Why are Tenders Failing?
Page 54
Page 57
If you've noticed an error in this article please click here to report it so we can fix it.
asks Ralph Cropper,
M.Sc. (Econ.), B.A., A.M.Inst.T.
B.T.C. and Disposal Board Base Their Valuations of Transport Units on Fallacious Reasoning : No Good will Being Sold
WH Y are tenders being rejected? What are the reasons for the Road Haulage Disposal Board refusing to sell the transport units offered? What are their powers of refusal?
These are important questions of principle and one would have thought that the public were entitled to some explanation before it is too late. This question of time is crucial: We are already about half-way between the passing of the 1953 Act and the abolition of the 25-mile restriction.
The whole procedure is being wrapped in too much august mystery. It is too slow and stately, without anything like sufficient vitality and reality. If the Disposal Board are wrong in rejecting some of the tenders honestly presented to them, there must at least be a lapse of many valuable months before that / policy can be tested and, if proved wrong, amended.
We all know that the attractiveness of special A licences declines as December 31 approaches, and their value decreases. It would thus seem most desirable, having regard to the dissatisfaction prevalent, that a statement of policy should be issued by the Board, giving answers to the questions posed at the head of this article.
Welcome Assurance Sir Brian Robertson, chairman of the British Transport Commission, has declared that they intend loyally to see that the terms of the 1953 Act are implemented. That is a welcome statement, particularly because of the well-known views of many members and employees of the Commission, who consider that the policy of the 1953 Act of breaking up the British Road Services is wrong,
However, words must be fulfilled in action. Obviously the Commission are doing something towards disposal. The question is whether they are doing sufficient, doing it quickly enough, and doing it in the way that Parliament would have intended.
It could be that here is a convenient device for hamstringing denationalization. One cannot expect that it is the most pleasing policy for the princes of nationalized transport to have to secede some of their empire. For each tender rejected and unit unsold, the vehicles concerned remain within the empire for at least a little longer.
Two conflicting policies face the Commission and Board in proceeding with disposals: to sell as quickly as possible, or to hold out for high cl 6 prices. Some point of balance has obviously to be chosen between the two.
Without belittling the difficulties, it would seem to be fair comment to state that the Commission are not selling off very quickly. The administrative difficulties have been considerable, but the delay is now being increased by the Commission leaning heavily towards the second policy and trying to stick out for high prices.
What balance should be struck between these policies? There can be little doubt as to the primary policy. The whole tenor of the Act is for disposal. The title of the Act states its purpose as "to require the British Transport Commission to dispose of the property held by them for the purposes of the Road Haulage Executive."
Commission's Duty
Section 1 starts by imposing the duty on the Commission "to dispose, as quickly as is reasonably practicable, of all the property" of B.R.S. Then Section 3 deals with the sales of transport units, which are to be devised in such a way as, in the opinion of the Commission, is " calculated to enable a purchaser to engage without delay in the carriage of goods by road for hire or reward." These quotations surely give ample support to the proposition that the primary policy of the Act is to get the disposals undertaken quickly.
It is only after all this in the Act that a clue is given about price. "Subject as aforesaid," the Act states, "the transport units shall be determined with a view to securing . in the aggregate the best possible price." Clearly, a policy which is to be "subject as aforesaid" must be subordinate to those stated previously in the Act.
Price, and the right price, is one of the most baffling of all problems. The determination of the right price troubled the classical philosophers, perplexed the medieval schoolmen, and provides constantly changing theories from the modern economists.
But whilst theories on price may not be 'of much assistance to the Commission and the Disposal Board in adjudging tenders submitted, there still remains one simple practical rule to guide them. It is so simple that some are apt to suspect it. The right price is merely what the article will fetch on the market. Nothing is worth more than buyers are willing to pay for it.
The rejection of tenders for transport units means one of two things: either that the Board and the Commission have inflated ideas about price, or that they have not fully explored the market among buyers. There certainly exists a fairly widespread body of opinion that the Commission's ideas on values seem to be excessive.
Useless Units In the February 5 issue of The Commercial Motor I explored some of the reasons why the values of special A licences were not always so great as some might expect. Many of the units offered are almost useless in relation to the special A licence, because the unladen weight does not permit the substitution of the kind of vehicle that is required for longdistance work.
From such scanty information as one can glean, it would appear that the Commission support their ideas on values of transport units on two other fallacious arguments. First, as to vehicles, the Commiskon regard those on offer as being generally well maintained, and accordingly consider that they should command prices equal to or better than those prevailing among reputable dealers in second-hand vehicles.
