Contract Rate

A contract rate is a price agreement between a shipper and carrier for moving freight on specific lanes over a set period, most commonly one year. These rates are the backbone of a shipper's transportation budget: they provide cost predictability, guarantee capacity commitments, and form the foundation of the routing guide that determines which carrier gets which freight.

Contract rates are typically established through a freight RFP process. The shipper shares lane data – origin, destination, volume, frequency, equipment requirements – and carriers bid. Winning bids become contracted rates, often memorialized in a routing guide with primary and backup carrier assignments per lane. The rate itself usually includes a linehaul component and a fuel surcharge mechanism (either a fixed percentage or an index-based table), with accessorial charges defined separately.

The challenge with contract rates is that they're static in a dynamic market. When spot rates drop well below contract levels, shippers are paying above market. When the market tightens and spot rates spike, carriers may reject contract freight – a phenomenon called tender rejection – because they can earn more elsewhere. High tender rejection rates erode the reliability that contract rates are supposed to provide, leaving shippers scrambling for spot coverage at a premium.

Smart shippers treat contract rates as a baseline, not a ceiling. They monitor market conditions continuously, benchmark their contracted pricing against current spot and tariff rates, and use that data to time mini-bids on underperforming lanes rather than waiting for the annual RFP cycle. The goal is a living rate strategy, not a static spreadsheet that goes stale three months after signing.