Message from the President
The Secretary General Writes
Report on MPX Issues at NAV 46
A Case for Cut Price Pilots?
Testing for Situational Awareness
Market Principles and Efficiency in Maritime Pilotage
Nationwide General Meeting of the German Brotherhoods of Sea Pilots
Spotlight on Vice President René Richard
XVI th IMPA Congress July 28 - August 2, 2002
Michel Pouliot cutting IMPA’s 30th Birthday cake on board the Wellington in July 2000
Gianfranco Gasperini with “Il Papa”
Italian Pilot Ladder Proposal
IMPA Officers
Enquiries
Advertising
Fellow pilots,
Another year has gone by and with it some encouraging signs for the future. Our membership continues to grow, which in itself is a good omen. Our headquarters on the “Wellington”, under the able direction of our new full-time Secretary General Nick Cutmore, continues to modernise our operations and means of communication. This will allow us to improve our capabilities for information exchange with you, our member countries, and also allow us to better publicise the role played by pilotage in our modern society.
There is no longer any doubt as to the urgency of informing the general public around the world as to the ominous changes in the traditional pilotage services that are being contemplated and the serious effect these changes will have on their quality of life. People must be reminded that the safe and expeditious movement of ships and their cargoes in restricted waters depends largely on the traditional regime of regulated pilotage as well as the quality and professionalism of the pilotage service.
Unrelenting attacks on our profession by unscrupulous shipowners with the tacit support from some national administrations must be denounced for its insidious effect on safety. The efforts of many to pressure and even dare improve the quality of life as well as the protection of the environment for the citizens of the world are being neutralized solely in the interests of greater profit. For a good many years now, the national merchant fleets of a large number of traditional maritime nations have been decimated by the same tactics now being used to erode the benefits of traditional regulated pilotage.
As a practising pilot I can share with you the concerns and apprehensions you have as you board modern day ships which are in too many cases poorly maintained and manned with mixed and inexperienced crews struggling to keep their ships afloat. Recent accidents and incidents only but confirm the realities we have been attempting to expose. Safety is being more and more compromised by the attempts to introduce competition in pilotage.
The “market forces” being the new catchword used to justify the levels of safety whilst at the same time serving as an excuse to increase the bottom line of those whose commitments to safety are easily overshadowed by increased profit. Those who promote and support such irresponsible actions seem to forget that competition in pilotage was attempted more than one hundred years ago.
It was abandoned because it was proven to be contrary to safety and thus to the public interest. Maybe a brief course in history could enlighten these misguided administrations and their shore-based experts. Being the holiday season may I take this opportunity in wishing you and your families joy and happiness as well as a safe, healthy and prosperous New Year.
Since our Conference I have been invited to two national association’ conferences and both have been an enlightening experience. Very similar concerns arose from both even though they were thousands of miles and an ocean apart.
Pilots continue to find depressingly low standards of crew aboard ships and they also find that the same people responsible for crewing those ships with the very lowest cost crew of the moment, are the people calling for competition in pilotage. As we know this is not really for reasons of “competitiveness” or “efficiency” but simple cheapness.
The same owners who switch crews (and flags) wholesale to the next source of cheap labour want the shore side of life to be equally cut price and basic. It is alarming now that the European Union in Brussels who would like to set up their own legislation outside of IMO in response to the “Erica” and “levoli Sun” sinkings seem to think at the same time that a safety service can be bought like any other commodity. Lessons seem to have to be learnt at such painful cost. Shortly after beginning to write this piece the New Zealand Pilots’ September journal arrived and I warmed to the correspondent from the Port of Tauranga who said “The current obsession with BRM procedures has me a little perplexed. Whilst I agree entirely with the principle of a bridge team, the reality seems to me that unless ships crews are trained to a similar level as we are then we are wasting our time expecting any input from them. Even a simple passage plan document and discussion is beyond the comprehension of the majority of crews, with pilots commonly having to answer questions on tug, pilot, berth names, tide times etc. whilst trying to manoeuvre the vessel safely, all of which appears in the passage plan. Is the onus on marine pilots to train ships crews in BRM procedures as well as the normal hand over procedure, and if so where are we to find the time to do so during busy periods of shipping?” As Admiral Bob North of the USCG said recently at the American Pilots Conference “Double hulls only mitigate the effects of human failings. The declining quality of crews is a universal concern.”.
On a positive note it is heartening to report that the Lisbon Pilots imprisoned on trumped-up charges have all been acquitted and indeed are now pursuing their accusers in court.
