Transport Canada Analysis Shows 2:1 Benefit to Cost Ratio for ELD Mandate

Published 2016-08-22

Momentum continues to build towards the implementation of a federal ELD mandate in Canada. Transport Canada has released its long-awaited Cost-Benefit Analysis (CBA) for a proposed mandate that would apply to all federally-regulated vehicles where the driver is currently required

The CBA looked at two scenarios: One included all federally-regulated commercial motor vehicles in Canada that would be covered by the mandate while the other excluded those vehicles which would be covered by the US mandate. In both cases the result was the same. Benefits are expected to exceed the costs associated with a Canadian ELD mandate by a 2:1 ratio.

According to the CBA “ELDs are an effective compliance tool to reduce the potential for driver fatigue and the likelihood of a driver reporting incorrect data on a paper log book … (and) are expected to improve road safety by increasing the accuracy of tracking driving hours (to ensure that allowable driving hours are not exceeded) and reducing potentially high-risk situations whereby drivers may operate in a fatigued state.”

The sidebar table provides a summary of the Transport Canada findings and conclusions. A full copy of the CBA is available to CTA members by emailingctaeldfeedback@cantruck.ca .

The net benefits will accrue to drivers, carriers and to government with the CBA suggesting that among the total benefits, savings to industry, including both drivers and motor carriers, account for 99% of the benefit.

“The CBA provides a sound analytical basis that confirms the significant net benefit from an ELD mandate and dispels some of the myths about ELDs that are out there,” says David Bradley, CEO of the Canadian Trucking Alliance, which has been championing such a requirement since 2005. “Now that the federal government has made its path clear, we call on all provinces to get onboard and extend the mandate to provincially-regulated vehicles as well.”

Summary: Transport Canada ELD Cost-Benefit Analysis

(July 2016)

Quantitative Benefits

·Time savings for drivers (reduced time to fill out paper logs, eliminate time to forward daily logs to carriers)

· Saved purchase costs of paper logs

·Time savings for carrier clerical personnel (daily log information electronically transmitted, stored)

· Reduced detention time due to improved compliance

·Time savings for roadside inspectors, auditors (quicker, more efficient detection of HOS violations)

·Safety benefits by reducing collisions attributable to driver fatigue, HOS violations

Qualitative

·For cross-border trucking, general alignment with US rule will ensure competitive playing field, improve road safety

·Meet public expectations for safertransportation

· Enhance carrier capacity to move goods (reduced detention time)

Quantitative Costs

· Acquisition, installation, activation and monitoring

· Training drivers, roadside inspectors, auditors

· Additional expenditures incurred by industry (e.g., hire additional personnel, purchase/maintain additional vehicles to redistribute workload)

· Enhance carrier capacity to move goods (reduced detention time)

Present Values ($ Millions, 2-Year Implementation)

Outcome 1:

All CMVs with federally-regulated logbook drivers included (including US-bound CMVs)

146,300 CMVs captured
Total Benefits (10-yr): $579.1
Total Benefits (Annualized): $82.5
Total Costs (10-yr): $291.1
Total Costs (Annualized): $41.4
Benefits to Cost Ratio = 2:1

Outcome 1:

CMVs with federally-regulated logbook drivers operating in Canada exclusively (US bound CMVs captured by US rule, with benefits & costs attributed to US rule)

64,200 CMVs captured
Total Benefits (10-yr): $ 256
Total Benefits (Annualized): $36.4
Total Costs (10-yr): $ 128.5
Total Costs (Annualized): $18.3
Benefits to Cost Ratio = 2:1

The compliance date for the United States’ ELD mandate is December 2017, with grandfathering provided for qualifying technology until December 2019. The exact phase-in period and dates for compliance with the Canadian federal ELD regulatory proposal has not been established. In the CBA, Transport Canada says that it wishes to align with the United States to the extent possible. However, it also says “regulatory amendment is expected to come into force in year three (2 years after publication of the final regulation)”.

