Making the Case hr Contract Hire
Page 45
If you've noticed an error in this article please click here to report it so we can fix it.
QOME of the merits and advantages 1.--7 of contract hire were outlined by Mr. .D. J. Reed, of B.R.S. (Contracts), Ltd., in a paper presented last week to the Birmingham division of the Industrial Transport Association. Here are some of the points made by Mr. Reed:—
The trader avoids capital outlay on vehicles and perhaps also on premises, and has control of vehicles without the responsibility of ownership. A contract fleet is maintained at full strength, thus ensuring continuity of service, and the cost of transport can be predetermined.
This is quite important in this modern era, when the preparation of budgets is now almost a standard exercise for all industries. Arrangements can be made to purchase and operate customers' existing vehicles.
Important Document The contract agreement is a most important document, the preparation of which demands the utmost care and attention. The most common and favoured term is one of five years.. Charges for contract usually take the form of an annual, monthly or weekly standing charge, plus a mileage charge for all miles run.
. 'To ensure correct rendering of charges, it is essential that adequate documentation passes promptly and regularly -from the trader to the carrier. It is also recommended that the vehicle mileage is recorded daily and not weekly; this will serve to lessen the possibility of any inaccuracies.
Much has been said and written before about road vehicle costs, said Mr. Reed, and he had no doubt all had at some time studied the cost tables which have appeared in the technical Press, either perhaps for the sake of comparison or purely as an academic interest. In the business of contract hire, it was of paramount importance to give detailed thought and consideration to individual vehicle costs, Necessary Information Failure to do this could have catastrophic results. Before attempting to prepare costs for contract hire, the following information must be obtained from or agreed with the trader: (a) Make, type and carrying capacity of vehicle(s). (b) Body specifications. (c) With or without driver. (d) Estimated annual mileage. (e) Garaging at customer's or contractor's premises. (f) Details of accessories required. (g) Livery requirements.
Charges for contract hire are normally based on a standing charge and a mileage charge, so that costs are divided under these two headings. Standing costs should include all expenditure which is incurred, whether the vehicle is to run 100 or 1,000 miles per week, and these are: depreciation, Road Fund tax, operating licence. vehicle insurance, garage rent,
sheets and ropes, administration, driver's and mate's wages, where applicable, together with National Insurance, holiday pay, and employers' liability insurance.
It was not recommended that depreciation should be calculated on a fixed percentage of the original cost and thereafter on a similar percentage of the annual reducing cost. Experience had proved that a fixed standing and mileage charge throughout the term of the contract was more acceptable to both sides.
Stressing the importance of accurate costing of fuel and lubricants, Mr. Reed pointed out that for a five-year term of contract, an operator could be out of pocket to the tune of some £150 or more if a vehicle's actual performance was one mile per gallon less than the costing.
If mechanical maintenance was undeicosted to the extent of one farthing per mile, a sum in the regkin of £180 would be under-recovered in the case of a fiveyear contract for a vehicle running 35.000 miles per annum.
A contract hire quotation should include details of the type of vehicle and body specification to which the charges relate. This would serve to remove any possible misunderstanding between the trader and the contractor, and any errors or omissions could be rectified at the outset. The quotation should make reference to the fact that it was based on costs prevailing on the date it was issued and was subject to adjustment should there be any changes in those costs.
Ratio for Wages During the discussion on Mr. Reed's paper he said that the ratio of the driver's wages to turnover in the 1:',Be of small vans on short distance operation should be about 27',per cent. if Saturday working on vehicle servicing Wele not taken into account, and about 30 per cent. if the extra cost were added. The ratio should also be about 30 per
cent. for 10-ton vehicles engaged in longdistance work.
Dealing with the normal profit margin. Mr. Reed said that this should be about 20 per cent, of revenue, the percentage of capital outlay varying with the type of vehicle, with a minimum of 10 per cent.
Vans Versus Lorries
Comparing the costs of operating vans and lorries of comparable capacity, Mr. Reed said that the charge for supplying a van should be 121 per cent. higher in a typical case. Spare vehicles were made available to the hirer by B.R.S. Contracts, Birmingham, for peak work at the normal charge, A licensed vehicles being withdrawn from general haulage if required to meet the demand. Since 1955, the number of contract vehicles in operation had increased from 99 to 315.
In his opinion, said Mr. Reed, the supply of a driver with the vehicle was advantageous to the trader, because he did not then have to cater for labour shortages and so on. If necessary. arrangements could be made for the trader to supply fuel for the vehicle.
TECALEMIT NEW FACTORY TECALEM1T, LTD., having reached agreement with the Board of Trade. have decided to proceed with the building of a factory at Pool, Camborne. Cornwall.
The first plan is for the erection of a building of about 30,000 sq. ft. with the necessary services on a 15-acre site, where there will be ample room for expansion. PERKINS AT BRANDS HATCH I-1 A DISPLAY and demonstration of Perkins-powered equipment will be
held at Brands Hatch racing circuit front June 12-17, Named "Power by Perkins," it will feature oil engines, outboard motors and gas turbines made by the Perkins group, and also the products of its manufacturing customers in the United Kingdom and overseas,