Dedicated Fleet Contract Pricing: The Fixed Weekly Charge Plus Variable Per Mile Model, Utilization Guarantees, Fuel Pass Through, and Renewal Resets

Dedicated Carriage Versus One-Way Truckload

In one-way truckload the unit of sale is a single movement from an origin to a destination at a lane rate. The carrier owns every risk after delivery: where the next load comes from, how many empty miles it takes to reach it, and whether the driver sits for a day waiting. The rate per mile therefore has to absorb deadhead, dwell, and market swings, and the carrier's revenue line moves with the spot and contract market every quarter. The shipper, in turn, has no claim on any specific tractor and no obligation beyond paying for loads it tenders.

Dedicated contract carriage reverses the arrangement. The shipper reserves a defined set of tractors, trailers, and driver positions for a term that is usually one to five years. Those assets work only for that shipper, often in that shipper's trailer graphics, running a repeatable pattern of store deliveries, plant shuttles, or distribution center outbound. Because the carrier can no longer sell that capacity to anyone else, the shipper pays for the capacity whether or not it is fully used. In exchange the shipper gets service consistency, driver familiarity with its docks, and insulation from spot market pricing. The contract structure follows directly from that trade: a fixed component that pays for reserved capacity and a variable component that pays for work performed.

The data consequence is that a dedicated account cannot be managed with the same reports as a one-way fleet. Revenue per loaded mile, the classic truckload metric, is almost meaningless when half the revenue arrives as a weekly fixed charge regardless of miles. Dedicated accounts need margin per tractor per week, utilization against guarantee, and fuel recovery versus fuel cost. The TMS has to be configured to produce those numbers, and that configuration starts with understanding each component of the price.

The Fixed Component

The fixed weekly charge is a cost build-up, not a market rate. For each tractor position the carrier lists the weekly cost of the tractor itself (lease or depreciation plus interest, licensing, and permits), the weekly cost of the trailer or trailers assigned, the driver's base compensation including payroll taxes, benefits, and paid time off, the insurance premium allocated to that unit, and an overhead allocation for dispatch, safety, maintenance management, and administration. A margin percentage is applied on top. The result is a weekly number for each position, and the sum across all positions is the fixed weekly charge on the invoice.

Two design decisions matter here. First, decide whether the driver's pay is fully in the fixed charge or split between a fixed base and a variable per mile or per hour component that mirrors how the driver is actually paid. If a driver earns an hourly wage, the fixed charge usually carries a guaranteed weekly hour count and the variable charge recovers hours above it. If a driver earns per mile, the fixed charge may carry only benefits and a minimum guarantee while mileage pay flows through the variable rate. Matching the contract structure to the pay structure keeps the margin stable when volume moves.

Second, decide the treatment of spare equipment and relief drivers. A dedicated operation with ten tractor positions typically needs more than ten drivers to cover vacation, illness, and turnover, and may need a spare tractor to cover shop time. Those costs are real and should appear explicitly as a relief factor or spare unit charge in the fixed build-up rather than hiding in overhead. When they are hidden, the account looks profitable on paper until the first audit of actual payroll against billed positions.

The Variable Component

The variable component pays for the work the fleet actually does, and it is usually expressed as a rate per mile, a rate per stop, a rate per hour, or some combination. Per mile recovers fuel burn before fuel surcharge, tires, maintenance wear, and mileage based driver pay. Per stop recovers the time and labor of a delivery, which matters on multi stop retail routes where miles are short but stops are many. Per hour is common when the work is a plant shuttle or yard move where miles are trivial and the shipper controls how long the driver waits.

The design rule is that each variable charge should correspond to a cost driver that the shipper controls. If the shipper decides routing, mileage is the shipper's cost driver and per mile is fair. If the shipper decides how many stores a route serves, per stop is fair. If the shipper's dock controls how long a driver is detained, per hour or a detention accessorial is fair. When the variable rate is attached to something the carrier controls instead, the shipper has no way to manage its bill and disputes follow.

