The trucking industry will get a nine-month reprieve from the most contentious components of government rules governing the number of hours that commercial truck drivers can do their jobs.
On Saturday the Senate passed a $1.1 trillion spending bill to fund the government for the remainder of fiscal year 2015, and sent it to President Obama's desk for signature, thus averting a federal government shutdown.
Contained in the omnibus spending bill is an amendment that sets aside two provisions of the Department of Transportation's (DOT) 2011 rule governing a drivers' hours of service: that drivers are required to take their 34-hour rest break only once every seven days, and that they would be forced to include in the rest cycle two breaks between 1 a.m. and 5 a.m. over two consecutive days. The current 34-hour rest cycle would be maintained, as would a requirement that drivers be limited to 10 hours of daily drive time and that they take a 30-minute break within the first eight hours of consecutive driving.
The measure, proffered by Sen. Susan Collins, R-Maine, repeals the two provisions while the Federal Motor Carrier Safety Administration, the DOT subagency that crafted the rules, conducts a comprehensive study—with input from the agency's Office of Inspector General—to see if the changes are justified by science and economics. The repeal is scheduled to sunset on Sept. 30, 2015, the end of the current fiscal year.
Supporters of the Collins amendment argue that elements of the DOT restart provisions are unsupported by science and that the nighttime rest requirements would force drivers on the road with commuters during congested morning rush hours.
Thomas S. Albrecht, transport analyst for BB&T Capital Markets, wrote in a note last week that the Collins amendment will add 1 to 2 percent of truck capacity to the market. Although the loosening of capacity resulting from the amendment may lead to a lower level of rate increases next year, a corresponding increase in driver productivity resulting from more miles being driven could mitigate the downward momentum, Albrecht said.
In an August survey by BB&T of 105 fleets, 60 percent said they suffered a 6- to 8-percent productivity hit due to the hours-of-service rules, about twice the estimate many had projected, according to Albrecht. The productivity drop was a result of all of the changes governing drivers' service, not just due to the restart provisions, he noted.
The suspension of the restart language will result in an immediate 2-percent productivity boost that will last until at least early 2017, the length of time needed for the study to be completed and for the FMCSA, if necessary, to write modified regulations, according to FTR, a consultancy. FTR estimated that a modified rule, depending on its details, could take back about 1.5 percent of those productivity gains.
The increase in capacity will result in a 300-basis-point drop in truck capacity utilization, bringing down the current levels to 96 percent, FTR said. While still high by historical standards, it is down from the critical levels of a year ago, it said.
The moderation in capacity utilization "means that the industry will have an important reserve of surge capacity to handle seasonal peaks or other issues in 2015," according to a report prepared earlier this week by the consultancy. In turn, the pace of rate hikes will slow next year, especially on the spot market where rates soared in the first half of 2014 due to ultra-tight supply, FTR said.
The lull is not expected to last beyond next year, according to both firms. Other government regulations, as well as a likely increase in the minimum insurance requirements, will start to hit home in 2016 and 2017 just as the revised hours-of-service language hits the street, both firms project. As a result, many marginal truckers, especially owner-operators, will be forced out of business due to higher costs.
Barring a recession in 2016 or a drastic and unexpected change of policy at FMCSA, capacity will exceed 100 percent and stay there for a year or more, according to Noel Perry, FTR's senior consultant and managing director.
Gartner, Inc.