Membership of IMPA continues to grow also which is heartening in these troubled times when unity is so crucial to our efforts at IMO and other less friendly places. Seasonal greetings to you all for a safe 2001.
A number of pilots attended IMO as part of their national delegation as this session included discussions on the operational procedures (Annex 2) of the revision of IMO’ s regulation on Pilotage A485 (X11), AIS and pilot ladder issues. The latter two items are covered in separate reports.
Those present included:
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IMPA |
Michel Pouliot |
President |
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Art Thomas |
Senior Vice President |
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Rene Richard |
Vice President |
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Geoff Taylor |
Vice President |
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Nick Cutmore |
Secretary General |
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Germany |
Hein Mehrkens |
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Netherlands |
Rein van Gooswilligen |
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Turkey |
Cahit Istikbal |
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C. Sozdemir |
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USA |
Michael Watson |
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Doug Grubbs |
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Paul Kirchner |
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Ukraine |
Valeriy Latipov |
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Sweden |
Bertil Hammargren |
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Benny Petterson |
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Italy |
Gianfranco Gasperini |
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Francisco Aiello |
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Japan |
M. Miyamori |
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France |
Patrick Payan |
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Panama |
Miguel Rodriguez |
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UK |
Les Cate |
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ICFTU |
Avald Wymark |
This meeting was the second IMO session at which the Intertanko/ICS proposal on the exchange of pilotage plans between ship and pilot before the vessels arrival off the port (MPX/PMX) had been discussed. At the previous meeting (NAV 44) pilots had been able to gain agreement to all of the proposals they had tabled on Master/pilot information exchange. On this occasion there was a joint industry paper extolling the benefits of an early exchange based upon faxed documents sent between ship and shore. This was supported to some degree by a UK paper which stressed the need for the earliest possible exchange of relevant information. IMPA, supported by all of its member associations, and with the tacit support of IHMA and IAPH tabled a paper supporting information exchange but pointing out the potential dangers and costs of the proposed system. The item was carried to a working group and discussions took place over several days during which we were able to highlight all of the practical problems associated with the delivery of dynamic or changing information (Wind, tide, berth, etc.) before a ship’s arrival. IMPA also pointed out that the use of pilot passage plans was widespread throughout the world and increasing but that it was vital that these were discussed with the master on a face to face basis after boarding. We suggested that these plans could be made available to mariners in pilot books or by other means if that was required, in their original form without the dynamic information included.
After considerable discussion IMPA offered to insert a phrase in Resolution A485 suggesting that pilots be aware of the masters requirements under the ISM code to plan voyages from berth to berth, before leaving the departure port (presumably including the numerous cases where the master does not know where his final or destination port will be!). Although some delegates sought to extend our compromise proposal this was the agreed majority position that was taken to the plenary or decision making chamber. When our item of business was introduced to the session there was a most unpleasant series of interventions by a small number of flag states who inferred that the presence of a number of pilots was somehow inappropriate, that more seafarers ought to have been present and that a much fuller discussion of the issue needed to be carried out. These comments were countered by a number of substantial countries who pointed out that this was a resolution on pilotage issues and that pilots were their countries technical experts. The discussions led to a proposal that there be a halt to further business until this issue was settled and a vote (a very rare event at IMO) was called for. In the event, a lunch break intervened and following this, it was agreed that further discussion on the topic should be delayed to the next relevant IMO session. The chair thanked us for not responding to the more contentious issues which were raised during the pre lunch period. We were left feeling that although we had won all of our points in the debate within the working group, other forces had been at work and that, rather than concede the arguments on basic maritime safety issues, there was a political agenda which took its course in the main assembly. Your representatives remain convinced that the basic safety issues are what must remain at the front of our minds just as they do when we go about our work. We shall continue to talk with interested parties to gain a positive outcome to this debate and to seek to lead the shipping industry to produce a safe and workable solution to the issue.
It always seems peculiar, until one falls back on flawed human nature, that shipowners who make such a song and dance about safety, object so strongly to paying for pilots.
It might seem almost ‘politically incorrect’ to whinge about pilotage costs, when the contribution of pilots to the safety of a ship would appear unarguable. The Royal Navy, perhaps, might be reviewing its policy on pilots as it examines the damage done to its frigate on the unyielding rocks off the Oslofjord. But pilots, like tugs since the bow thrusters became available, represent a cost which the shipowner likes to think he can do without.
Pilots are exhorted to be “more competitive” whatever that might mean. It probably means doing it for love, rather than money, and being willing to accept huge pay cuts and longer hours. Pilots, thus, are expected to be unlike other men and be perfectly prepared to see their incomes decline, at a time when their own costs are rising. It is how market forces intrude into every area of life, even marine safety, where arguably they have no place.
