Rates for Local Work
Page 78
Page 81
If you've noticed an error in this article please click here to report it so we can fix it.
• . N owner of two B-licensed vehicles has put to me A
some questions of wide interest which he wishes tile to discuss_ He framed his problem in these terms: would I deal with the difficulties of a B-licensee confined to local haulage of general goods?
He has a 3-tanner and a 5-tanner, and I gather that his licence allows him to operate within a 25-mile radius. The 5-former is used for general traffic, and the 3-tanner is on daily hire to local. councils. He wanted me to recommend daily hire rates for both types of vehicle and to give time and mileage charges. He stated that he had two different rates for the use of the 5-tanner. According to one, he runs 20 miles out and back. 40 miles altogether, and charges 2s. id. a mile. This earns him £4 3s. 4d_ a trip. Ry the other he is allowed four hours for the same journey and is paid 7s. 6d. an hour and Is. a mile. • Four hours at 7s. 6d. an hour is fl 10s., and 40 miles at Is. a mile is £2, so that he earns £3 10s. It might therefore be concluded that the all-in rate of 2s. Id. a mile is better, but from his experience my correspondent has come to the contrary conclusion, because only a little delay at either end of the journey for loading or unloading is required to offset the apparent gain of 13s. 4d.
Consideration of this fact led him to ask my advice on time and mileage rates. As will subsequently become clear, he is obtaining good revenue if he is being paid 7s. 6d, an hour and is. a mile for his 5-tanner.
Much Rate-cutting
He added that there is much rate-cutting in his area. I should explain that he operates in a rural area where tenders were recently put in for work for the current year for a rural district council and a county council. He reported that operators with 2-3-ton tippers had been working for 5s. and 5s. 6d. an hour. .
Believing that these charges were too low, he and a friend called a meeting of local operators so that they could discuss rates before new quotations were put in. As the outcome of that meeting it was agreed that it was advisable for everyone to quote 7s. an hour.
"See what happened," he stated. "Two of us, both members of the Road Haulage Association, had our quotations of 7s. an hour turned down. Another member quoted 6s. 6d. and was accepted, but he now finds that he will have to stand down when a man who quoted 6s. an hour obtains another vehicle which he has ordered. This is an indication of the state of affairs in this particular area."
Before recommending rates to him. I must set out the c.40 operating costs of the two vehicles. It is always valuable to know the weekly mileages of the vehicles when doing this. Maintenance and depreciation, for example, are higher per mile for short weekly distances than for long. The fuelconsumption rate for low-mileage work is greater than normal, but I do not think that fuel consumption in this case will he excessive.
To judge from the example quoted of round journeys of 40 miles a day, it would seem that' if I took 300 miles a week as an average this would be satisfactory. It is higher than the total of 40 miles a day and will cover various contingencies. I will proceed by taking figures from the current issue of " ' The Commercial Motor' Tables of Operating Costs," modifying them as I go along to suit the circumstances.
Standing Charges
Taking the 5-tonner first, the standing charges per week will he: tax, 12s.; levy, 3s. 3d.; wages, with provision for holidays with pay and insurances, £8 5s. 6d.; garage rent, 10s.; vehicle insurance, £1 5s.; interest, 12s. Total, El 1 7s. 9d. For the running costs I shall take petrol at 31d. a mile, lubricants +d., tyres lid., maintenance 21d. and depreciation 2.1d. Total. 10d.
For the 3-tonner. the corresponding figures for standing charges are: tax, 12s.; levy, 3s. 3d.; garage rent, 9s.; wages, etc., £8 5s. 6d.; insurance, £1 2s. 6d.; interest, 8s. Total, 111 Os. 3d. The running costs are: petrol, 31c1.; lubricants, Lyres, Id.; maintenance, 2d.; depreciation. 2d. Total. 841.
In the foregoing I have assumed that Grade I area wages apply, notwithstanding that it appears that the operator's base is in a Grade II area. I do this because his Grade ii area is small And in the middle of a highly industrialized district, and it is improbable that many journeys will be made without going into a Grade I area, thus justifying Grade 1 wages..