But this cannot be so. Vehicles sold by dealers carry some sort of guarantee, even if it is no more than a satisfied customer which will enhance the dealer's goodwill. Some dealers, of course, go further and give specific guarantees.
Nothing of this kind exists with vehicles sold by the Commission. Tenderers are not permitted to test vehicles properly; they can only inspect them in the yard and cannot le them round the streets. Vehicles ave to be inspected today and a rice offered on the chance that the md.erer may get them in six to eight 'mks' time.
Buyers obviously have to discount 'om their estimate of value for all Le possible things that may happen ) the vehicle in that six to eight reeks. They not only discount for roper fair wear and tear, but also )r other irregular substitutions and djustments in the vehicle, which
■ ould certainly be forbidden by the `ommission but which, to a certain Ktent, the B.T.C. are powerless to etect and prevent.
Secondly, the Commission appear ) consider that there is a factor of Blue in goodwill. For goodwill to mamand a value in any sale, it must lways be shown that the buyer is etting it. This is not only common Dnse, but is also the legal principle Dcognized by the Courts.
The Commission are making no (forts to pass forward any measure f goodwill with the units on offer. 'deed, no information is given as to le work which the vehicles have een engaged on, and no attempt is lade to hand on the work and secure ustomers' assent to the transfer.
No Goodwill Perhaps when the Commission ome later to dispose of vehicles -trough the company method, there lay be some real goodwill passing prward, which should naturally be aid for. But the units at present eing offered possess not a particle f goodwill.
So far as can be ascertained, few Dnders have been accepted in which le value of the special A licence ppears to work out at less than £100 er ton of unladen weight. If the :ommission have been able to cornhand this price, and more in certain ases, it is certainly fallacious for 'tem to imagine that such a high rice can always be secured. If tat is the reserve price, or whatever is, it would clear the air of much tisapprehension and suspicion if a tear statement were publicly issued. Buying and selling is a funny usiness. There is much that is !most temperamental and whimsical bout it. People follow each other ke sheep, which can cause a run on he market. Equally, a suspicion nce abroad causes everyone to shun [urchasing. If buyers start to sense at everything is not absolutely above the table," their ardour for uying can quickly evaporate.
There already exists much perilexity as to why tenders are being refused. Another reason for hesitation is whether there are better fish still in the sea. The sprats and shrimps so far offered may be useful enough to those wanting such catches, but others may be hoping for halibut to follow. The Commission seem to be dilatory in announcing how and when some of their more attractive possessions are to be offered.
Keeping the Best For the 3,500 vehicles which they are permitted to retain, the Commission will certainly select the best of the fleet for themselves. But there will remain many large and modern vehicles which can be put on offer. What is especially needed is more large vehicles, such as 15-tonners. so that purchasers obtain a special A licence with an unladen weight which will allow the operation of vehicles that are really suitable for longdistance work.
The fact that these may be offered. sooner or later, causes doubts among some would-be buyers, who do not know whether to bid for less suitable units now or to wait in the hope that more appropriate units may be forthcoming in the future.
How can the present policy on disposal be vitalized? It is good to learn that the Road Haulage Association have been to the Minister. Even though he does not seem to have any statutory power, it is to be hoped that he may find some way of stimulating the whole process.
Apart from that, the stage may now have been reached when an appeal to the Courts can be considered. With the issue of the R.1 list, definite information becomes available as to the units not previously sold. Some tenderers are now in the position of knowing, not only that their tender was refused. but also that no one else tendered any higher. Hence, their tender was considered too low by the Commission and/or the Board.
The point at issue is whether the Board, in thus rejecting tenders, are implementing the primary policy of the Act of disposing of the B.R.S. The Board would be able to quote Section 3 (7), which instructs them to refuse to approve a tender "unless they are satisfied that the price is a reasonable one having regard to the value of the property and rights which the purchaser will obtain by the purchase, including the rights" of the special A licence.
The test would have to be taken by a writ of mandamus or certiorari, and would be in the form of a request to the High Court to determine whether, in the particular case, the bodies dealing with the 1953 Act have been properly fulfilling their duties under it.
A " Reasonable " Price The question boils down again to the " reasonable " price. In essence, as has already been argued, it is no more than the Board can entice from tenderers. It is obvious that no one can be forced to pay more for a transport unit than he is prepared to offer.
Unless, therefore, this principle is recognized, the whole process of denationalization is arrested. The efforts of all those who have fought nationalization are brought to nought and the intentions of Parliament in the 1953 Act are sidestepped.