The squeeze is on pilots, because there is no premium put on their expertise. Shipping companies, which would have no hesitation in accepting invoices from law firms charging them £300 per hour for an opinion (based on experience), bleat like sheep before the entrance to an abbatoir at pilotage charges which have lengthy pilotages complain bitterly about the pilotage costs which make them uncompetitive with ports nearer the sea, and demand reform of pilotage services to even up the charges.
A port with two pilots is exhorted to have them compete with each other to drive down the price. It is pretty silly, at a time when expertise is at a premium and the intolerance of accidents absolute, to be intent on driving pilotage charges down and enraging a group of people whose calm expertise and knowledge ultimately keep those expensive lawyers at bay.
The Dutch have proposed so-called reforms of pilotage that make no sense whatever to pilots, while the French have even dabbled with ‘remote’ pilotage, which seems to mean the pilot sitting ashore and rapping out crisp commands to possibly even more than one ship simultaneously.
Now the Germans are making a concerted drive on marine pilotage, attempting to make it cheaper; inevitably making good pilots angry and demotivated. E-commerce driven folk selling communications and navaids suggest all manner of electronically driven solutions that they suggest will offer cost reductions. Shipowners inevitably revisit the hoary old statistic that demonstrates that most ships go aground when they are near rocks and bump into each other mostly in areas of very heavy traffic
Professional bodies are starting to show concern, not least because of the average age of pilots, which is high, and the need to encourage committed newcomers to begin the lengthy training that will enable a new generation to provide the right level of professionalism.
The trouble is that the unexpected is almost normal practice at sea and only the hands-on pilot, standing in the wheelhouse of an inbound ship, is able to see that the helmsman is barely able to steer, the master suffering from terminal exhaustion and the mate completely unsure of the vessel`s position, as the radar has just packed up.
Of course ships should not be run like that, but the fact is that they sometimes are and the pilot represents both local knowledge and an important layer of insurance.
Some pilots are fond of telling anyone who will listen that ‘it takes something special to be a pilot and you’re either born with or you aren’t. Well, I recently met someone who thinks he knows what ‘it’ is. Otago University senior lecturer in psychology Dr David O’Hare is an expert in the fields of complex-systems operation and aviation human factors. Consequently he knows as much as there is to know about how people carrying out demanding jobs behave under pressure.
Dr O’Hare sees similarities between piloting and a number of other activities with which he is more familiar, such as aviation, air traffic control, emergency medicine and nuclear power plant control. In common with these jobs, the practise of shiphandling requires a pilot to monitor and control a dynamic environment in which priorities and available choices change frequently, often with little or no warning. Engineering psychologists describe key workers in such environments as complex-system operators.
This capacity to cope with complex situations is known in the trade as situational awareness. Dr O’Hare has studied and researched situational awareness in some detail. According to his definition, situational awareness is the ability to:
• Attend to multiple information sources
• Identify alternatives
• Establish priorities
• Estimate probable outcomes for different actions
• Work on whatever has highest momentary urgency without losing sight of the routine
• Reorder priorities as situations deteriorate or improve
• Act decisively in the face of indecision by others
Coupled with experience and suitable technical knowledge, the above list probably comprises the wish list for the abilities required in a good shiphandler. Interestingly, Dr O’Hare states that situational awareness has nothing to do with general intelligence. It does not change over a person’s lifetime and is unaffected byexperience. In other words, there is some proportion of people who are simply not suited to handling complex operations, yet may be very successful in other endeavours. They may have all the necessary knowledge and skills required but lack the ability to put them together in the confusion of a complex operation. Dogged persistence may get these people up to the base level required to carry out the job, but no matter how much training and experience they get they cannot increase their inherent capacity for performance.
The costs associated with employing people with low capacities for situational awareness are not limited to those associated with mismanagement of complex operations. There is also the cost of recruiting and training staff only to find that they fail to make the grade, or fall by the wayside ten years down the track due to operational stress.
During a discussion with Dr O’Hare, I was interested to learn that there are accepted tests for situational awareness, and that these tests are in common usage in a diverse range of industries. Typically, candidates for entry or promotion into complex operations roles undergo situational awareness testing as part of the selection process. Dr O’Hare gave me a demonstration run-through on a PC-based test for situational awareness, stress tolerance and attention management abilities that he has used in research. The test takes around sixty to ninety minutes to complete, and requires the subject to perform a primary task of tracking moving objects on a screen while carrying out a selection of other tasks whose point-scoring potential changes over time. To score well, the subject must closely monitor a set of indicators to follow the changing priorities of the various tasks as indicated by their potential scoring values and to detect indications of failure modes that may require termination of one activity in favour of another.
