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Tendering for Bulk Delivery
Page 106
Page 111
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Operating Costs for an Eight-Wheeled Tanker, a 5-cu.-yd. Tipper, and a 11-litre Staff Car
ANORTHERN operator asks for advice on quoting for the carriage of traffic in bulk. He has under consideration the possibility of tendering a weekly or monthly rental charge plus a mileage charge. There would. be a minimum contract of 18 months duration, after which the customer would have the option • of either renewing the contract or purchasing the vehicle outright at an agreed valuation. The contractor would supply the driver and be responsible for all costs.
The vehicle considered to be suitable for this particular job would cost £6,400 and be based on an eight-wheeled rigid chassis giving a payload of about 15 tons. The mileage for a single journey would be 175 and, as three return trips a weekare contemplated, an average weekly mileage of just over 1,000 is to
be expected. .
The operator estimates that the unladen weight of the vehicle he has in mind would be just under 7.tons 10 cwt., although this may be an under-estimation of the more elaborately equipped types, of bulk delivery vehicle of this size. The annual licence duty for a goods vehicle with an unladen. weight over 74 tons and up to 74 tons would be £120, the equivalent of £2 8s. a week. This is based on a 50-week year to allow for two weeks when the vehicle may be off the road for major repair or driver' ii holidays. The reader states that the driver's wages will amount to a total of £13 a week.
Rent and rates in respect of garaging the vehicle will be reckoned to add 13s. 4d. a week to the standing cost. The annual insurance premium for a vehicle costing £6.400 and operating under A licence will be necessarily high and, allowing for the recent substantial increase in commercial vehicle insurance premiums, will be reckoned to cost the equivalent of £4 8s. a week. Interest charged at a nominal rate of 3 per cent. will also be high and amount to £3 16s. 9d. This gives a total for these five items of standing costs of £24 6s. id. per week.
The rate of fuel consumption will be reckoned to average 9 m.p.g. jWith fuel oil purchased in bulk at 3s. 104d, a gallon, the resulting fuel cost per mile will be 5.19d. Assuming that throughout the year an average weekly mileage of 1.000 is maintained, the fuel cost per week will amount 'to £21 12s. 6d. Lubricants are calculated to cost £1 3s 4d. per week and tyres £12 10s. This is based on a tyre cost per mile of 3.00d.
Maintenance would normally be reckoned to cost £12 10s. 10d.. but on account of additional equipment with which this bulk vehicle will be fitted, some addition must be made to this assessment. This will be normally reckoned here to cost £1 5s. Id., i.e. 10 per cent., giving a total maintenance cost per week, when averaging 1,000 miles, of £13 15s. 11d.
Because of the high initial outlay the cost of depreciation will r20 be substantial. In order to obtain the balance to be written off the equivalent cost of the original set of tyres is first deducted from the price of the vehicle with a further deduction to allow for the ultimate residual value, The resulting depreciation cost per mile then becomes 6.31d., or £26 5s. 10d. per week. The totafrunning cost per week is therefore £75 7s. 7d. and the total operating cost £99 13s. 8d. per week when averaging 1,000 miles.
This latter amount, of course, is solely the cost to the contractor in respect of operating this particular vehicle. No allowance has so far been made for overhead or establishment costs which under normal circumstances, i.e, general haulage, is commonly reckoned to add at least 20 per cent, to the operating cost. However, where a vehicle is working exclusively under contract to one customer, overhead costs incurred by the contractor may be substantially reduced. But the extent to which this would apply could be determined only by individual contractors relative to the particular circumstances. Some overhead costs wilt however remain; and it should not be Overlooked that in the case of shortor medium-termed contracts some provision has to be made in advance to provide fresh traffic when the first contract comes to an end. This must inevitably incur expenditure by the contractor.
Regarding profit margin, an addition of 20 per cent. is again common practice but in this instance two special factors have to be considered. If there is an assurance of regular employment over a long period then alower percentage may be acceptable. However, because of the specialized type of vehicle to be employed it would probably be more difficult for the contractor to find other work should the original contract be terminated for any reason. The extent to which this possibility may be covered by the provision that the customer would purchase the vehicle outright as an alternative to renewing the contract would be determined by the ultimate price mutually agreed.
4WHAT does it cost to run a 5-cu.-yd. tipper 400 miles per week?" asks a prospective operator. Based on a 5-ton short-wheelbased chassis a 5-cu.-yd. tipper, fitted with oil engine would weigh, unladen, 2 tons 19 cwt. This gives an annual licence duty of £35, or 14s. per week.
Assuming a standard 44-hour week is worked in Grade 1 areas, the total amount expended on driver's wages would be £9 14s. 8d. a week. This amount includes allowances for holidays with pay and additions in respect of National Health and voluntary employers' liability insurance contributions. Rent and rates in respect of garaging the vehicle are assessed at 10s. 9d. a week, whilst insurance adds I5s. 10d. a week. Interest charged at 3 per cent. on the initial outlay of £1,300 adds 15s, 7d. resulting in a total of £12 10s. 10d. for these five items of standing costs. When 400 miles per week are-averaged the standing cost per mile"would be 7.52d. Some adjustment of the normal rate of fuel consumption flowed for a 5-tonner must be made on account of the tipping rork on which this particular vehicle is engaged. Assuming is amounts to 12 m.p.g. for this oiler, the fuel cost per mile fould be 3.90d. Lubricants add 0.24d. per mile. Again, because f the abnormal wear experienced in tipper operation, tyre osts will be reckoned higher than usual for this size of vehicle. 1ased on a mileage life of 20,000 per set, the tyre cost per tile would be 1.92d., whilst maintenance is similarly increased rid is reckoned at 3.19d. per mile.
