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What to Ask for Contracts

29th August 1958, Page 56
29th August 1958
Page 56
Page 57
Page 56, 29th August 1958 — What to Ask for Contracts
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Which of the following most accurately describes the problem?

ASa change from ancillary operators who are considering entering into C-hiring contracts, a vehicle distributor writes for advice on the rates to be charged in connection with a proposed contract-hire arrangement with a local operator. The proposed hire would cover not only the vehicle, but also the provision of full maintenance and the supply of oil fuel.

The inquirer also a'Sked for an opinion as to what would be considered reasonable depreciation to be taken on the vehicles included in the contract. It was expected that they would be changed not more frequently than every two years, and possibly three years.

Initially, it was expected that three 11-ton oil-engined vans, each costing about £1,175, would be required. Annual mileage was estimated to average around 40,000 per vehicle.

The distributor considered that the following items of 'cost would have to be included in the quotations for the hire contract: initial cost, depreciation, road licence, comprehensive insurance, all repairs, all scheduled service, replacement of tyres and batteries, and the supply of fuel at an estimated consumption rate of 30 m.p.g. He asked for the recommended rates to be given in terms of cost per mile or an aggregated annual sum per vehicle, with the object of giving a reasonable return on the outlay of capital.

& Providing the Driver l Before entering into details of operating costs, it is first necessary to establish whether the vehicles were to be operated under contract on C-hire licence, as this would obviously affect the standing costs to the extent of the inclusion (or omission) of drivers' wages. In this instance it was confirmed that the customer would provide the driver.

Dealing first with standing costs, licences would be approximately 10s. per week, resulting from an unladen weight in the 11-2-ton category. Rent and rates are assessed at 8s. 6d. per week. Insurance is placed at 10s. per week, based on a comprehensive policy with an annual premium of £25. Interest at 6 per cent, would amount to £1 8s. 6d.. giving a total standing cost for the week of £2 16s. .

Although the annual mileage of 40,000, as initially given, seemed rather high for this class of vehicle, it was confirmed that this might even prove a. conservative estimate and an average weekly mileage of 800 must be assumed. The standing

costs per mile would, therefore. be 0.84d. . , The major item of running costs—fuel—would amount to 02 2d. per mile. It was thought that whilst 30 m.p.g. might b readily obtainable under the best conditions, it would be prudet to take a lower figure. Lubricants were assessed at 0.22d. an tyres at 1.20d. per mile. Maintenance adds a further 1.654 and depreciation 2.70d., making the total running costs pt mile 7.77d. When added to the standing cost per mile for a 800-mile week, this gives a total operating cost of 8.61d. pe mile.

Rent and rates have the distributor will be been included on the assumption du responsible for garaging, whilst 4s. pt gal. has been taken as the price of fur In view of the comparatively hi weekly mileage, the estimated tyre co has been based on a mileage of 20,0( per set. The figure of 2.70d. per mi has been obtained for depreciation aft' deducting the estimated residual yak and the cost of an initial set of tyr. from the original price of the vehicle.

It should be emphasized that the fin figure of 8.61d. per mile is the estimatt minimum operating cost, to whit should be added the distributor's own overhead costs, whit show wide variation between different organizations. Final] a profit margin has to be added which, in similar instance varies from 15-20 per cent.

Whatever individual arrangements are made in a C-hi contract to suit any set of circumstances, it should always borne in mind that the operating costs of a commercial vehic comprise 10 items—licences, wages, rent and rates, insurara and interest, fuel, lubricants, tyres, maintenance and depreci. tion. It is, therefore, important that before agreement reached. all these items should be considered and mutual accepted as the responsibility of one party or the othe Similarly, the extent to which replacement vehicles are to provided should be clearly defined.

ALTHOUGH readily understood by regular readers, ti terms, "operating cost per mile" and "hauliers' figur (charges) per mile," as used in "'The Commercial Moto Tables of Operating Costs," are the subject of another quer This reader asks, if he wishes to calculate the cost per ton fl a certain journey 126 miles from base, would he be correct taking the hauliers' figure (charges) per mile for the 126 mil while the load is being carried and the operating cost per mi for the return journey? Would these two amounts divided I the tonnage carried give the charge per ton?

It is first necessary to emphasize the clear distinction to 1 made between costs and charges. For examPle, referring to pages 28 .and 29 in the 42nd edition of "'The Commercial Motor' Tables of Operating Costs (incidentally, the 43rd edition is to be published on September .26), it will be seen that the total operating cost for the popular 5-ton oiler, when operating 500 miles per week, is shown as 13.78d. (approximately Is. lid.) per mile. In this sum is • included all the items involved in actual operation.

Lower in the same table, the corresponding minimum charge per mile for the same vehicle, when operating 500 miles. per week. is Is. 6i.d. The difference is accounted for by the addition of a profit margin of approximately 20 per cent., plus an allowance for overhead costs. Overheads are. incurred by the business as a whole and not directly by any vehicle.

If, therefore, it is the actual cost to himself that the operator wishes to calculate, then, in the instance quoted, this would amount to 252 miles at 13.78d. per mile, whilst under average Conditions the haulier would have to charge Is. 61d. a mile to his customers to obtain an adequate return. In practice, however, there would obviously have to be other trips to do as well to provide a:reasonable week's work, whilst it would be usual for established hauliers to be able to obtain a proportion of back-loads. This factor, together with the extent of local competttion, must inevitably have some influence on charges.

AN ironmonger says he is considering forming a limited company to deal with the bulk sale of heating oils. As le already has a C licence in connection with the ironmonger's Jusiness, he is wondering whether he can use the same vehicle 'or both businesses, or whether he would need to hire a vehicle 'rom himself to the newly formed company.

As it is not permissible for a vehicle to be specified in more .ban one carrier's licence at the same time, the two separate businesses could not make joint use of one vehicle. But a licence granted to a holding company owning not less than 90 per cent. of the issued share capital of a subsidiary is valid for any vehicle operated by the subsidiary. if, therefore, in this instance, when the new company was formed to deal with the bulk sale of heating oils, arrangements were made to comply with this provision, it would be possible to use any vehicle specified on the C licence for both businesses. It would appear that this should not present any difficulty.

STOP lights arc the subject of another inquiry. A reader asks when it will be necessary by law for a pre-war goods vehicle to carry two rear stop lights and whether such rulings would also apply to trailers.

As there is no legal obligation for stop lights to be fitted to any vehicle, the distinction between pre-war and post-war models does not arise. If, however, they are voluntarily installed, the following conditions must be complied with: (I) If only one stop light is carried, it should not be fitted to the left of the centre, but this, of course, does not preclude duplicate stop lights on both sides. (2) The light must be red or amber and diffused by means of frosted glass or similar means. , These conditions apply to both vehicles and trailers unless they were registered before January 1, 1936, in which case they would be exempt. it is emphasized again, however, that this date refers only to the conditions to be satisfied if stop lights are voluntarily fitted. S.B.

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