OK, there seems to be much concern about the use and application of Price Per Pound recovery billing on accident tows. I will try to explain more about this method and attempt to help you better understand its uses.
First of all, when Price Per Pound billing was created in the late 1980's by Stormin Norman Horton owner of Stormin's Towing in Ozark, Alabama it was created because of the industries progression into Hydraulic recovery units and use of Air cushion recovery systems. He saw that he was spending money to become more efficient and therefore doing roll over accidents faster and safer for the cargo and the truck and trailers, and thereby spending less time on the job. He realized that he needed to evaluate his billing methods. He noticed that he was working smarter not harder and that he was more efficient and that meant that he was not charging as much to do that recoveries of overturned tractor trailers. He was not invoicing as much as he had been before he invested in more modern equipment.
Everyone has seen this happen. So he started to look around and talk to other industry leaders and try to gain insight as how to solve a growing industry problem.
He came up with several suggestions and ideas and started to work though them. He finally came up with Price Per Pound, and started to play with it and see if it worked. He started to match older recovery invoices and found that the pricing was not that far off from hourly billing methods. This meant that he was getting closer to what he needed. So he played around with the numbers till he came up with a workable system that was fair to the tower and to the customer also. After all, he wanted to keep the customers happy.
OK, so what is the basic principles of Price Per Pound?
It is and was created for heavy duty tractor trailer rollover accidents. Not for winch outs of stuck vehicles or doing nose down trailers. It was designed for recovery of overturned semi trailers. That is what it was designed and intended to be used for. The use of it for cars, or winch outs is where we are getting the flack and problems. The system is new enough and not used by a majority of companies yet. We are still faced with educating the customer, be it the trucking company or insurance company. We have a lot of work to do in order to get Price Per Pound accepted as an industry standard billing method.
OK, I was recently asked to explain the advantages of using the Price Per Pound billing method verses Hourly billing methods, and if it was still being used on TOW411.NET. Here are some of the answers and things which were asked.
Yes Price Per Pound is still being used and discussed. Sometimes subjects just find better press agents that keep it out of da news..
Ever notice you do not see so much stuff about pit bulls now, or Volcanoes ? ( guess Mount Saint Helens in Washington state is making the news now)
Advantages of Price Per Pound? Yes there are lots of them out there and Price Per Pound is more effective nowadays verses the days of Holmes 750s.
It used to be that you charged for your time on scene with what trucks you took. Now you have incident management and the requirements for modern hydraulic recovery units and air cushions to do the jobs quicker and safer and in a more intact manner.
Now the basic idea for the creation of PPP was that if you went and spent $400,000 on new equipment to handle the rollover which used to take 3 trucks (use Holmes 750's as example) 4 hrs, and you charged by the hour at say (just pulling numbers here so do not get mad about rates mentioned) $500.00 per hour. you would have 12 truck hours billable at $500.00 which equals $6000.00.
OK follow that one?
Now you went and invested in a new sliding rotator and air cushions. You got your $400,000 invested, and you get the same job / call (I know that is impossible), you go do the job with air cushions and the rotator and only take 1 hr and have $ 500.00 per Hour for the rotator ( I know but remember just picking numbers here to show examples ) and you have a $ 2,000.00 minimum for the air cushions, do you just bill the $ 2,500.00 for the job..
You just spent money to lose money.. That is why PPP was created.
Now if this recovery described above is during day time hours, 20 miles from the office and it is normal weather and non hazardous materials, flat on the ground. You know the ideal job, you would be using the standard rate for Air cushion recovery and complete handling of the job with delivery to your yard. No other charges in this sample here.
Now at 80,000 pounds ( legal truck load for roads ), you would be charging ( using the March 2002 rate sheet )
3.4 cents for normal recovery with air cushions and 6.0 cents for hanging complete recovery of the unit .. making a total of 9.4 cents per pound,
80,000 X 9.4 CPP (Cents Per Pound) = $7520.00 for the job. Now granted this is more than you would get on the 3(three) Holmes 750's but you also have got the job done faster, safer and hopefully with less damage to the unit and cargo loss.