During the course of the CBA, a one-year transition period was considered but showed a significant cost increase. CTA supports the two-year phase-in, plus an additional two-years grandfathering for qualifying equipment. It is expected Transport Canada will kick off the formal regulatory process with a Canada Gazette Pt. 1 notice as early as Spring 2017.

Some interesting facts and assumptions based on various sources and years contained in the CBA include:

Basic Industry Data

GDP from Canadian transportation services totals about $58 billion, or about 3.7% of total GDP, with trucking accounting for the largest share of the transportation total at 30.7%
83.2% of shipments transported by Canadian trucks are domestic, with the remainder being cross-border shipments to or from the US and Mexico
Trucks transport 45.1% of Canadian exports to the US (by value) and 73.5% of US imports
The total Canadian trucking industry (for-hire, private, owner-operator and courier) includes about 56,800 firms
Small trucking carriers (100 or fewer employees) represent 98.7% of all carriers

Trucks

There are about 750,000 heavy trucks operating in Canada (defined as any truck over 4500 kg)
About 80,000 Canadian CMVs operate into the United States on a regular basis
The trucking fleet will grow at an annual rate of 3.1% over the next 5 years
The average life span for a power unit where driver would maintain logbook is 6 years
The average annual cost per CMV is estimated at $355,000 based on annual travel distance of 100,000 km at the cost of $3.55 per km

Drivers

There are 1.2 drivers for every truck
The industry employs about 201,108 company drivers and there about 54,000 owner-operators
The overall turnover rate for truck drivers in Canada is 6.7%
A wage rate of $30 per hour for truck drivers is assumed including an overhead rate of 25%
About 170,400 truck drivers will be covered by the mandate

Trucks Covered by ELD Mandate

There are 170,000 federally-regulated trucks operating in Canada
About 84.5% of for-hire trucks are equipped with fleet management systems with ELD capacity and 56.5% have operational ELDs
30% of the ramp up for the mandate will be completed in 2016 and 70% in 2017 due to US rule
On average, the proposed regulation would cost $1,193 per year for a small carrier versus $46,685 for a large carrier

ELD Costs

ELDs at an entry or mid-level range from $300 to $900 per unit
Likelihood that mobile ELD applications could push the costs down even further
Associated installation cost is $220 per device and activation fee is $15 per unit
Monthly monitoring service fee is estimated to be $30 per month
Average driver training costs $48 per hour
Average inspector/auditor training is about $457 per person

Savings from ELDs

Driver time savings from maintaining paper log books estimated at 4.5 minutes to 23 minutes per day
Time spent forwarding daily logs by drivers to carriers will save about 5 minutes about 25 times per year
In total drivers will save about 20.08 hours per year currently being spent administering paper logs
Clerical employees take about 3.5 minutes to file each paper log received from each driver

Road Safety/HOS Compliance/ELDs

Motor vehicle collisions were the cause of 1,923 deaths and 165,306 personal injuries; 226 fatalities and 4,512 injuries involved a semi-truck
Although police reports tend to estimate the contribution of fatigue at below 5% of crashes, there is established consensus amongst the world’s leading experts in the field that fatigue is more likely responsible for about 15% to 20% of crashes
300 (all types of vehicles) crashes occur in Canada each year where fatigue or falling asleep is a contributing factor and this is likely understated
It is estimated that 42 such crashes involving the 146,300 (Outcome 1) federally-regulated CMV operators subject to an ELD mandate occur annually and 19 under Outcome 2
A 10% effectiveness rate in reducing these types of crashes is assumed
Percentage of drivers/carriers exceeding allowable HOS limits is estimated at 5% to 10%

Inspectors/Auditors

There are about 1,052 roadside inspectors in Canada with an average of 282,587 daily log inspections conducted in Canada each year
There are about 102 auditors with 1,166 facility audits completed annually
Of the total inspections, it is estimated about 102,156 annual inspections correspond to the in-scope CMVs inOutcome 1 and 44,828 for Outcome 2
It is estimated 976 audits are conducted annually of the 146,300 in-scope CMVs or Outcome 2 and 428 audits of the 64,200 in-scope CMVs for Outcome 2
Hourly wage rates of inspectors and auditors are $57 and $58, respectively