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Contract-A or C Hiring

7th September 1951
Page 60
Page 63
Page 60, 7th September 1951 — Contract-A or C Hiring
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Which of the following most accurately describes the problem?

In this Timely Article the Conditions of These Two Types of Licence are Fully Examined and Described

UNTIL recently, 1 was accustomed to receiving inquiries about contract-A •licences. The interest has now switched to operation under a C-hiring margin. It would be of interest to deal with the two kinds, showing first of all how they .differ in the legal aspect and what is the difference in cost of operation.

A contract-A licence is, as its name implies, an A licence limited in its use to a specific contract. Such a licence is issued to an operator who can produce a properly signed and drawn-up contract with a trader or merchant for a period of not less than one year, The vehicle so licensed may be used in the service of only that merchant or trader, and it may not carry goods belonging to anyone else. It used to be the case that a contract-A licence was equivalent to a C licence. Before the days of nationalization, a vehicle authorized to a haulage contractor under a contract-A licence could do precisely the same work as it would be allowed to do if it were operated by an ancillary user under a C licence.

The Transport Act, however, altered all that inasmuch as • a vehicle on contract-A licence operated by a free-enterprise , haulier was, like any other A or B licence vehicle, limited to a 25-mile radius, and this limitation, of course, greatly reduced the value of such a licence.

• Granted on Demand

Even so, this type of licence is attractive to many operators, particularly because of the difficulty of obtaining additional A and B licences of the ordinary type. A further point which lends attraction to this type of licence is that, generally speaking, it is issued by the Licensing Authority practically on demand just the same as an ordinary C licence. It is true that comparatively recently the Licensing Authorities have been much more restrictive in granting such licences, and have, before making a grant, taken the trouble to satisfy themselves that the terms and conditions of the contract are such as to ensure economic operation so far as the haulier is concerned. The principal purpose of this is to prevent hauliers entering into unremunerative contracts.

The C-hiring margin differs from the contract-A licence in several ways. First of all, it is not taken out by the haulier. If a merchant or trader, an ancillary user of any kind, desires a haulier to operate vehicles for him under a C-hiring margin, then that ancillary user most obtain the licence to hire the vehicle. This is provided for in the Road and Rail Traffic Act by a section which reads: "The vehicles authorized to be used under a licence shall be (amongst others) motor vehicles from time to time in the possession of the holder of the licence under an agreement for hire or loan not exceeding at any time such maximum number as is specified in the licence."

438 What this means may be more clearly understood if reference be made to form G.V.5, which is the one on which the original application for a C licence is made. On that form there is provision for the applicant first to apply for a C licence in respect of the vehicles which are specified by their index mark and registration number, and then for a number of vehicles which the applicant wishes to take on hire without a driver. These hired vehicles are those which are referred to as being on hiring margin; it should be noticed that they are not specified by reference to any index, mark or any registration number, and there appears to be no specific limit to the period, other than the ordinary duration of a C licence, for which the vehicles can be used under this hiring margin.

Haulier's First Responsibility

If, therefore, a haulage contractor is requested by an ancillary user to provide vehicles, the haulier must ask that ezcillary user first if he has a licence to hire vehicles without a driver, and secondly, if there be sufficient number of vehicles included under that licence to cover those which the haulier is being asked to supply.

If there be provision under the C licence to cover these requirements, then no more need be done in the way of applying for licences. If, however, the C-licensee has not asked for any vehicles under a hiring margin, or if he be already using vehicles under a hiring margin to the maximum specified in his licence, then he must apply on form GN.7 for a variation of his C licence under the paragraph which reads: "Please increase the number of motor vehicles authorized to be hired without a driver. . .• ."