Now there are more charges that are applicable but in the interest of keeping the answers somewhere under 88 pages long. I will refrain from going into more details..
I would love to explain how the pricing was reached. First of all, There are 2 sets of formulas one for aircushions used and one for " Wrecker Only " ( I do hate the " W " word also.)
Now if you go to the web site for Stormin's (www.stormins.com/perlb.htm) you can see the different formulas. It is kind of hard to explain in a short paragraph., but questions about weather, travel, and stuff like that is covered with variables in the formula. But, I will try to explain a few things thought.
FOR ONE, either version Stormin's or WreckMaster has numbers listed as base rates, and for variables. NOW these numbers are only wrote in paper or cardboard NOT STONE. you can adjust them for the area that you are in.. I am sure that the numbers from the March 2002 rate sheet of Stormin's or the one on the website that shows the March 2000 rate sheets are not current right now due to fuel and insurance rate increases...
BUT as a side note you do have to be careful and not get to high as you will run into problems with people complaining ( course they do complain about PPP anyway.
Ok the rates that were picked are part of what Stormin figured his costs were to operate the business. The basic formula is not much more then if you did the call on hourly rates, using the trucks that you have. He figured that for each roll over he needed to make (say $7,000.00 ) for the job to be profitable. This figure was also in line and real close to the price under hourly. Now his task was to come up with prices that allowed him to make as much or a bit more while billing by weight.
Now as to my pricing in the prior post where I came up with the 9.4 Cents Per Pound in the above example, that is combining the 3.4 Cents Per Pound for normal day time recovery using air cushions, and also the rate of 6.0 Cents to handle complete recovery. Those are the 2 prices that would apply to the listed recovery. (these rates are off his March 2002 rate sheet.) Now if the unit was over an embankment with wheels higher than the roof, (you know what I mean here ) then you would be adding .08 ( this is 10th of a Cent per pound), which would make that price per pound rate to 10.2 cents per pound. and there by the total invoice would be $ 8160.00
The additional rates that can be added into the base rates, for Price Per Pound include travel 50 - 100 miles from the yard, wheels higher than the roof, back door open or tractor pulled from under the trailer, severely buckled tops or blown out tops.
Now as to trucks on scene, the beauty of Price Per Pound is that you have one price for the job, which can be figured shortly after arrival on scene and the customer can be told of the costs. They all hate the answer to "how much is it going to cost me to get it rolled back over and towed to my yard" with the hourly rate answer of, "I do not know how long or how much equipment it will take."
Yes, Price Per Pound can beat you at times, by requiring excessive work, on the job, or the basic throwing of manpower on the job. BUT on the other hand you can beat it at times. Rolled over containers are one where you have an almost bulletproof recovery job that has the hook points built in. Everyone that has done one of these jobs knows they go real easy compared to a Swift dry van scattered over the roadway. You will make more money on the simple quick rollovers than on the complex jobs. It is cost averaging at its best.
Do I flip flop with this answer?
Saying use the Price Per Pound method when it works to your advantage, them switch back to hourly when that works to your advantage???
NO, I was saying that Price Per Pound can work good and bad, just like hourly can. If you are on hourly and charge say $500 a hour and you go do the container roll over with 1 truck and it takes 2 hrs, you get to charge $ 1,000.00 but if you get to do the same thing with Price Per Pound at lets say the 9.4 cents a pound and it still takes 2 hrs and you invoice 7620.00. Which looks good.?
BUT you also know of those wrecks that take 2 trucks and 10 hrs to do.. at the $500.00 a hour and 20 truck hours you would get $10,000.00 verses the 2 trucks under the price per pound.
The point I am trying to make it does at times work great and at times it does seem to lose money for you..