The task and score structure places a high premium on a rational attention allocation strategy. Frustration tolerance is tested by periods when the very best that can be done will produce a low rate of score accumulation. In the face of this kind of computer behaviour, the testee must recognise that something is going on beyond his or her control and accept it until the bad times pass, but for some the frustration might lead to a breakdown in performance.
The test measures an individual’s capacity to perform complex operations at a high level. It says nothing directly about a person’s motivation or attitude, although high motivation is clearly needed to achieve a top score. It correlates only modestly with intelligence, co-ordination, or motor skills and is totally independent of knowledge, experience, or ability to function well in a team. It should be emphasized here that situational awareness is just one of a number of factors that contribute to a successful pilotage act, although few would dispute its importance.
The fundamental objective for any HR manager involved in recruitment is to find the best fit between job and staff. Pilot vacancies however are frequently filled by people with little or no prior shiphandling experience. Only a small percentage of applicants have controlled complex operations at the same level as pilotage demands before taking on the job. They are essentially ‘untested’ until a port takes them on and attempts to turn them into a pilot. Unfortunately, in a small proportion of cases, and despite glowing references and a string of letters after his or her name, the trainee is clearly unsuited to the job. In most cases the person stays in the industry, in some cases he or she is culled on no-performance grounds or elects to bail out voluntarily. The end result is pretty much the same: unhappy employee, unhappy employer and a big waste of time and money.
That’s where I think the situational awareness test could prevent a lot of heartache for all involved. At the risk of being tarred and feathered, or at very least horsewhipped, I would like to suggest that it is time that we strode bravely into the 21st century and joined other industries that test new entrants to the profession for situational awareness. It may be equally suited to selection of tugmasters.
In practise, the test has not been used to select job applicants on score alone, but more as a means to alert employers to any applicants that may be clearly unsuited to complex operations. Taking the limitations of this test into account, I see real potential for it to help prevent people entering a profession for which they are unsuited. More information about the PC-based test for situational awareness is available at the Canadian maker’s website: http://www.aero.ca
Introduction
The creation of the Single Market in the European Union (EU) and the wider process of globalization have led to an intensification of the competition between sea ports throughout Europe. An important aspect of this competition is the cost of shipping to and from the respective ports, including the dues and fees for pilotage services. Consequently, representatives of the shipping and port service industries demand cuts in the costs of
pilotage. At present, maritime pilotage in Germany is organized in monopolies, both in the provision of infrastructure (pilot boats, helicopters and other transfer and support services) and in piloting, i.e. in the supply of the ‘core’ service of assistance in navigation. Pilotage tariffs are set by the Federal Ministry of Transport and comprise dues for the use of the infrastructure (Lotsabgaben), and fees for the pilots’ services (Lotsgelder). The demands to lower these prices are often combined with proposals for exposing sea pilotage to market forces, which are widely believed to increase efficiency by helping to cut costs. Moreover, the abolition of monopolistic barriers to market entry is part and parcel of the market principles of EU policy. At first sight, the German system of Pilots’ Brotherhoods (Lotsenbrüder-schaften), organized under the umbrella of a Federal Chamber (Bundeslotsenkammer), may be considered incompatible with these principles. In the light of the ‘market vision’, proposals for reorganizing sea pilotage in Germany range from scenarios of locally competing pilot companies to models of single integrated port-service providers which compete between the regions and/or over time (by bidding for contracts).
In the green paper of 1997, however, the European Commission also acknowledged that, in the case of sea pilotage, restrictions on competition might be necessary to make markets work. In our study (prepared for the Bundeslotsenkammer in 1999), we have examined the reorganization proposals and analyzed the markets for sea pilotage and supporting services (pilot transfer facilities, radar systems etc.) in order to find out whether, and exactly in which service segments, such restrictions may be justified by the criterion of social cost efficiency. (The full version of our study is available from the Bundeslotsenkammer.)