The next point to note is that in this application the vehicles are distinctly specified as being "without driver." This is important and should be particularly noted by the haulier. He is being asked to hire vehicles to the C-licensee under this hiring margin and, therefore, the vehicles must be without driver. The driver must be an employee of the C-licensee, not of the haulier, • Quite a number of misunderstandings arise on this point, and it may be just as well to confirm it by a further reference. In Section 1, Sub-section 3 of Part 1 of the Road and Rail Traffic Act it is stated: "When a goods vehicle is being used on the road for the carriage of goods, the driver of the vehicle, if it belongs to him . • . and in any other case the person whose agent or servant the driver is, shall . . . be deemed to be the person by whom the vehicle is being used"—and, therefore, the person who holds the licence.

That strengthens the condition to which I have already referred, namely, that the vehicle is being hired without driver, for it makes it perfectly clear that the driver is the employee, of the C-licensee. The above paragraph quoted from the Act suggests, in fact, that the person who is using the vehicle, the person who has taken out the licence, must be the employer of the' driver.

This provision for a hiring margin was not, before the passing of the Transport Act, a matter to whichany great amount of consideration was normally given by the haulier. Only now and again was he asked to provide a vehicle without driver and even then it was to oblige a customer and not with a view to obtaining additional business. .

Now the conditions are radically altered. The ancillary users, traders, merchants and manufacturers, who for -any• reason prefer not to operate their own transport or who would rather make use of -the services of a free-enterprise haulier than put their traffic in the hands of British Road Services, have found in this hiring-margin provision the way to satisfy these preferences.

Recourse to the C-hiring margin often comes about +n this way. The ancillary user has been accustomed., to employing a certain haulage contractor to transport his goods and wishes to continue to do so. He contacts ,a haulier who, as a rule, advises him that it is practicable to continue the service by taking advantage of the hiring-margin provisions, .provided that the ancillary user is willing to take over the responsibility of employing the driver. The important point, so far as, the haulier is e.oneerned, is that the 25-mile-limit does not apply t6 vehicles licensed in this -ma tiger.

Another point which should' be' noted is that it is not necessary in the appliCation for a hiring •margin to specify the vehicle. The haulier' is therefore not compelled by law , to provide a specific vehicle.' Any vehicle may be used provided that iris of the right size and type to Suit the purpose of the C-licensee: Different Costs Turning now to consider the cost angle, it should be fairly obvious that there is this important difference between a:contract-A licence and a C-hiring licence. In the first, the haulier pays the driver and should include that expenditure in his estimate of the cost of operation, whereas in the other case the driver's wages are paid by the customer and Must be omitted.

As an example, let me take .a recent inquiry relating to a 25-30:cwt. van. The inquirer sent me the form of contract which it was stated would apply in this case, and must say that there was nothing mean about the conditions. The agreement related to a van of the capacity named, painted and written to choice of colour and design, taxed, insured under a fully comprehensive policy, the contract to cover provision for all repairs, including replacement of tyres and maintenance of the paintwork in • first-class condition.

Each van had to be touched-up and varnished once every 12 months and a regular inspection had to be made by a fully qualified mechanic who, was to check. and replenish lubricating oil whenever necessary. There was provision for a spare van to be kept in readiness and available instantly in the case of a breakdown.

Those having experience of this class of work will appreciate that the foregoing is a brief summary of a normal form of contract of hire. There is, however, this exception.

I had not previously heard of a case in which the haulier had to allow a regular inspection by a mechanic appointed by his customer. The fact that this clause appeared indicated that the conditions of the contract Were likely to be stringently -applied against the contractor who would no doubt be expected to live up to the spirit, as well as the letter of his agreement. .

The stipulation that the vehicle was to be touehed up and varnished annually is another indication of the way in which the contract as a whole is likely to be interpreted by the customer. It follows from that alone, apart from the possibility ...cif any breakdown, that a spare vehicle would be required for at least two weeks out of the 52. It is practically;Ce.nain that the spare vehicle would be required for a

month in every year. • There were, of course, other clauses. The work involved full-time use of the vehicle for six days per week, during which it was expected that 200 miles at least would he covered. It should be noted that in view of this particular clause, servicing operations would have to be carried out either at night or on Sundays, which would involve extra cost because the mechanic employed would have to be paid at overtime rates.