Miles themselves need a definition. State in the contract whether billed miles are practical route miles from a named mileage system and version, actual odometer or ELD miles, or shipper supplied planned miles. Each choice has consequences. Practical route miles are stable and auditable but ignore detours. ELD miles are exact but include out of route driving the shipper did not request. Many contracts bill practical miles with a clause that out of route miles above a stated tolerance are either reviewed or borne by the carrier. Whatever is chosen, the TMS must store both planned and actual miles on every movement so the comparison can be run.

Utilization Guarantees and Minimum Weekly Charges

A utilization guarantee is the shipper's promise that the reserved capacity will be used enough to justify the fixed charge, or that the shipper will pay as if it had been. The simplest form is a minimum weekly charge: the invoice for any week will be no less than a stated amount per position regardless of miles. A more precise form guarantees a minimum number of miles or hours per tractor per week and bills the shortfall at the variable rate. A third form guarantees a minimum number of positions for the term and charges an early release fee if the shipper reduces the fleet.

The guarantee protects the carrier from a shipper that reserves ten tractors in January and uses six in July. It also protects the shipper, because a carrier that is guaranteed a floor can price the fixed charge lower than it would if it had to carry the whole idle risk. The tension appears when volume is seasonal. A retail account with a fourth quarter peak may want a lower guarantee in the slow months and a higher one in peak, or may want the guarantee measured on a rolling four week average rather than a single week. The TMS must be able to calculate the guarantee at whatever grain the contract states, and that is the first configuration question to ask before signing.

Shortfall billing needs a clear calculation. For example, if a position carries a guarantee of 2,000 miles per week at a variable rate of 1.50 per mile and the tractor runs 1,600 miles, the shortfall line is 400 miles at 1.50, or 600.00, in addition to the actual 1,600 miles billed. Those are illustrative numbers. The invoice should show the actual miles, the guarantee, the shortfall, and the shortfall charge as separate lines so the shipper's freight audit team can verify the arithmetic without calling.

Fuel Pass Through Indexed to the EIA Diesel Price

Fuel is the largest variable cost the carrier does not control, so dedicated contracts almost always pass it through. The standard mechanism references the U.S. Energy Information Administration weekly retail on-highway diesel price, which EIA publishes each Monday for the United States as a whole and for Petroleum Administration for Defense Districts and selected sub-regions. The contract states which series is used, what peg price is built into the variable rate, what fuel economy in miles per gallon is assumed, and which day's publication governs which billing week.

The calculation is then mechanical. The fuel surcharge per mile equals the difference between the published price and the peg, divided by the assumed miles per gallon, floored at zero if the contract does not allow a negative surcharge when fuel falls below the peg. For example, with a peg of 3.00 per gallon, an assumed 6.5 miles per gallon, and a published price of 3.65, the surcharge is 0.65 divided by 6.5, or 0.10 per mile. Again, these are illustrative values chosen for arithmetic clarity, not a recommendation of any peg.

Three details prevent disputes. First, store the EIA index value in the TMS with its publication date and the series identifier, so every weekly invoice references a specific release. Second, decide whether the surcharge applies to all miles including empty repositioning or only to loaded miles, and whether it applies to hourly work at all. Third, decide whether the peg resets at renewal. Some shippers prefer a higher peg with a higher base rate because it smooths the surcharge line; others prefer a low peg so the base rate is comparable to one-way quotes. Neither is wrong, but the choice should be explicit and the TMS rate table should carry both the peg and the base so a reset is a data change rather than a reprogramming job.

Accessorial Schedules and Driver Wage Escalators

An accessorial schedule lists the charges for work outside the standard route pattern: detention beyond a free period, layover, extra stops beyond the contracted count, driver assist or hand unload, pallet exchange, tolls, weekend or holiday dispatch, and hazardous materials handling. In a dedicated contract the schedule is usually shorter than in one-way because routine stops and routine waiting are already priced into the fixed and variable components. What remains is the exceptional. The schedule should state the trigger, the unit, the rate, and the evidence required, such as ELD arrival and departure times for detention or a signed delivery receipt showing additional stops.