This particular operator claims that he would expect to be ble to run such a vehicle for three years before disposing I' it. On the basis of an average weekly mileage of 400 the anual mileage would be 20,000, giving a total of 60,000 for ie three-year period. Allowing for a nominal residual value f 10 per cent, at the end of this period, the depreciation cost er mile would be 4.04d. The running cost per mile is then 3.29d and the total operating cost 20.81d. Still assuming an verage of 400 miles per week, the running cost per week would e £22 3s. and the total operating cost £34 13s. 10d. To this mount would have to be added overhead costs and a profit rgin before charges could be formulated.
3URCHASE TAX continues to be a subject often raised by readers, particularly as it applies to specialized types of 'Groups of goods chargeable with purchase tax and le statutory exemption from the tax are defined in the Second 2hedule to the Finance Act 1959, and as subsequently mended.
The relevant section is contained in Group 27. Under pare mph (a) road vehicles (excluding subsequent exceptions) instructed or adapted solely or mainly for the carriage of issengers or having to the rear of the driver's seat roofed 2commodation which is fitted with side windows or which is mstructed or adapted for the fitting of side windows are subct to purchase tax. Within this category mechanically .opelled vehicles are subject to a tax of 50 per cent, whilst tose not mechanically propelled pay 25 per cent, tax. Goods :hides, of course, are no longer liable to purchase tax.
There are, however, several exemptionsfrom this liability pay purchase tax. Under category (1) these include
nbulances, tramcars, trolley vehicles and other vehicles conructed to carry not less than 12 passengers. Vehicles of not ss than 3 tons unladen weight are also exempt, as are prison ins, fire tenders and caravans. Taxi cabs conforming with
e conditions of fitness laid down in the London Cab Order, 134, are similarly not liable to the payment of purchase tax. should be noted, however, in respect of this particular vehicle at if the "For Hire" sign was removed or a fourth door hied to a three-door type of cab the exemption would be illified and purchase tax would then be payable, In the second category of exemptions are included a number vehicles which do not readily' fall within the two general tegories of either passenger or goods vehicles. In such -hicks the carriage of passengers is only incidental to the e of the vehicle for other purposes, and it is this particular pc of vehicle with which many of the readers' inquiries are mcerned. Included in this category of exemptions from la-chase tax are bullion vans, mobile canteens, libraries, shops,
showrooms and workshops, Tower wagons and vehicles used on road construction, cleansing, watering and refuse collection are also exempt from purchase tax, as are breakdown vehicles fitted with a crane or other lifting device.
I T is the added responsibility of many commercial vehicle operators to run a fleet of staff cars or, alternatively, be partly responsible for the maintenance of privately owned cars used for business purposes. As a result inquiries are often received for an impartial estimate of operating costs presumably with a view to reimbursing staff in such circumstances. A recent inquiry concerns the operation of a car in the 1,750-c.c. category and the following costs are relevant to its use when averaging 400 miles per week, although the general manner of calculating the costs will be the same for other cars.
As for any other size of car, the annual licence duty would amount to £12 10s. Od., the equivalent of 5s. Od. a week. In this instance the car would not be chauffeur driven and, therefore, no driver's wages would be incurred. Wide variations could arise in the cost of garaging the vehicle according to the type of area in which this took place. It will be assumed that in this instance the cost would amount to 7s, 2d. per week. The basic insurance premium is reckoned to cost £38 10s. Od., but to this must be added a 50-per cent, excess charge to allow for the cover to be extended to include commercial travelling. The total premium would, therefore, be £57 I5s. Od., or fl 3s. 3d, per week.
Interest on the initial outlay of £780 would cost the equivalent of 9s. 5d. per week Imsed on the nominal rate of 3 per cent.
ASSIJMING in this instance that vehicles are replaced annually, another £2 5s. 2d. will be placed on standing costs in respect of depreciation. This gives a total for these five items of standing costs, excluding wages, of £4 10s. Od.
For the purpose of calculating fuel cost, it will be assumed that petrol is purchased at 4s. 7-.41. per gallon and that an average rate of consumption of 30 m.p.g. is maintained. The resulting fuel cost per mile is then 1.84d. Lubricants are reckoned to add 0.12d. and tyres 0.17d. per mile. Because of the policy of annual replacement it is assumed that no expenditure would be incurred due to normal tyre wear, but some allowance will be made for the possibility of accidental damage, This is here reckoned as the equivalent to the cost of one cover.
Maintenance is calculated to cost 0.86d. per mile. Here again this does not represent the cost of maintenance over a longer period but is obtained by averaging the cost of the manufacturer's servicing schemes which would normally be undertaken during a 12-month period. Inclusive of fuel costs the total running cost per mile would be 2.99d., or alternatively I.15d. without the cost of fuel. This latter figure is useful where it is more convenient to recompense staff in this manner rather than be involved in checking innumerable receipts for separate supplies of fuel.
When averaging 400 miles per week the total operating cost per mile inclusive of fuel would be 5.69d. or alternatively 3.85d. without fuel and with no allowance for driver's wages in either case. S.B.