Contracts were the issue for DANSA
Traffic Commissioner’s judgement is that tendered work is incompatible with the EC ‘non-commercial’ permit exemption
A full, written decision of the public inquiry into DANSA Ltd, the South Wales community transport operator, reveals that Traffic Commissioner Nick Jones decided that tendering for contested contracts made it a commercial company.
As reported last week, the Traffic Commissioner will revoke all 32 Section 19 and 22 permits held by DANSA on 31 December. He also issued a formal warning against its O licence, for four vehicles, which he ruled could not be used alongside the permits.
The public inquiry was triggered by police issuing fixed penalty notices last year for DANSA operating the school contracts without O licensing, and by renewal applications for permits. Nick Jones added, in his background: “Guidance issued by DfT indicates that an entity cannot both hold permits issued under sections 19 and 22… and at the same time hold a PSV operator’s licence…”
In his judgment, the Traffic Commissioner – who is due to retire in October – appeared to question the permit system, not only pointing out that, although a TC has jurisdiction to call an inquiry, there is no provision for how the meeting should be conducted. He added that all 22 local authorities in Wales alone can issue permits, together with more than 60 other organisations, including the Community Transport Association, which issued DANSA’s permits.
Nick Jones acknowledged the social aspect of the transport DANSA provides and praised it for its co-operation with the inquiry. He accepted that directors of DANSA are volunteers and that staff got only modest salaries, supporting their claim to be a social enterprise.
But he said the exemptions for permit holders had to be considered: “It is important to apply the appropriate tests in the correct order,” he said. “The first test applied to an application for a Section 19 or 22 permit… must be whether any exemption under EC Regulation 1017/2009 applies.
“…EC Regulation 1071/2009 takes precedence over domestic provisions. In this particular case, the EU regulation very much post-dates the domestic legislation.
“Only once an applicant has satisfied an issuing body that they meet an exemption [under EC law] do they fall to be considered under the criteria for Section 19 of the Transport Act 1985…In other words, although it may appear that an entity meets the criteria for a Section 19 or 22 permit, this cannot be the case unless it first meets the requirements of [the EC regulation].”
The TC said that the UK has not legislated for the ‘short distance’ exemption and, in any event, any changes would not come into force until October, leaving only the exemptions of ‘non-commercial’ (claimed by DANSA) and ‘main occupation other than that of road passenger transport operator.’ He added that in deciding whether an entity is ‘non-commercial,’ the intention not to make a profit is the important factor.
Highlighting the tendered work in which DANSA is involved, he said: “Evidence of tendering processes and lack of general interest from PSV licensed operators may assist the deliberations. There are arguments that permit operators have a lower cost base than licenced PSV operators; just because a price quoted by a PSV operator was deemed excessive does not on its own account provide conclusive proof that the service [run by a permit holder] is being operated non-commercially.”
Examining the police penalties issued in June 2018, the TC said that, had DANSA formally tested the legitimacy of the fines under appeal, the resultant court hearing might have tested the legality of the penalties. However, the penalties went unpaid and, subsequently, the Ministry of Justice intervened and withdrew the fines on the basis that there was ‘no merit’ in enforcing them.
In interviews with a director of DANSA, Dean Cawsey, the TC heard that both he and another director have since become local councillors. Top salary at DANSA is £30,000, paid to Transport Manager Susan Evans. Drivers were being paid £8.70 per hour.
There are 40 employees, 23 drivers, among whom there were 12 with PCV entitlement. Susan Evans said that, if it were forced to use O licensing, it would probably lose some of those without the PCV entitlement. However, she said the non-PCV drivers were also being put through CPC as a matter of good practise.
Nick Jones was told of a complex funding picture, which included council support and even a council vehicle on its downtime. DANSA provided financial details of six services it provides under contract.
The contract ‘lots’ awarded were contested through open tender and received eight bids. DANSA tendered for two of ten lots and won them. Both lots were contested by O licence holders. Neath Port Talbot Council said DANSA operates four home-to-school routes won in 2017 at open tender. It said the award was made after a ‘blind’ reverse auction process, and examination of bids showed DANSA tendering at lower rates than other operators, and generally winning them on the basis of cost.
For the avoidance of doubt in this specific case it is the tendering for and procurement of contracts against PSV licence holders that tips the balance so that I cannot conclude that DANSA Ltd is exclusively non-commercial
“In the absence of case law, I seek to determine whether DANSA Ltd is ‘exclusively non-commercial’…” said the TC. He said the staff were well-paid in relation to other, commercial operators: “Are there posts that suggest the organisation has a commercial role? The answer is affirmative, the job title of Business Development Manager and some of her (Susan Evans) functions point to a commercial element.
“How are the services procured? Does the operator bid for contracts in the same way as ordinary commercial contractors? The answer here is affirmative…. Contracts are allocated using the same IT portal as that for standard national PSV licence holders which are unequivocally commercial enterprise. The open tendering system would suggest a commercial enterprise and an inability to fall within the exemption set out in EC 1071/2009.
“For the avoidance of doubt in this specific case it is the tendering for and procurement of contracts against PSV licence holders that tips the balance so that I cannot conclude that DANSA Ltd is exclusively non-commercial.”
Nick Jones said that he accepted that DANSA had acted in good faith on the advice of the Welsh Government and local authorities, and the DfT: “In another case involving permit holders and tendering for contracts, I previously indicated that the Welsh Government (and local authorities in Wales) would assist the position if it ensured that there was a different procurement process for Section 19 and 22 permit holders. If it is claimed that there is no genuine competition, then a separate procurement process must surely be attainable.”