The Rationale behind Market Restriction is Sea Pilotage
The current regulatory framework of sea pilotage in Germany is based on the supposition that unrestricted competition in this market would generate serious safety produce the socially optimal demand for and supply of pilot services, due to characteristic problems of information and coordination. Demand may fall short of the optimum because ship owners and masters underestimate the difficulties of navigating in waters where traffic is dense or where other local conditions pose specific risks, or because they ignore the negative effects of accidents, hazardous manoeuvres and delays on other users and residents. Supply may fall short of the optimum because pilots shun the ‘sunk costs’ of investing in acquiring the local expert knowledge and the material infrastructure needed to facilitate the safe and swift passage of ships, or because they do not consider it to be profitable to serve any ship that is in need of their advice. Since safeguarding the traffic in coastal risk zones has been declared a public responsibility, and since pilotage is an integral part of the public ‘production of safety’, the German Pilotage Act puts both sides of the market under comprehensive obligations to contract. Demand for pilotage is rendered compulsory for major vessels and carriers of dangerous goods, and the pilots have to serve any calling ship at any time. These obligations appear to be all the more justified in view of the strong cost pressures on the shipping industries which, over the past three decades, have greatly increased the risks that come along with the pressure of time, the lower manoeuvrability of increasingly bigger vessels, understaffing and deteriorating standards of qualification of the crews aboard.
The current regulatory framework prescribes for every pilot membership of the district’s Brotherhood. Independent of this specific type of organization, the service obligation would, however, force pilots to coordinate their services, the training of apprentices and the acquisition, maintenance and use of the required infrastructure. The question is, whether alternative structures of pilot organizations could be more cost efficient.
Testing Alternative Structures of Organization All assessments or organizational structures in maritime pilotage must take into consideration that pilots are part of traffic control and other safety systems on public waterways. Unrestricted competition in pilotage services could be incompatible with the pilots’ obligation to put safety first. Competitive pressures and commercial interests could lead to reductions in the quality and availability of service, generating a higher frequency of accidents. A priori, we cannot exclude the possibility that such costs of competition would outweigh the implicit costs of the present monopolized systems. The present organization of German pilotage guarantees a high level of service quality and the availability of service at any time. Both characteristics were used as benchmarks for our assessments of alternative systems.
Given the fully elastic adjustment of high-quality supply to the demand for pilotage services in the present rotation system, the hyopthetical range of alternative solutions is limited. We have assessed the cost efficiency of different modes within this range only. The use of the quality andavailability benchmarks does not, of course, imply that the current organization of German sea pilotage in strictly regulated Brotherhoods is per se considered to be the most efficient solution of the cost problem. The implicit costs and advantages of the status quo have been brought out by contrasting it with the alternative types of organization that have been sketched out in recent proposals.
The flow chart (see next page) illustrates the relevant choices between different ways to organize sea pilotage in a logical sequence of decisions. At the level of provision, the first stage in the regulatory decision-making, the principle question arises whether the market for pilotage services needs to be regulated at all. At that stage, the need for regulation seems to be widely acknowledged, even though the extent to which pilotage is rendered compulsory remains a matter of dispute. It is obvious that markets may fail to produce the socially optimal supply and demand for pilotage services, because those services help to protect public and common goods, such as public waterways and their environment. The unambiguously positive answer to the question of ‘market failures’ (in the rhombic box at the top of the flow chart) leads to the next question at the level of production. Public responsibility at the level of provision of sea pilotage does not necessarily imply public production. A contracting-out of pilotage services to private producers may be more efficient than the production of those services in the public sector (by civil servants or salaried employees of public enterprises). This is precisely the next question in the ‘flow of decisions’: Should the public service be supplied by public producers or by private contractors? The answer depends to a great extent on the relative importance of transaction costs and the costs of production. Whenever public services are delegated to private suppliers, transaction costs arise at all stages of regulating the supply (and demand), selecting the suppliers and drafting the contracts. These costs accrue mainly from the processes of legislation and authorization (licensing, organizing tenders etc.), from monitoring the performance of the suppliers and from enforcing their compliance with the general regulations and the specific contracts. Transaction costs are often neglected or underestimated in current debates about reorganizing sea pilotage.
Before looking at ‘private sector’ solutions, we evaluated various forms of public production under the aspects of their transaction and production costs. It was shown that the costs of production would be higher in all forms of public production, compared to the present system of independent Pilots’ Brotherhoods.The main reason for this relative inefficiency is the requirement of regular shift systems of watch duties in all organizations that work with civil servants or with salaried staff.
The German Pilots’ Brotherhoods, on the other hand, work under single rotation schedules. There is plenty of historical evidence that such rotation systems are less costly than regular shift systems, because they can operated with much smaller capacity reserves for traffic peaks. This is a unique feature of co-operatives of self-employed professionals, whereas the cost disadvantage of regular shift system does not occur in the public sector only. If private firms work with salaried pilots, they face similar problems. They may nevertheless have other advantages that make it feasible to privatize the production of pilotage and its supporting services.
Competition in the Market?
