Making two quotes comparable

A tender that was scored correctly and awarded wrongly

Norlbeck puts its Alexandria lane out to tender every year. Six forwarders quote. The bid sheet asks each of them for an ocean rate per forty-foot high-cube, and every bidder fills that cell in. So it is the one column that can be compared without interpretation. Norlbeck scores on it and awards on it.

Halvorn Logistics quoted 1,340. Marbrook Freight quoted 1,180. That is 160 cheaper, on the only line that was compared.

Rebuilt door to door on the same shipment, PO NBK-7714, the two quotations come out like this.

Marbrook is 189 dearer. The tender was decided on a line where it was 160 cheaper, so the swing between the number that won and the number that was paid is 349 a container. Norlbeck moves 46 containers a season on this lane, so USD 8,694.

The scoring was not careless. It compared the only cell that all six bidders had filled in the same way, which is exactly the right instinct and exactly the trap. The comparable column and the decisive column were not the same column.

Where the 189 actually came from

Three of the four differences are structural rather than commercial.

Marbrook has no office in Rotterdam. It uses a local agent, and the agent's handling fee of 150 is a real cost for real work. Somebody has to receive the file, chase the terminal and hand the box to a haulier. Halvorn's own destination office does the same work inside its own overheads. A forwarder with its own network at both ends will usually show fewer destination lines. That is not always a saving. Here it is.

Marbrook's quote was port to port. Halvorn's was door to door. The delivery leg exists either way. On Marbrook's sheet it appeared later, as a number nobody had agreed in advance.

The free time was different, and this is the line that decided it. Free time is the number of days you may keep the container without paying for it. Halvorn's rate carries ten free days at destination. Marbrook's carries five. Norlbeck's distribution centre held the container for eight days, because the receiving bay was full. Under Halvorn's terms that is free. Under Marbrook's it is three chargeable days at 48 a day, so 144.

Free time is not a courtesy. It is a priced part of the product, and it is the part most likely to be worth more than the rate difference on the lane. Before comparing two rates, find out how many free days each one carries at both ends — and free of what.

The seven questions that make two quotes comparable

Ask all seven, in writing, of every bidder, before you compare anything.

1. What are the two end points? Factory door, origin terminal, destination terminal, or consignee door. A door-to-door price and a port-to-port price are not two prices for one product. They are prices for two products.
2. Which surcharges are inside the number, and which are named separately? And is the rate "subject to surcharges ruling at date of shipment"? If it is, the rate is a base and not a price.
3. How many free days, at each end, and free of demurrage or of detention?
4. What is the chargeable unit? Per container. Per revenue ton for loose cargo. Per chargeable kilogramme for air. Per shipment for the fees. Two quotations on different units cannot be subtracted.
5. How long is the rate valid, and what re-prices it? A date, a volume commitment, a fuel index, a currency movement.
6. What is not carriage at all? Customs entry, attending an inspection, amendment fees, per-document charges, or a fee for a certificate a bank will ask for.
7. Who is the actual carrier, and is this a house bill or a master bill? That is lesson 1's question, and it belongs on the tender sheet, because it decides the liability you are buying along with the price.

A door-to-door price is a multimodal product, and its liability is not one number

Question 1 has a consequence beyond price. When a forwarder sells you carriage from a factory in Abu Hammad to a distribution centre in Rotterdam, it is selling one contract covering a truck, a ship and another truck. That is a multimodal contract: one document, several modes of transport.

The rules normally used for such a document make the issuer responsible for the whole carriage in its own right. But where the loss can be shown to have happened on one identifiable leg, the liability limit of the convention governing that leg applies instead of the document's own general limit.

So the same box, under one document, is compensated by different arithmetic depending on where it was damaged. Damage found at sea is limited one way. Damage in a warehouse or on a road leg is limited another. This is why "door to door" is a genuinely different product from "port to port" plus two arranged legs, and why it belongs on the comparison sheet as a characteristic and not only as a price.

And when the container is the wrong unit

Halvorn also quotes loose cargo, at 42 per revenue ton. A revenue ton is the greater of one cubic metre and one tonne. NBK-7714 is 64.8 cubic metres against 7.2 tonnes, so it would be charged on volume: 64.8 revenue tons.

Set that against the container's ocean subtotal of 1,833 and the crossover falls at about 43.6 revenue tons. That is roughly 505 cartons, or 8,080 pieces. Below that, loose cargo is cheaper on the ocean leg. Above it, the container is. It is worth knowing the number for your own carton, because the answer to "should this go in its own box?" is arithmetic rather than habit. And loose cargo carries its own destination handling per cubic metre, which pushes the real crossover lower than the ocean leg alone suggests.