1 have no idea about this haulier's establishment costs and must make some assumptions. His headquarters are in the country, which would suggest that some of his overheads are likely to be below average. Some principal items are: office rent and rates, £10 a year; lighting and heating, 15: telephone, £6; audit fees, £5; haulier's own salary as manager, £160; printing and stationery, £2; postage, £5; sundries, £12. That totals £205 a year, approximately E4 a week.
Splitting that amount pro rata to payload capacities of the two vehicles, I propose to allocate £2 10s. a week to the 5-tanner and LI 10s.. to the 3-tanner. if I add these to the
totals of standing charges 1 get a weekly sum of £13 17s. 9d. for thc 5-tonner and £t2 10s. 3d. for the 3-tonner.
We come now to the profit ratio, that is the percentage to be added to the total cost to arrive at minimum revenue. This operator is engaged upon casual hire and is therefore entitled to not less than 25 per cent, as a profit ratio. It is true that, in the ordinary way, 20 per cent. or maybe 15 per cent, is sufficient in respect of work for a municipal authority, but it seems clear that the contracts into which this haulier enters are not long-term in the sense that they give him security of employment for any extensive period.
I gather that his quotations are on an hourly basis for daily hire. That means that the council will call upon him as and when he is needed and pay him the quoted rate. In such circumstances, the 25-per-cent. profit ratio applies: It is necessary to add 25 per cent, to both running costs
and standing charges. I emphasize this because I once found that some readers thought it should be added to either one but not both. In this connection 1 recall that on one occasion, when I Was arguing about sugar-beet rates before the National Farmers' Union. my opponent observed:
I see you take a double profit." I have never been able to discover whether he was being serious.
Taking the 5-tonner, 25 -per cent. on £13 17s. 9d. is 13 9s. 5d., so that the revenne per week for time must be at least £17 75. 2d. If I divide that amount by 40 hours, get 8s. 8d. as the minimum charge per hour. Adding 25 per cent. to the .running cost of 10d. a mile brings it up to Is. (P.d.
For the 3-tonner, the fixed charges are £12 10s. 3d., and adding for profit makes them £15 12s. 10d. That is equivalent to 7s. 10d. an hour for a 40-hour week. The running cost is 8td. a mile, and 25 per cent. of that is 21d., so that the mileage rate must be not less than 11d.
As a matter of interest, let us inquire into the costs for comparable oil-enginesd vehicles. First, the 5-tonner. The weekly standing charges will be: tax, 12s.; levy, 3s. 3d.: wages £8 5s. 6d.; garage rent, 10s.: insurance,-£1 5s.; interest 15s. 3d. Total. £11 1 is. Add £2 10s. for establishment charges and we obtain £14 is. for fixed costs. Profit at 25 per cent. will amount to £3 10s. and the total earnings perwk to cover that will be £17 I Is. For a 40-hour week that is 8s. 10d. an hour • The running-costs per mile are: fuel, 21d,; oil. id.; tyres, I Id.: maintenance, 2d.; depreciation, 31d. Total, 8.id. Adding for profit at 25 per cent, we obtain lid, a mile.
For the 3-ton oiler, the figures are: tax, I2s.; levy, 3s. Id.; wages, £8 5s. 6d.: garage rent, 9s.: insurance, £1 2s. 6d.:
'interest, 1 Is. 3d. Total. £11 3s. 6d. Add E1 10s. for establishment costs, making £12 13s. 6d., and 25 per cent. for profit and the weekly fixed charges become £15 16s. '10d. That comes to 7s. Ild, per hour for. a 40-hour week.
The running costs will approximate to 71d. a mile, comprising lid. for fuel, '.10:1. for oil, 11d. for tyres, ltd. for maintenance and 21(1. for depreciation. Adding 25 per cent. for profit makes the mileage charge 9d. I yvill continue the comparison between petrol and oil.Vehicles in my next
article. . S.T.R.