Methods of Quoting to Fit the Job
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Examples of Various Classes of Contract and How to Draw Up Quotations Which Will Yield Adequate Remuneration: Passenger Vehicle Operators' Difficulties LAST week I dealt. with some tricky problems arising from the special requests of customers who, in asking for a price for a job, wanted the quotation made in ways not commonly encountered by the haulier in the ordinary way of business. I promised that I would describe the principal ways in which hauliers should deal with orthodox requests for tenders, quoting examples of each. Here, then, are a few samples of the various kinds of job which may be offered, together with • suggestions as to the way in which they should be dealt with.
I will begin with a couple which can be solved by the direct use of " 'The Commercial Motor' Tables of • Operating Costs." Take the case in whichthe haulier receives an offer of regular work from a manufacturer in, say, a large tawn, involving the carriage of their products to a variety of delivery points, some near, and some far . from the works. An examination of the conditions discloses that the weekly mileage will be approximately 600 for a vehicle of 2-tons capacity.
Rate tor 600 Miles
Referring to the Tables the operator sees that the quotation should be 11d, per mile, that being the minimum figure at which he should undertake the job. In tendering, he will quote on the basis of, say, Is. 3d. per mile. The actual figure will be based on his personal knowledge of the circumstances and from what others are doing. He will thus reckon that 600 miles at Is. 3d. per mile will amount to £37 10s., and his tender will be for that amount.
Another example to which the same method can be applied but not, perhaps, quite so directly, would be where a haulier was asked to travel regularly between Manchester and London carrying a load of 10 tons each way. It may be assumed that he uses an oil-engined rigid maximum-load six-wheeler. His mileage, on the assumption that he does two complete journeys per week, will be nearly 800 and for that, according to the Tables, his minimum charge should be £84.
To that, however, must be added the extra expense of subsistence for the driver for two nights, and other A34
expenses incurred as the outcome of, the vehicle being away from home two nights per week. Perhaps £2 would cover these, so that his minimum revenue for that vehicle must be £86, My recommendation would be that the price should be not less than £90.
-1 want to emphasize the fact that the rates given in the Tables are minima and that any quotation should be rather more. In any case, I expect the haulier to have the gumption to get what he can for the job, but not less than the figures given in the Tables.
£2 5s. per Ton
In this particular instance, the haulier will no doubt be asked to give a price per ton, in which case he will reckon that he has carried 40 tons in all, so that his minimum charge is £2 3s. per ton and his recommended charge (at £90 total) £2 5s.
Next, I will take an example when it is desirable that the Charge should be on a time basis. This will be on what I might call -4' short-haul" jobs. Typical cases of this sort of work occur in connection with road mending, road making or building contracts.
In the majority of eases, the vehicle employed will be a 5-tonner or, although not as it should be, a 4-tonner regularly loaded with 5 tons. The mileage will probably be between 10 and 15 per day, or 60 to 80 per week. On the basis of the figures for a petrol-engined 5-tanner, the revenue should be from £1.8, the figure for a 60-mile week, to £19, the minimum charge for an 80-mile week. In such a case the haulier should endeavour + to get a minimum of £20 per week, or £4 per day.
I should, perhaps, go into a little more detail and explain how I have arrived at the foregoing figures. I have taken them from the Tables, but not directly. First, I have the standing charges of £9 4s. 8d. per week for a 5-tonner. Then there is provision for establishment costs—£.2 5s. 4d. Running costs are 10.34d. per mile for a 5-tonner covering up to 100 miles per week.
For 60 miles per week that is £2 I ls. 84., the total 'so far being £14 ls. 8d. Next comes that important item, so
often overlooked, profit, which is £3 10s. 5d. per week, this being 25 per cent. on cost. The total is 117 12s. Id. The same procedure is adopted for an 80-mile week.
There is a point to bear, in mind here which is sometimes overlooked, possibly because there is no clear reference to it in the Tables-. I refer to the fact that there is more wear and tear per mile in connection with a vehicle running low weekly mileages than there is in the case of one engaged on long-distance haulage. Actually, it is provided for in the Tables, as may be seen on reference to the figures for maintenance relating to the 5-tonner which is the subject of this calculation. Up to 200 miles per week, maintenance (e) i& 1.63d. per mile, whereas for mileages of 300 per week and upwards it is 1.47d. per mile.
There is another method of quoting which is popular with those who hire vehicles direct. When well managed, this can be very profitable. The Method might well apply to a haulier who is asked to hire a 1-ton van to a grocer or other tradesman for delivering his goods. The hours wilt usually be from 10 a.m. to 7 p.m., with one hour for lunch. Reckoning it as an eight-hour day for five days per week, and a four-hour day on the occasion of the shop closing for the afternoon, there is a total of 44 hours per week.
Weekly Charge for Vehicle It would be fair to allow a customer of this kind an average of 8 m.p.h., including, of course, time for stops. This would be 352 miles per week. A minimum charge for this is 122 10s. per week, but bearing in mind what has already been said about the difference, from the point of view of profit, between high and low weekly mileages, the haulier will attempt to obtain at least £25 per week for the hire of this vehicle.