At the next level, pilotage was tested for natural monopolies, i.e. constellations in which a single organization can supply the service to the entire market, or market segment, at a smaller cost than could two or more competing firms. In such cases, the monopolies arise from strong economies in scale and scope. Competition would be ‘naturally’ eliminated by market forces, and not by political restrictions. If natural monopolies exist, there can – at best – be competition forthe market, but not competition in the market. In such cases, contracting out to one single supplier is more cost efficient than concluding contracts with a greater number of service suppliers.
Our detailed examination of pilotage (the core service of navigation advice), of pilot transfer facilities, and of radar stations led to the following conclusions:
(a) Due to large economies of scale in co-ordinating missions and maintaining reserve capacities, pilotage is a natural monopoly, at least in smaller districts. The same argument applies to transfer facilities. In Germany, only the Elbe district may be big enough to allow for cost efficient competition of several suppliers, i.e. for competition in the market. The historical process of merging a number of different pilotage organizations into one single Brotherhood seems to have falsified that hypothesis, but the subbadditivity of costs may be eliminated by technical progress and other factors. Hence, the (potential) cost differences between the Brotherhood monopoly and a greater number of suppliers should be reassessed at frequent intervals.
(b) The VTS centres and other parts of radar systems are natural monopolies.
(c) There are considerable economies of scale and scope in the combination of on-board pilotage and shore-based pilotage. Radar pilots need permanent training on the job aboard, and vice versa. Full specialization in any of the two segments is neither feasible nor safe.
(d) There are large economies of scope in the combination of operating on-board pilotage and setting up and running pilot transfer services.
(e) There are no economies of scope in the combination of the provision and maintenance of VTS centres on the one hand, and the operation of pilotage and pilot transfer facilities on the other. In the operation of VTS centres, however, economies of scope are observable in the combination of traffic control and shore-based pilotage. The integration of VTS centres into the service supply of pilots could help to cut costs. The alternative solution of incorporating radar pilots in the civil service would not make economic sense. It would either eliminate the economies of scope as of (c), or lead to the full incorporation of pilotage into the public sector, which would require a significant increase in reserve capacities, as explained above.
Natural monopolies exist in many segments of the market for pilotage services; insofar as they include combinations of segments (economies of scope), they exist in all German pilotage districts. In the relevant segments, competition in the market would fail to work. Sooner or later, it would produce cartels or monopolies, creating additional costs by temporary abuses of market power, the building up of excess capacities etc. Even if competition could be made to work, it would require comprehensive regulation. The costs of such regulatory measures might not show up in the operational accounting of private suppliers, but they would have to be covered in one way or other, probably by the taxpayer. The social costs of regulation must be set off against the benefits of competition; the net effect is not necessarily positive. The long and the short of it is that the require framework of regulations might not essentially differ from the present regulations of qualities, quantities and prices in pilotage.
Competition for the Market?
Competition for the market could be implemented by putting contracts for single operators out to tender. Our analysis of bidding procedures and bidders’ incentives led to the conclusion that, in the core service of pilotage, even such operator models tend to be more costly than permanent contracts or legal mandates of service. The core problem is again that, unlike a co-operative of self-employed pilots, a private firm with salaried pilots would have to run a regular shift system of watch duties. Compared to the status quo in Germany, the additional staffing requirements would amount to 30-50 per cent of the current number of pilots. Bidding for service contracts might help to achieve significant cuts in other costs of organization, but it can hardly compensate for the implicit rise in total staff expenses.
Moreover, inviting to tender makes sense only if newcomers who put in a better bid are allowed to replace the incumbent operator. In pilotage, however, such changes of operators are less likely because they cause considerable costs of transferring staff. Qualified ‘outsiders’ are not available at short notice – or not without extra costs, since they have to be trained on the local waters first. So the newcomer would have to attract a large share of the ‘insiders’ who were employed by the old operator. They would have to be offered better working conditions or higher incomes in order to support the bid of the newcomer and co-operate in the starting phase of the new contract. In this environment, it will be very difficult to establish cost-efficient competition for contracts.
Finally, contracting by tender will be successful only if the shareholders and managers of the bidding firm see a profit to be made from the service operation. The intention behind models of competition is precisely to cut costs by making use of the profit motive. It is highly unlikely, however, that profits can be made and costs be cut to levels lower than those achieved by the present system, in which the total budget for pilotage (including pilots’ incomes) is determined on a non-profit base, at comparatively low costs of co-ordination and reserve capacities. Hence, there are several economic arguments for letting one organization operate pilotage services permanently, either by contract or by legal mandate. This is illustrated by the last stage in the flow chart.
