Over the past few weeks I’ve attend TMC’s Interactive Client Forum and Descartes’ Evolution 2011 User Conference (TMC and Descartes are ARC clients). At both conferences, there were speakers focused on regulatory trends in transportation. The Descartes conference featured Annette Sandberg, a former Administrator of the Federal Motor Carrier Safety Administration (FMCSA). TMC’s conference featured Angie Freeman, C.H. Robinson’s VP of Investor Relations and Public Affairs (TMC is the transportation managed services division of C.H. Robinson Worldwide).
“Hopefully everyone’s had their coffee because I’m going to speak about regulatory issues,” Annette joked at the beginning of her speech. But I found her speech, and Angie’s, interesting and insightful. What I particularly valued is that both speakers – two very smart women – did not just report on where regulations stood, but gave their informed opinion on where things are likely to go.
Here are my four main takeaways from the two speeches:
1. Since we are going into an election year, the pace of regulation will slow down because agencies don’t want to create any controversy. Deadlines have already slipped for several pending rules, and many will slip further.
2. There has been a lot of focus on Hours of Service (HOS). Of all the pending transportation regulations, HOS is the least likely to happen. The Obama administration has admitted that it is one of the most expensive rules pending across all US government agencies. Further, once the rulemaking process is finalized, it is susceptible to a successful court appeal because the FMCSA changed the way it conducted its required cost/benefit analysis for this regulation.
3. If you go to the site where the Carrier Safety Measurement Safety (SMS) data is displayed, there is a disclosure that states “Readers should not draw conclusions about a carrier’s overall safety condition simply based on the data displayed in this system.” Many shippers believe that this disclosure helps protect them from litigation if they use a carrier with marginal or unfit ratings that ends up in a crash. But they are mistaken. Motor carriers are only mandated to carry at least $750,000 in insurance. If there is a crash that causes multiple fatalities, $750,000 does not go very far. Lawyers will go after shippers and brokers with deeper pockets.
So what should a shipper do? Have a policy framework in place and follow it consistently. That policy should include checking SMS scores of your carriers frequently (there are software solutions that have proactive alerts for this). The policy should also set standards for which carriers can and can’t be used based on their scores. One key piece of advice: don’t make this policy too restrictive. In case of a lawsuit, it is worse to have a policy in place and not follow it then not to have a policy at all. So before deciding what sort of policy to implement, shippers are advised to do a simulation and see how many carriers would fall out of their routing guide based on a particular driver scoring threshold. But also realize that using carriers with overall ratings of “Unfit” or “Marginal” could be dangerous.
4. Electronic On-Board Recorders (EOBRs) are being proposed as a way to replace paper documentation to show compliance to HOS. While the mobility revolution is driving down the cost of GPS-enabled mobile devices, EOBRs are actually pretty expensive – a $1,000-$4,000 purchase price – based on the requirement that law enforcement officials must be able to plug into the device to download data. Despite the expense, there will likely be an industry-wide EOBR mandate within the next 5 years.
The FMCSA, as part of its ongoing responsibilities, audits carriers and asks them if they use GPS to track their trucks. If a carrier says yes, they compare the GPS data to the paper logs. Between 30 and 70 percent of the time the entries don’t match. As a result, a carrier’s rating can move from satisfactory to conditional and the carrier can lose business. In short, there are good reasons for a carrier to use an EOBR even if it is not required.
Whenever regulations are discussed, carriers and shippers assume that transportation costs will rise. But transportation costs are far more correlated with the price of fuel than anything else. In fact, there is a graph in Morgan Stanley’s June 2011 freight transportation report that shows drivers have lost ground during this economic downturn as compared to an index of the Wages & Salaries of Private Industry Workers and the Consumer Price Index. As of now, there is no real proof of a driver shortage because if there was a shortage, driver wages would be rising.
Sarah ONeill says
Interesting post, Steve!
We agree that EOBRs can help carriers remain HOS compliant, as well as save time prepping for audits. In our work at Xata (and you may be finding the same), there seem to be a lot of misconceptions regarding EOBRs across the industry. We tried to address some of those issues–the belief that EOBRs automatically trigger violations, shut down trucks when they’re out of hours, the notion of “big brother”–in our blog. We hope your readers might find this post interesting. http://ow.ly/7BICW
Also, while EOBRs that employ on-board computing platforms may require a large initial capital investment, there are some flexible, affordable options on the market. Xata Turnpike tracks Hours-of-Service, as well as other important metrics, through the driver’s mobile device and a Bluetooth connection to the truck’s engine for $35/month.
Thanks for sharing your thoughts on the conferences!
Tom Sanderson says
I disagree with your comments about CSA/SMS. Shippers and brokers should not check their carrier scores frequently and in fact should not check them at all. If you are using a carrier with a satisfactory safety rating and adequate insurance, you should be choosing carriers based on service levels, capacity availability, and price (in that order). The FMCSA is obligated by law to determine which carriers are fit for service. If you create your own credentialing system, you jeopardize your right to rely on federal preemption, and subject your company to court questions about your credentialing method. You may then compound the error by not relying on your own credentialing system creating further exposure.
Here are the facts about CSA/SMS. (1) There is no correlation between BASIC scores and accidents per million miles. Anthony Gallo of Wells Fargo has prepared an excellent study. (2) Of the 770,000 carriers in the downloadable CSA database only 92,000 have a score on even one of the 5 BASICs available to the public. Only 12% of the carrier universe is even measured. (3) Of those 92k unlucky enough to be snared in the measurement web, 51,000 have an “Alert” or score above the intervention threshold on at least one BASIC. Any system than scores 55% of all measured carriers as possibly deficient in safety is absurd. The trucking industry has dramatically reduced accidents per million miles well before CSA. (4) The system is discriminatory against smaller carriers who have fewer opportunities to have one problematic inspection balanced out against numerous clean inspections.
CSA is yet another example of over-regulation and it does nothing to improve highway safety.