That is the basic charge and, on the top of that, there should he an extra charge of Is. 6d. per mile for each mile over the total of 352 and at least 12s. 6d. per hour, or part of an hour over eight hours or four hours per day, as the case may be. Extra miles to the number of eight are. allowed for in each 12s. 6d. that may have to be charged.
It may be useful to explain this method of charging in some detail, as it occurs to me that, as set out it may not be fully understood by those who have not yet had any experience of it. I may take it that the need for an extra charge per mile for any distance over that named in the contract will be understood. I must make it clear, how: ever, that this figure of Is. 6d. per mile extra applies only to extra mileage which is run off within the stipulated times of eight or four hours per day.
Excess Mileage Clause If the hours be exceeded, the extra charge of I2s. 6d. per hour, or part of an hour, includes additional mileage at the recognized and agreed standard, namely, 8 m.p.h. If, in addition to the extra time, there is mileage in excess of the estimated 8 m.p.h. that, too, should be charged at Is. 6d. per mile.
A simple calculation will show that 44 hours for £25 is approximately Its. 4d. per hour. The standard for extra time is made 12s. 6d. because the driver will expect to he paid at overtime rates for any time he works beyond the eight hours per day.
The reason why the excess charge of Is. 6d. per mile is so profitable is because the running cost per mile of a 1-ton van is, as the Tables show, only about 6d. per mile. Only that 6d. per mile is involved in the extra mileage, because the basic rate of remuneration is sufficient to cover all the standing charges, the establishment costs and the minimum profit. If, therefore, he does only 48 miles excess per week, bringing the total mileage up to 400, he makes a clear profit of nearly 12 8s.
In such circumstances, his total revenue, assuming that no extra hours were worked, would be the £25 basic charge, plus 12 8s. for the excess mileage, that is £27 8s. His total operating costs amount to £18 2s. (see Tables) and if I assume that his standing charges are 12 8s. per week and his total outgoings are £20 10s. then his profit is £6 18s. per week.
Coach proprietors and the like have problems similar to those which have to be solved by hauliers, as my post-bag shows. Here are two recent inquiries to confirm this.
The first is, in a way, the reverse 'of those with which I have been dealing, wherein 1.have oeen asked what should be the rate for a specified job of work. In this case the coach operator has been offered a rate and asks me for my opinion of it,
He writes: "We have the offer of a six-months contract for a 26-seat bus, the weekly mileage being 1,100. We have been offered is. 6d. per mile, or £84 10s. per week, irrespective of the number of passengers carried, but with an agreement that no more than 30 should be aboard on any one trip. Is this likely to be reasonably profitable? he asks.
Net Operating Cost My reply to this was that, the net cost of operating this bus can be worked out from the Tables as follows:Running costs 10.73d. per mile, which comes to £49 3s. 7d. per, week and standing charges of £13 15s. 10d., making a total of £62 19s. 5d. The gross profit is thus £21 10s. 7d. In a case of this kind it is not likely that the establishment costs will be high: £5 10s. 7d, should cover them, so that there still remains a net weekly profit of at least 116 on this contract, which I should, therefore, recommend be accepted.
Here is another inquiry: "We are operating a service using two 32-seat coaches, covering mileages of, bus (a) 665 miles and bus (b) 515 miles. We are in receipt of a flat rate of Is. 9d. per mile. It has been suggested that, as 25 per cent, of the mileage is run without passengers, a lower charge for those miles would be fair. Is that so?"
According to my reckoning these vehicles will cost the operator the following amounts: standing charges 114 10s. 3d. per week per vehicle; running costs per week, at is. per Mile, to the nearest penny would be £33 5s. for bus (a) and 125 15s. for bus (b). The total cost of operating the two vehicles is thus £88 Os. 6d. per week.
No Margin for Allowances Establishment costs are likely to bring that up to £95, in round figures. The revenue, at is. 9d. per mile is £103 5s. The net profit is thus only £8 5s., whereas, on the basis of 20 per cent. on cost, it should be £19. There is thus no margin for any allowances, whether for empty running or otherwise.
On the subject of coach operation, I am sometimes asked whether it would be possible to set out in the Tables of Operating Costs what the fares should be. There are many reasons why that has not been attempted and a reference to one of them should suffice to show why it has not been done.
The Tables, as has so often been pointed out, are built up on averages, collected from here, there ahd everywhere. There is no such thing as an average for the proportion of seats that may be occupied, none that is, which could be used to advantage to serve as a basis for a rate per passenger, which it is obvious is what is required.
That single factor is enough to justify the omission of fares from the Tables. It is a fact that there are peculiar features about both coach and bus operation which, in many cases. limit the useful application of those sections of the Tables which purport to give costs and hire charges for a given weekly mileage. That is, of course, not indicative that the Tables are useful to only a minority of coach or bus owners, for there is not one to whom they are not likely to be valuable.
It is a fact, however, that in certain cases, some instruction as to the best method of applying the figures given in the Tables would be helpful. That is a subject to which 1 hope to devote attention in some future articles.