Contract rates are the foundation of predictable freight procurement. Rather than going to the spot market for every shipment, a shipper with consistent lane volume negotiates rates in advance for a defined period — typically one year — and builds a routing guide that sequences carrier awards in priority order.
The negotiation involves rate, volume, and service commitments from both sides. The shipper commits to tendering a minimum number of loads on the lane and to following the agreed routing guide. The carrier commits to accepting tenders at the agreed rate and to meeting service standards (on-time pickup and delivery, communication, etc.).
Contract rate negotiations happen in cycles: large shippers run formal requests for proposal (RFP) annually, collecting bids from carriers across their lane portfolio and awarding freight according to cost and service criteria. Smaller shippers may negotiate more informally, establishing rates directly with preferred carriers.
The contract rate is not always the rate shippers actually pay. If a contracted carrier declines a tender — which happens when the carrier's equipment is tied up elsewhere or when the lane is temporarily unattractive — the shipper falls back to spot market coverage at whatever the market rate is. A routing guide with reliable, responsive contracted carriers reduces spot market exposure.
Contract rates are typically established net of fuel surcharge; the fuel surcharge component is calculated separately using the carrier's published fuel table tied to a diesel index. All-in cost comparisons require including the expected fuel surcharge at current fuel prices.