, quite apart from the acceptability of the conditions named.

• Arriving at an Equitable Hire Rate •

To arrive at an estimate of the rate of hire which should be received in such cases, it is necessary to consider the position of the operator and to compare his situation when the. vehicles are in his possession and in normal operation, with that which results when he is, as in this case, deprived of his vehicles and of his means for earning a living.

In considering the matter in this way, it is necessary, first of all, to appreciate that this so'-called impressment took place at the beginning of the summer—that is at the start of the coach-operating season. During the season, which is, • in effect, no more than 20 weeks or so in the year, a coach operator should earn a net profit of at least £10 per vehicle per week; £12 is a more reasonable figure.

If, therefore, it had been deemed fair and reasonable to assess the.rate of hire on the basis of the potential earnings of the vehicle, then the offer of £5 per week is, at once, shown to be so absurd as to be unworthy of serious consideration. Indeed, so it is from any aspect.

Now, to assess a fair rate of hire, on the basis of cost plus profit, it is necessary first of all to ascertain what expenditure must be faced by the operator, notwithstanding the fact that the vehicle is out of his possession. He is, by. his hire, deprived of an asset which has involved him in an actual outlay of from £1,500 to £1,800. The interest on this amount is approximately 30s. per week and that amount should be provided for in any payment which he receives.

Another item of expense is depreciation. This is unavoid able and cannot be assessed in the case of a vehicle of this type at less than £250 per annum, £5 per week. The garage in which the vehicle is kept is empty, but the rent, probably 12s. per week, has still to. be paid. A coach operator deprived of his vehicles at the beginning of the season in this way will, no doubt, be able to cut down the bulk of his establishment expenses which are mainly concerned with the, organization of tours, payment to agents, and matters of that kind. It would be impossible, however, to reduce them beyond a minimum of £1 per week.

The total thus far is £7 2s. per week. • Are there any other unavoidable commitments? We do not know. This Government contractor, in the terms he offers, is just as vague as in those already mentioned.

The only thing to do, in a case of this sort, is to hope for the best but prepare for the worst. Experience teaches that when maintenance operations become due, or tyres need renewal, the vehicles, more likely than not, will be returned to the owner for that work to be done at his expense.

Here we come up againstanother disability, another absence of any definite terms in the contract. There is no mention of the mileage that each vehicle is likely to cover on those infrequent days when it is being used. We are, therefore, once more compelled to fall back upon assumption.. In this case, as in that with the goods vehicle, with which I dealt last week, I have assumed 300 miles per week..

The cost of tyre wear may be taken as 25 per cent, above the figures given in The Commercial Motor Tables of Operating Costs, which means that there must be provision of at least Id. per mile on that account. I say at least advisably, because judging by the general nature and lack of terms of this contract, it seems more than likely that little care will be taken to minimize tyre wear.

Precisely the ,same condition is likely to apply in respect of the chassis. Maintenance cost will be high. Certainly not less than double the average figure, which means that provision must be made for it at the rate of 3fd. per mile. That is a total of 44d. per mile on the basis of 300 miles per week—that is £5 12s. 6d,

• Total Commitments of the Operator •

The operator's total commitment is, therefore, in the region of 212 14s. 6d and if he adds no more than 15 per cent, to that, which is £11 18s. per week, he must receive £14 12s. 6d. per week, or not less than £2, and preferably £2 2s. per day.

Ina.:addition, there should be a provision that, in the event of the mileage exceeding, say, 50 per day, he must be paid at least 8d. per mile excess.

If it be really intended that the contract should be read as I interpreted it in the first case, and in the only rational way, then it is necessary to arrive at a figure which the operator must receive per week for each vehicle on the assumption that it is standing idle. In that case, his figure for expenditure is the £7 2s. total of interest, garage rent, depreciation and establishment costs. If we add 15 per cent, to that, we arrive at £8 2s. 6d. per week.

An alternative method of payment would be at the rate of £S 2s. 6d. per week, plus 80, per mile ran. S.T.R.

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Organisations: War Office

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