BUT important thing is to stay with one billing system as you will establish a reputation for consistency. If you switch back and forth between PPP and hourly for rollovers it looks like you are trying for money
How about the example of a 8 unit car carrier nosed down into a ditch due to swerving to miss another vehicle or forced off the road during a collision. The nose of truck is about two - three feet down into the mud, the rear most axle was at the foot of the road shoulder, the trailer was bottomed out at the front, major suspension damage (front axle pushed back) and the transmission was inoperable.
Total weight was 83263 lbs give or take a pound or two, travel was with in 50 miles, day time fair weather, and only 1 (one) truck on site. (this was sent to me by someone wanting guidance on Price Per Pound billing methods by using an actual tow call they did)
Now under Price Per Pound ( as it was originally created ) you are looking at an accident I suppose, BUT one that is not an ACCIDENT...
OK confusion time here I know
Lets look at it a different way, if you charged Price Per Pound for every " accident " tow you do, would you charge Price Per Pound for the typical tractor tow that had been cornered ( front corner run over by other truck ) while parked at the truck stop.
After all, following the definition of accident, it is an accident, and yes it is reportable to the police and the insurance company. Yes someone is paying for it other then the company (in most cases) Now how would you bill for that tow to the repair shop. You go tow the tractor to the local dealer. Does a 19,000 pound tractor require any special recovery skills with the hood torn off and the radiator ruined? Do you think that charging 7.8 Cents Per Pound is reasonable for the tow using the 30,000 pound straight truck minimum ($ 2340.00)
Now never mind that you had to take that vehicle to a dealer which is about 180 miles away. Under your regular tow rates for your company, what would you of charged (lets say it takes 9 hrs start to finish and you charge for sake of discussion $100.00 per hour) $900.00
How does that look, under Price Per Pound you appear to be ripping someone off. But, under your rates you might be to low. You have to know your costs.
Now back to the car carrier, it is STUCK in the ditch, no worse of job than if it tried to enter a dealership and hung up on driveway curbs or fell into the road side ditch.
You have to winch it out (or lift )if you have rotator and swing ( NEVER DO BOTH at same time unless you like replacing swing drives )
Now you get it out, remove driveline to protect the inop trans, hook it up and cradle the loose, damaged front axle and tow it to the dealership yard, you said it weighed 83263 pounds. Now you got your correct description in how to use Price Per Pound for figuring out the rates, and of course I know that PPP at 7.8 Cents Per Pound (this comes out to $6495.51) which sounds great, but if the damage was not done that made it undrivable, you think that would be a reasonable rate to charge.
This is where people get confused on Price Per Pound, the application for " accidents ". Price Per Pound was created and intended for " Heavy duty truck accidents " involving ROLL OVERS or onto their sides.
The use of it during winch outs (yes you are dealing with resistance) or nose down trailers is not were it was designed for.
For example take a nose down loaded trailer, with 45,000 pounds of paper rolls in one of those Orange dry vans that totals out to 60,000 pounds. You are lifting the front of the trailer, not the whole thing. Yes, you are winching / lifting during this operation, just like doing a roll over (you winch in the wire rope and lift the unit when it is rolled over)
Similar? able to charge the same rates ?
Now back to the carrier, you winched it back to the roadway, hooked it up, aired up the system to get it off the ground a bit, dropped the shaft, and towed it in so they could get it unloaded (got to love that electrical system to run the back) then you might of broke it apart and towed it for repairs, did I miss anything here.
Price Per Pound billing is one way of billing for accidents, you have to determine what is the best method for your company and also what is allowed in your area. I know several states and cities regulate the prices charged for tows ordered by law enforcement and also some are regulated by tariffs and other methods. Some of the rates apply on any tows and some are only on non consent tows.
You as the business owner have to make the decision, but I hope that this helps you make a better choice.
"Don't waste time calculating your chances of success
and failure. Just fix your aim and begin" ----- Guan Yin Tzu