The pilot transfer facilities should be put out to tender. In this case, competition for the market can help to cut costs and to raise the quality of service. The pilots’ service companies, such as the Lotsen GmbH in Germany, should not be excluded from the bidding. On the contrary, bidding for the contract would force the pilots’ organizations to assess whether and to what extent they can make use of the economies of scope that help to cutpilotage costs for the service users. Bidding should take place at regular intervals, and there should be no selection bias, neither for the pilots’ subsidiary bidders, nor against them.
Risks and Side Effects of Introducing Competition
In the framework of this study, we did not have the possibility to evaluate the efficiency of the present system of German sea pilotage and its proposed alternatives in numerical detail. The data required for such comparisons are currently not available. We hope nevertheless that our study helps to identify areas in which more detailed data collection and comparative evaluation is possible and desirable – for instance, concerning the optimal number of rotation systems in one district. If it is greater than one, competition in the market may become feasible. Furthermore, we have based our hypothetical evaluation of organizational alternatives on the state of the art in theories of competition and regulation, and on a number of plausible assumptions.
On the whole, our study leads to the conclusion that it is highly improbable that any of the reorganization proposals currently discussed in Germany would be more cost efficient than the present system. It provides some evidence for a high degree of efficiency in the present system. Numerical examples in our study show that, compared with the ARA ports (Amsterdam, Rotterdam, Antwerp), pilot fees and dues for passages to and from Hamburg are lower in every respect. Contrary to allegations of discrimination against large vessels by cross subsidies, fees per (container) unit are much lower for large vessels compared to minor vessels. The comparative cost advantages of pilotage in German districts are even more obvious, if the full internal and external costs of transport are calculated in various mixes of sea, road, rail and air traffic between identical points of origin and destination. On the whole, the widespread complaints about excessively high costs of German sea pilotage do not bear scrutiny.
Under the benchmark assumption of the availability of high-quality pilotage services at any time, our study results in the pattern prediction that competition – as a process of discovering new methods to increase efficiency – would sooner or later generate organizational structures that bear great resemblance to the present ones. It should be noted that such a process of discovery would require many adjustments to changing regulations and changing requirements of information, co-ordination, communication, the maintenance of reserves etc. These adjustments could be quite costly. In a long-run perspective, it may therefore be less costly to preserve the present structure of pilotage, trimming its costs by way of further rationalization.
In this context, it should be remembered that the efficiency of regulations is defined by the criterion of minimizing the social costs of privileges extended to service suppliers. Due to its specific characteristics, sea pilotage requires extensive regulation of some type or other. The introduction of competition in this market is likely to require even more extensive regulation of pilots’ activities. If competitive pressures are strong, ‘rational agents’ tend to make investments in lobbying or other activities that may help to change regulations in their favour, rather than investing in the regulated business. In many cases, lobbying helps to gain privileges that generate higher profits compared to investments of the same amount in the original market activity. For providers of pilotage services, the extension of compulsory pilotage may increase profits. Correspondingly, users of pilotage services may attempt to increase their profits by reducing the scope of pilotage regulations.
Success in lobbying at national or international levels requires great financial and personal resources. It can hardly be denied that the ports and the shipping industries have greater lobbying powers than the pilots’ organizations in Europe. If the system of sea pilotage in Germany were changed so as to make the majority of pilots salaried employees or freelancers at the mercy of the ports and shipping companies, the authorities might find it much hard to resist lobbyistic demands for relaxing safety standards. In the long run, lobbying might put competitive pressures on national regulators that tend to be detrimental to the public provision of traffic safety and the protection of the environment.
Summing up, we conclude that competitive pressures are unlikely to increase the cost efficiency of sea pilotage in Germany. At the current state of the reorganization debates in Germany and the Netherlands, there is – to our knowledge – no proposal that seriously considers all or even most of the cost arguments raised in our study. If those arguments were taken into account, they might as well lead to the conclusion that the present organization of sea pilotage in Germany is not outdated. Its co-operative structure may very well serve its purpose of providing high-quality service at relatively low costs for a long time to come. Having said that, we do by no means exclude that much more can be done to increase the cost efficiency of sea pilotage in Germany. For example, closer co-operation or further mergers of Brotherhoods could help to make use of economies of scale and scope in the logistics of pilot transfer, in the use of material and personal capacities etc. History shows that the Brotherhood system is flexible enough to adjust to technical progress and structural changes in service demand.
If the Zeitgeist makes regulators insist on a testing of the relative efficiency of pilots’ co-operatives by way of competition, they may well be done. But it should be clear that such testing will be costly – probably also for those who demand that the costs of sea pilotage be cut.
