Membership Pays

Why Ontario’s LCV program should have been made open to any carrier with the safety rating to back up their “commitment to safety”

Joanne Ritchie, executive director, Owner-Operators Business Association of Canada

So, Long Combination Vehicles (LCVs) are finally coming to Ontario, and with them comes a new twist on the old economic regulation theme.

In days gone by, the Public Commercial Vehicle Act (PCV) kept up-and-coming carriers from encroaching on lanes dominated by established carriers. Now we’ve got Ontario’s new LCV pilot project. The Ministry of Transportation (MTO) unveiled a program that could quite possibly be advantageous to any number of carriers (and shippers) in the province -large or small -but only a select few will get the chance to compete.

MTO bills the pilot program as a private sector initiative led by the Ontario Trucking Association (OTA) and the Private Motor Truck Council of Canada (PMTC), and if you don’t belong to either organization, you won’t be pulling LCVs any time soon.

MTO will grant up to 100 LCV permits to as many as 50 carriers who have demonstrated proven commitments to safety, have at least five years trucking experience, carry at least $5 million liability insurance, and have a safety rating of ‘Satisfactory’ or better -which could prove interesting. A couple of the carriers one might assume to be shoe-ins for the program currently have only ‘Conditional’ ratings, and many others are rated ‘Satisfactory- Unaudited.’

MTO claims that the initial 10 participants in the pilot program will have at least one previous year’s experience operating LCVs. I can’t imagine where we’ll come up with 10 Ontario-based carriers with a year of LCV experience, but I guess OTA, PMTC, and MTO know something the rest of us don’t. Subsequent entrants will be chosen by a lottery, with each winner granted only two operating permits. That, MTO says, will maximize participation and prevent any carrier from gaining unfair competitive advantage.

How ironic that MTO is worried about carriers gaining a competitive advantage in the market, when the pilot project, by its very nature, limits participation to just a small portion of the province’s carrier population. I can think of a number of small “non-member” carriers -and owner/operators even -who might do well pulling LCVs. There could be a real niche market opportunity, for example, for a small operator to run a “tractor service” pulling doubles from drop yard to drop yard for other small carriers. Though it’s a viable business model in other jurisdictions, Ontario-based carriers who don’t belong to the right club will never get that chance.

There’s another twist here that further limits the pool of potential applicants to those with very deep pockets. Prospective LCV haulers will have to pay for engineering studies of public thoroughfares leading to and from terminals and drop yards to the primary highway system.

The way it was described to me, if Carrier X completes a study, it remains the property of that carrier. In the name of “fairness,” if Carrier Y then comes along and applies to run an LCV over the same route, it will have to satisfy MTO’s requirements by paying for another study of that same route.

That’s just plain silly, but it gets better.

If any work is required realigning an intersection to allow for the wider turning radii of these 40-metre long (131 ft.) combinations, the carriers will have to pay for that too. So, once a consortium of carriers has bought itself an intersection, what happens to subsequent entrants who want to use that access way? Tolls? Rent? Pro-rated payments on the work -in perpetuity?

Another possibility, I’m told, is dedicated drop-and-hook facilities, located near enough to the primary highways that roadway alterations would not be necessary. From what we have been able to ascertain, MTO won’t be paying for anything here, so the door is obviously open for carriers who own the facilities to charge rent or fees for drop-and-hook operations.

Either way, this sounds like a cash-for-life scheme to me. If I was a carrier trading along the Quebec City to Windsor corridor, and hadn’t paid my dues to the right association, I’d be quite concerned at this point. Among the benefits of LCVs -touted by MTO, OTA, and a prominent shippers’ group -are reduced transportation costs, and ultimately lower prices for consumers. What do you think that means for freight rates in this highly competitive corridor?

Competing with two-for-one specials could prove an insurmountable challenge for the other players in that market.

I’m deeply troubled that MTO has structured the LCV pilot as a “permit” program, rather than writing regulations that would apply to anyone wishing to engage in this type of business -and could come to the table with the infrastructure investment to support it. Given the public concern surrounding LCVs, it’s sensible to proceed prudently and safely, but I just don’t see the connection between the best operators for the job and membership in certain associations.

This program should have been open to any carrier with the safety rating to back up their “commitment to safety.” Had MTO limited participation to only carriers with ‘Excellent’ safety ratings, like the more than 500 listed in their database -most of them small companies and owner/operators, by the way -I’d have very little to complain about. Instead, we’re likely to see a large number of ‘Satisfactory-Unaudited’ carriers pulling LCVs around this province. For a program with qualification requirements that depend heavily on paper documentation, it bothers me that an MTO audit of a carrier’s facility isn’t even part of the package.

Joanne Ritchie Is Executive Director Of OBAC. She can be reached at jritchie@obac.caor at 888-794-9990.

No Apologies Necessary

Of course the carriers from the associations who invested their time, money and experience in making LCVs possible in Ontario, should be the ones to participate in the pilot

Julie Tanguay, President/CEO L. E. Walker Transport Ltd Chair Ontario Trucking Association

It is unfortunate Joanne Ritchie uses her column not to inform or participate in constructive dialogue on LCVs and other issues, but to take shots at other industry groups for getting things done, most notably the OTA. It all smacks of so much sour grapes that normally I would not bother to respond, but I think your readers deserve better.