I set to work to estimate the charge which this haulier 'should make. I assumed that the petrol consumption rate would be 18 m.p.g., basing that assumption on the fact that there was bound to be a certain amount of local deliveries, which would raise the consumption rate above average.. With petrol at an average cost of 3s. 5d. per , gallon, the cost per mile for fuel is 2.28d. For lubricating oil I assumed a consumption of one gallon for 600 miles, and the price to be fis. per gallon. On the basis of these figures for lubricating oil, the cost per mile is 0.12d. A set of tyres for this size vehicle at to-day's prices' will cost approximately 160. If I make the assumption that a set. will cover 16.000 miles, the cost of tyres is 0.90d. per mile. For maintenance, having in mind the special requirements of the case, I will assume 0.80d. per mile. That is, of course, maintenance (e), for ,nowadays I put maintenance (d) among the standing charges.

Depreciation Calculation

Now comes the calculation for 'depreciation. I have

assumed that the initial 'cost of the van, painted and lettered and ready for the road, is £680. It. ii equipped with four 32 by ,6 tyres and the cost of a set, as I have already stated, is, in round figures, £60. Deducting £60 from 1680, I get £620 as a net cost less tyres. If I assume a residual value of £70, then I am left with £550 as a basis for 'calculating depreciation.

I .propose to split depreciation, taking half of it as a standing charge and the other half as a running .cost. For the first; the' amount is .£275 and, reckoning on five 'years, J-have.£55.per anntim. which is It 2s. per ,week. For the second I"again have 1275, which spread.over 120;000 miles gives me 0.55d.

The fifth figure for the running costs is therefore 0.55d., and the total running cost per mile is 4.75d The standing charges per week comprise: tax, 10s.; wages, with the usual allowances for insurance and holidays, £5 19s.; rent and rates, 7s. fiele insurance, 10s.; depreciation (half), Li 2s.; maintenance (d), 13s.; interest, 8s. fid. The total is £9 10s.

The above arc vehicle operating costs only; it is still necessary to provide for overheads and profits. For overheads I am going to assume £2 10s. per week. That is a figure rather above the average, but is justified in view of the somewhat stringent nature of the contract Adding that to the standing charge of £9 10s., I get a total £12 per week as the fixed charges. Adding for profit at the rate of 15 per cent., that is £1 16s., the total of weekly charges without running costs is £13 1.6s

What to Quote' • .must also add 15 per cent, to the running cost, 4.75d. per mile, to get the mileage charge, which thus becomes 50., and for 200 miles per week that is 14 Us. 8d., which, added to the £13 16s., gives me £18 7s. 8d. I should recommend the inquirer to quote £.18' 10s., plus a minimum of 6d, per mile for mileage in excess of 200 per week.

Those are the figures I should quote in the case of the contract-A licence. If the inquiry related to a similar vehicle to be licensed under a C hiring. margin, then the simplest way to assess the charges wOuld be to deduct the amounts inserted in the standing charges for wages, insurance and holidays, that is £519s,, from the £18 10s. suggested as a fair rate for the contract-A vehicle. Deducting

£5 19s. from £18 10s. leaves 112 Its.

Alternatively, and more accurately, the procedure should be to deduct the £5 19s. from the total of £9 10s. standing charges, giving a new figure for standing charges of £3 Its. Add the overheads, 12 I0s. per week, to that and we get £6 'Is. per week as the total of fixed charges. The profit on that at 15 per cent. is 18s., giving £6 19s., to which add £4 1 Is. 8d. as before for the mileage charge andthe total becomes £11 10s. 8d. The difference between this and the figure previously quoted is because of the fact that in this more accurate calculation we .are adding profit to 'only £6 13, instead of to 112: S.T.R.

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Organisations: Licensing Authority

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