Driver wage escalators protect the carrier over a multi year term. Driver compensation is the largest single element of the fixed charge, and driver pay in the market changes faster than most other costs. A typical escalator either applies a stated percentage increase to the driver portion of the fixed charge on each anniversary or ties the increase to a published wage index with a floor and a cap. The contract should identify exactly which dollars escalate. If the escalator is applied to the entire fixed charge, the shipper is paying wage inflation on the tractor lease, which is not the intent and will be noticed at renewal.

Annual Renewal Resets and True-Ups

A reset re-prices the fixed component from the current cost basis. The carrier presents the updated tractor, trailer, insurance, and driver costs, applies the agreed escalator where it governs, and proposes the new weekly fixed charge for the next contract year. The shipper's audit team compares the new build-up to the prior year's and to the original. The process is far smoother when the original build-up was recorded in the TMS contract record line by line, because the conversation becomes "insurance moved from this to this" instead of a debate over a single lump sum.

A true-up reconciles what was guaranteed against what actually happened. Over the year the shipper may have paid shortfall charges in slow weeks and run well above guarantee in busy weeks. Some contracts allow banking, where excess miles in strong weeks offset shortfalls in weak ones within a quarter or a year, with the net settled at true-up. Others reconcile fuel, where a lag between the EIA publication and the billing week created small over or under recoveries that are netted annually. A true-up can also address lane mix. If the shipper's routes grew longer or added stops beyond what the variable rate assumed, the true-up documents the change and the reset prices it going forward.

The data required for a clean true-up is simple to name and hard to produce after the fact: weekly miles by position, weekly hours by position, weekly stop counts, weekly fuel index values, weekly fixed and variable charges billed, and weekly actual costs by position. A carrier that has those fifty two rows per tractor in a reporting table can run the true-up in an afternoon. A carrier that must reconstruct them from invoices and payroll exports will spend weeks and lose arguments.

Modeling the Contract in the TMS

The contract should exist as a first class object in the TMS, not as a customer note. A workable model has a contract header with the customer, term start and end, billing cycle, invoice day, mileage system and version, fuel index series, peg, assumed miles per gallon, and guarantee method. Beneath it, a position table lists each tractor or driver position with its fixed charge build-up, its assigned equipment, its guarantee value, and its effective dates so that positions can be added or released mid term. A variable rate table lists each charge type (per mile, per stop, per hour, shortfall) with rate, unit, and effective date ranges. An accessorial table lists each exceptional charge with its trigger, unit, rate, and evidence requirement. A fuel index table stores each weekly EIA value with publication date.

Weekly invoicing reads from all five. The fixed lines come from the position table for positions active during the week. The variable lines come from completed movements joined to the rate table by charge type and effective date. The fuel line multiplies eligible miles by the surcharge computed from the fuel index table. Shortfall lines compare actual to guarantee at the stated grain. Accessorial lines come from movement level events that match a trigger. Every invoice line should carry a reference back to the contract line and the movement or week that generated it, so an auditor can trace from the invoice to the source without a spreadsheet.

Cost allocation runs in parallel. Each position's actual weekly cost is assembled from equipment cost records, payroll by driver and week, fuel purchases by tractor, maintenance work orders, and the insurance and overhead allocations. The margin report then shows, per position per week, revenue billed, cost incurred, and margin, with the fuel recovery versus fuel spend broken out. Our TMS implementation work typically configures these tables and the weekly cycle together, because an invoice that cannot be reconciled to a margin report will eventually be reconciled by the customer instead.

• Contract as data - Header, positions, variable rates, accessorials, and fuel index as tables with effective dates.
• Weekly cycle - Fixed from positions, variable from movements, fuel from the index, shortfall from the guarantee.
• Traceable lines - Every invoice line references its contract line and its source movement or week.
• Margin per position - Revenue and cost at the same grain, every week, with fuel recovery shown separately.