Let me begin first by saying that I am the owner of a relatively small, family trucking business. Ritchie’s continued assertion that OTA is a “club” exclusively of large carriers is pure bunk. Second, it is worth reminding people that LCVs are not for everyone. There are clearly many situations and many types of freight where they will not be able to be used. But, where they can, the potential for improved productivity is significant. OTA has always subscribed to the view that the industry should not stand in the way of productivity enhancement. There is a healthy dose of self-preservation behind this thinking. Ontario, more than ever, needs to retain and attract direct investment (and that means customers for truckers). By contributing to a more productive supply chain, LCVs can play a role in doing that. So, we applaud the Government of Ontario for what it is doing.

In terms of pricing, Ritchie’s mention of two-for-one specials shows a lack of understanding of how most carriers view LCV pricing and does us all a potentially great disservice by building erroneous expectations amongst shippers who may read her column.

But, her chief complaint and the one I would like to focus my attention on is that only OTA members can participate in the on-road pilot of LCVs expected to commence this summer. As the headline to her column states: Membership has its privileges. I could not agree more and as OTA chair I make no apologies for the fact that the carriers from the associations who invested their time, money and experience in making LCVs possible in Ontario, should be the ones to participate in the pilot -so long as they meet the stringent permit conditions. As a carrier, I have no tolerance for free riders who want all the benefit of what OTA accomplishes, but don’t contribute a dime to the cause. Often it can’t be helped -for example, all carriers are benefitting from the exemption OTA obtained from the Michigan Business Tax -but on an issue such as who gets to participate in a pilot, why should my money, paid out in membership dues to OTA, be used to benefit a non-member?

The official announcement of the LCV pilot was very recent. However, OTA’s efforts to gain permission for LCV use in Ontario began three decades ago. Those who are even remotely aware of the issue, know how difficult and frustrating a process it has been.

Even last year when it appeared the Ontario government might be open to revisiting the LCV issue, there was an enormous amount of work that first needed to be undertaken to ensure that public concerns and perceptions were addressed. An accord had to be reached with MTO on the permit criteria for LCV operation. It was understood from the outset that the permit criteria would need to be sufficiently strict if they were to satisfy groups like the CAA and the Ontario Safety League. Then, an independent engineering study of the primary (common route) network, to assess the capability of all current on-and off-ramps on the 400 series of highways to safely accommodate LCVs -to identify emergency stopping areas and then contact the facility operators to secure permission for use of those locations -had to be undertaken. Finally, a fair process needed to be established to select the carriers to participate in a one-year pilot.

What was OTA’s role in all of this?

• The OTA LCV Committee (made up of more than 30 carriers and was open to all interested members) led the effort on industry’s behalf, investing countless hours in the process both at the negotiation table and in preparation and follow-up.

• OTA paid the entire bill -which was in the range of $200,000 -to engage the indepen dentengineeringconsultants to conduct the common route study. This relieved the burden from any OTA member from having to go out and do its own common route study (which would be cost prohibitive for most) and avoided duplicative studies. As such, it also levelled the playing field for all interested carriers. Moreover, OTA has always understood MTO’s position that the pursuit of LCVs is a private sector initiative. We have been seeking permission from them to operate these vehicles under special permit. OTA has been consistent over the years in stating that the private sector, not the taxpayer, should be responsible for funding the required studies and for building/purchasing any additional infrastructure that may be required in order to operate LCVs.

• When it came to deciding who should participate in the pilot and have access to permits, OTA felt it only fair that participation in the pilot should be limited to those qualified carriers who had paid for the engineering work -in other words the OTA members. There was nothing stopping other carriers or groups from coming up with the cash and doing their own study; it’s just that no one did. Such is the benefit of belonging to a strong and effective organization as opposed to trying to do things on your own or belonging to groups that don’t have the will, the knowledge, the means or the credibility to deliver.

• Lastly, OTA developed a lottery system, which gave all carriers -again regardless of size, domicile, etc. -equal opportunity of being selected. However, it is important to note that being chosen in the lottery is no guarantee of participation in the pilot. The carriers must first meet all requirements of the permit criteria. And, they are also responsible for conducting individual engineering analyses to verify that LCVs can operate safely between the highway and the ultimate origin-destination of the freight. Ritchie suggests this will lead to duplicative studies of the same routes. In fact, OTA members are already teaming up and working together to jointly conduct and pay for such studies. This is another example of the benefits of belonging to an organization like OTA -chances are there is always someone else in the same boat as you that is prepared to work towards mutually beneficial solutions.

As with all complex issues, there is always give and take. That can be frustrating. It takes a lot of hard work, a spirit of compromise and mutual respect from all involved to reach a satisfactory conclusion. Sitting in front of a computer taking pot shots at those who are prepared to show leadership is easy, but ultimately ineffective and as I said at the outset smacks of sour grapes. The lesson for non-member carriers in all of this is perhaps you should join OTA.