* Frankfurter Allgemeine Zeitung
** Professor of Social Service Economics, University of Hohenheim, Stuttgart
*** Professor of International Economics, University of Oldenburg
The sea pilots attending the central, contemporaneous nationwide Extraordinary Meeting held by the German Brotherhoods of Sea Pilots hereby urge the German Federal Government and the governments of the coastal-lying regions (Länder)
1. to establish in the forthcoming tariff settlement an income of appropriate measure, which justifies the preparatory training undergone and special responsibility held by the sea piloting profession (Sea Pilotage Act § 45, Para. 3, Sent. 2);
2. to take full account of established operating expenses in the forthcoming tariff settlement;
3. when calculating normal demand for pilots in the forthcoming tariff settlement, to take into account the special stress factors of a physical, mental and health-related nature, which are caused by the pilots’ irregular system of duty rotation, providing pilotage round the clock, so as to guarantee permanent availability of pilots as part of a highly efficient duty system now and in the future;
4. when fixing an appropriate level of income in the forthcoming tariff settlement, to adopt the results of the “Study and appraisal of the fundamental elements on which to base an appropriate income for sea pilots, according to § 45, Para. 3, Sent. 2 of the Sea Pilotage Act” (Kienbaum Report) and those of the “Report on the structures and methods applied for calculating the duty hours and income of sea pilots,” prepared in connection with the former (University of Hohenheim Report);
5. that, in the forthcoming draft statute for the Second Revised Act on Seagoing Shipping, Article 5 (ref.: Sea Pilotage Act § 9, Licensing of apprentice pilots) an additional licensing criterion be added, i.e. a successful pass in a specialist course in nautical studies at a Technical University, so as to give continued assurance of the universally demanded high standard of consultancy provided by pilots;
6. that, on national, European and international councils, they advocate for a fully regulated pilotage system, with the aim of:
• ensuring that pilot services are provided to all users on a non-discriminatory basis in the interests of fair and honest competition in the port sector;
• ensuring the safety and free flow of all traffic, protection of the environment and avoidance of danger to persons and objects as a public duty at appropriate expense.
Hamburg, 7th September 2000.
• Born December 23, 1953 in Concarneau, Brittany, France
• Pilot of the Loire River, Nantes-St Nazaire Port since January 1st 1987
• Entered the Nautical Academy in Le Havre in 1972
• Cadet, Deck Officer and Engineer at Louis Dreyfus & CIE Ltd
• Masters Certificate in 1985
• Senior pilot since January 1992
• Involved in the Executive Committee of Loire River Port Pilots Association for many years
• Part of the Euro-International Working Group o the Fèdèration Française des Pilotes Maritimes, which is involved within EMPA and IMPA business.
• Elected IMPA Vice-President in Shanghai, December 1998
• Represents IMPA at IALA, in VTS and AIS Committees
Proposals for a new/alternative type of Pilot ladder step were presented to the IMO sub-committee on Safety of Navigation NAV 46 (Agenda item 16) in July.
In September 2000 the Italian Coast Guard submitted the modified step for laboratory tests, but requested the co-operation of pilots who act in icy conditions in order to explore the consequences of the use of such a ladder in extreme cold conditions. A questionnaire should be completed by any pilot using the modified pilot ladder on a number of ships expected to call in cold weather during winter. Pilot ladders of different lengths (9, 8, 7 mts.) ready for tests have already been built in Italy, and Fedepiloti has asked the IMPA secretariat to investigate, as a matter of urgency, the following points:
(a) which pilot station could co-operate in these trials;
(b) the modified pilot ladder could be forwarded to their stations from Italy: by what means is considered best;
(c) interested pilots should make provision to deploy the ladder on board some ships plying their ports;
(d) they complete the questionnaire.
Please advise IMPA on the Wellington if you can assist with these trials.
President
Captain Michel Pouliot – Canada
Senior Vice President
Captain Arthur Thomas – USA
Treasurer/Vice President
Captain Geoff Taylor – UK
Vice Presidents
Captain Helcio Kerr – Brazil
Captain Hein Mehrkens – Germany
Captain Steve Pelecanos – Australia
Captain René Richard – France
International Technical Committee
Captain Rein van Gooswilligen – Netherlands–
Captain Masaru Miyamori – Japan
Captain Bertil Hammargren – Sweden
Captain Cahit Istikbal – Turkey
IMPA Secretariat
Secretary General:
Mr Nick Cutmore
Seacretary
Miss Caron James
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