An Illustrative Weekly Example

Consider an illustrative account with one tractor position. The example numbers are chosen for arithmetic clarity and are not market rates. The fixed weekly charge is built as tractor 650, trailer 150, driver base with benefits and relief 1,700, insurance 250, overhead 300, for a cost of 3,050, plus a 12 percent margin of 366, for a fixed charge of 3,416. The variable rate is 0.55 per mile and 25 per stop with a guarantee of 2,000 miles per week. The fuel peg is 3.00 with an assumed 6.5 miles per gallon.

In the example week the tractor runs 2,200 miles with 18 stops, and the published EIA price for the governing Monday is 3.65. The variable mileage line is 2,200 times 0.55, or 1,210. The stop line is 18 times 25, or 450. The fuel surcharge is 0.10 per mile times 2,200 miles, or 220. There is no shortfall because miles exceeded the guarantee. The invoice total is 3,416 plus 1,210 plus 450 plus 220, or 5,296. On the cost side, suppose actual fuel purchased for the tractor that week was 338 gallons at an average of 3.60, or 1,217. The fuel surcharge recovered 220 against a fuel cost increase above the peg of 338 gallons times 0.60, or about 203, so fuel recovery is slightly ahead that week, which is common when actual fuel economy runs at or above the assumed value.

The point of the example is not the numbers but the shape of the report. Every element on the invoice has a source line in the contract and a source record in operations, and every element of cost has a source record in equipment, payroll, fuel, or allocation. When the week's margin is lower than planned, the report shows whether the cause was low miles, high stops without a stop charge, a fuel economy shortfall, or an overtime week for the driver. That is a conversation a fleet manager can act on.

Common Contract Disputes and the Data That Resolves Them

Dedicated disputes tend to repeat. The shipper questions billed miles; the resolution is a movement level record showing the mileage system, the version, the origin and destination used, and the ELD miles alongside. The shipper questions a detention charge; the resolution is ELD or telematics arrival and departure timestamps at the geofenced dock, compared to the free time in the accessorial schedule. The shipper questions a shortfall charge; the resolution is the weekly miles by position against the guarantee value in force that week, including any mid week position change. The shipper questions the fuel surcharge; the resolution is the stored EIA value, publication date, and series identifier for the governing week, with the calculation shown.

On the carrier side, the recurring internal dispute is whether the account is actually profitable. Sales may show a healthy margin on the original build-up while operations sees overtime, extra relief drivers, and a spare tractor that was never priced. The resolution is the weekly margin per position report built from actual cost records rather than from the contract assumptions. A SQL data mining review of a dedicated account usually begins by building exactly that report, then comparing the assumed relief factor, assumed miles per gallon, and assumed hours per week with the observed values. Those three assumptions explain most of the gap between the margin that was sold and the margin that was earned.

Finally, there is the dispute over what happens at renewal when the shipper's network changed. Routes grew longer, stops increased, or a new distribution center opened farther from the driver domicile. If the TMS kept movement level history with miles, stops, and hours by week, the carrier can show the shift in work content with a single table. Contract redesign, and the question of whether a dedicated structure still fits or whether some lanes should return to one-way or be brokered, is part of our business process optimization work for carriers that run both models.

Related practice areas for this work include TMS Implementation SQL Data Mining Business Process Optimization Fractional Freight CIO. Each practice page describes scope, deliverables, and how an engagement starts with a short discovery call.

How Strong Tower Consulting Helps

Strong Tower Consulting helps carriers turn a dedicated contract from a signed PDF into a configured, auditable system inside the TMS. The work begins with the contract itself, decomposing each clause into a header value, a position line, a rate line, or an accessorial trigger, then building the weekly billing cycle and the margin per position report from the same tables so revenue and cost never drift apart. Strong Tower Consulting, LLC and Exspeedite LLC are separately organized sister companies under common ownership. That separation keeps consulting advice vendor neutral and focused on the carrier operation.

To discuss your dedicated accounts, your current billing process, and the reports you wish you had, call 763-244-1373 and ask for Scott Elliott. A short call is enough to identify which contract terms are already in the TMS, which live only in a spreadsheet, and which one to fix first before the next renewal.

Frequently Asked Questions