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SELF-DECEPTION IS TOO EAS N QUOTING FOR CONTRACTS
Page 76
Page 77
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Hauliers must Take Part of the Blame for the Uneconomic Rates at which Municipal Contracts are Placed in Many Cases, as it is So
Easy to Underestimate
IN this article I am not going to harp upon the tendency of hauliers, when quoting for municipal contracts, to do so on that familiar basis of ascertaining the rate at which the work was done the previous year and tendering for it at 6d. per hour less than that. I want, this time, to consider the subject from another angle.
It is uphill work trying to convince both parties to a contract that the price is unfair and uneconomic. It is understandable that a town or county council should be inclined to dispute my figures, when I tell them that they ought to pay higher haulage rates. After all, it is their duty to see that their ratepayers get full value for their money, and to guard against paying more for work than they need pay. , If, however, they go beyond certain limits in the matter and forget that they have a double duty to perform—to be fair to those they employ, as well as to those who "pay the piper" —then anyone is justified in reminding them of that.
My position becomes more difficult, however, if the hauliers themselves do not support me. It would be wiser, surely, if those who disagreed with me were to hold their peace, accepting any increase in rates which I was able to obtain for them.
The real reason they take that attitude is simply that ' they are ignorant of what their real costs are, and what the rates really ought to be if they are to make the margin of profit which is justifiable in respect of haulage work, having in mind its peculiar and special conditions.
As exemplifying the extent of the ignorance which does prevail in this matter, I can quote an actual case It arose at a meeting I was addressing on the subject of costs and rates. During the discussion, a haulier told me and those present that he was operating a 2-ton vehicle averaging 250 miles a week and that his total cost of operation—ascertained, he stated, as the result of careful accountancy over at least a couple of years— was no more han 41d. per mile.
I challenged his figures, and on his stating that he would prefer to bring his books, offered to prove that he c22 was wrong, without reference to any books at all, and to do so out of his own mouth. He accepted the challenge.
I said: "I will take your standing charges only ; I will take them on a minimum basis, giving you every possible credit and I will guarantee that, without going any farther, I can prove that you are wrong." His tax, he admitted, was £25 a year, or 10s. a week. He paid his driver £3 5s. a week wages. I ignored the fact that, in addition to the net wage, he has also to pay his appropriate share of national insurances, unemployment and health, and that he probably had something to pay in connection with employers' liability insurance.
• S.T.R. Makes Generous Allowances •
On the question of vehicle insurance, he assured me thatt he was in a particularly favourable position as he was an insurance broker and his expenditure thus amounted to no more than 6s. per week on this item. We had a tussle over garage rent, because he said he housed the vehicle in a building of his own and in the end I accepted, but only on the principle of giving him credit for everything that I possibly could—a figure of 2s. a week on account of rates. I did not dare suggest to him that he should make allowance for interest on the capital outlay involved
I pointed out to him that the total of these four items alone was £4 3s. per week, which is 906d. and that, as near as makes no matter, is 4d. per mile, on the basis of 250 miles per week. I asked him if he expected me to believe that his running costs, comprising expenditure on petrol, oil, tyres, maintenance and depreciation, were cbvered by the remaining halfpenny per mile. Do you think I convinced him? I did not!
Now let us try to interpret that man's firm determination that his costs are only 41d. per mile, in terms of a municipal contract.
It is fair to do so, because 250 miles is approximately the distance likely to be covered in a week, on that work. The average, allowing for 48 hours per week, is 5 m.p.h., approximately. Five times 41d., is is. 101d. Such an operator will imagine that he is well paid if he obtains 2s. 6d. an hour and would probably feel that he was robbing the municipality concerned if he were to accept 2s. 9d. or 3s. per hour. That is the sort of difficulty that those who would take steps to obtain better conditions in connection with municipal contracts have to face.
I would ask every haulier who is in doubt, to read the two articles which appeared in the issues of The Commercial Motor dated February 10 and February 17, 1939, in which I set out the actual costs and minimum rates which should apply in connection with municipal haulage. I showed that the rates per hour should be as follow : for a 20/30-cwt. vehicle, 5s. lid. ; for a 2-ton vehicle, 55. 7d. ; 3-ton, 6s. Oid.; 4-ton, 6s. cid.; and 5-ton, 6s. llid. Those are fair rates.
I would ask every haulier who is considering rates for this class of work, to begin by assessing his own standing charges, in.the manner-in which I put them before this individual at the meeting. I suggest that he just jots down the five items as follow, assuming that he has in mind a vehicle of the same capacity, namely, 2 tons. I will take Grade 2 wages as a basis.
The tax is probably 12s. a week, because many of these 2-tonners, with tipping gears, exceed the unladen weight of 2 tons, which is the limit of application to the £25 per annum tax. Assume that his garage rent costs him 5s. per week, his insurance 10s., and let him allow 4s. per week for the interest on the capital locked up when he purchased the vehicle. In those four items
alone, there is a total which mounts up to 31s. per week.
He has still to consider wages, and should bear in mind that according to the terms of the contract into which he proposes to enter, he must pay as the net wage alone, £3. In addition, he has to make provision for national unemployment, for national health and employers' liability insurances.
• The Holidays-with-pay Factor • Moreover, in the near future—it cannot be more than a few months now, at the outside—he will have to arrange to give the driver of every vehicle a week's holiday with pay. If he is going to run the vehicle for that week, that means he will have to get another driver and thus find an extra week's pay each year. If he makes all those provisions, and adds the total on to the net wage, he will reach the figure of 64s. per week.
In addition, he must appreciate that he has certain other regular expenses to meet, expenses which I usually refer to as the cost of operating his business. At the most moderate estimate, these cannot total less than 10s. per week per vehicle.
For these fixed charges alone, therefore, the total is £5 5s. per week. If he appreciates, as any haulier of experience must, that the average number of hours per week he is likely to be engaged will not exceed 40—it is more likely to be fewer—he will realize that for those items alone, his bare expenditure is in excess of 2s. 6d. an hour.
That appreciation will go a long way towards preventing his offering the vehicle for 3s. an hour. If he does so and runs at no more than 6 m.p.h., then his allowance per mile run for petrol, oil, tyres, main tenance, depreciation and profit is only Id. S.T.R.