What is Contract Freight?
Contract freight is pre-negotiated rates and volume commitments between shippers (or brokers) and carriers for a defined period — typically quarterly or annually. Contract freight provides the revenue stability carriers need while giving shippers guaranteed capacity, making it the foundation of the freight economy alongside the spot market.
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O TruckingWhat is Contract Freight? Guide for Carriers
What is Contract Freight?
Contract freight is a formal or semi-formal agreement where a shipper or broker commits to providing a carrier with a specified volume of freight at a pre-negotiated rate for a defined period. This stands in direct contrast to the spot market, where every load is a one-time transaction at whatever rate supply and demand dictate that day.
Approximately 60% of all truckload freight in the United States moves under contract. The remaining 40% moves on the spot market. Large shippers — Walmart, Amazon, Procter & Gamble, PepsiCo — move 80-90% of their freight under contract because they need reliable capacity at predictable costs. Small to mid-size shippers typically move 50-70% contract and rely on the spot market for overflow and surge demand.
Quick Facts: Contract Freight
Definition
Pre-negotiated rates & volume commitments
Duration
Quarterly (3 months) or annual (12 months)
Rate Structure
Fixed base rate + variable fuel surcharge
Market Share
~60% of all US truckload freight
How Contract Freight Works
The contract freight cycle follows a predictable pattern throughout the year. Understanding this cycle is essential for carriers who want to participate in contract bidding:
RFP Season (Q4: Oct-Dec)
Large shippers release Requests for Proposals (RFPs) during Q4 for the following year. The RFP specifies lanes (origin-destination pairs), expected volumes, equipment requirements, service expectations, and the contract period. Carriers and brokers submit competitive bids.
Award & Contract Execution (Q1)
Shippers evaluate bids based on rate, service history, safety record, capacity, and reliability. Winning carriers receive rate confirmations or formal contracts. Most annual contracts begin January 1 or April 1. Some shippers split freight across primary and backup carriers.
Tender & Acceptance (Ongoing)
Throughout the contract, the shipper tenders loads to the carrier via their TMS (Transportation Management System). The carrier accepts or rejects each tender. Tender acceptance rate is a critical metric — carriers who consistently reject tenders lose contract status quickly. Target: 90%+ acceptance rate.
Mini-Bids & Rate Adjustments (Quarterly)
Market conditions change faster than annual contracts can account for. Many shippers run mini-bids (shorter bidding rounds) quarterly to adjust rates on specific lanes. These are opportunities for carriers to re-price lanes that have become unprofitable or bid on lanes they did not win initially.
Contract Freight vs Spot Freight
Contract and spot freight serve different purposes in a carrier's business model. Smart carriers use both strategically:
| Factor | Contract Freight | Spot Freight |
|---|---|---|
| Rate determination | Pre-negotiated, fixed period | Real-time supply/demand |
| Rate stability | Very stable | Highly volatile |
| Volume commitment | Committed (with tender) | One load at a time |
| In tight markets | Below spot rates | Premium rates |
| In soft markets | Above spot rates | Depressed rates |
| Planning ability | High — known schedule | Low — day-to-day |
| Source | Direct shippers, large brokers | Load boards, brokers |
For a deeper analysis of when to prioritize each approach, see our contract vs spot freight guide and when to choose spot vs contract freight.
The Floor-and-Ceiling Strategy
Typical Contract Freight Terms
Every freight contract includes specific terms that define the relationship between carrier and shipper. Understanding these terms is critical before signing any agreement:
Duration & Renewal
Most contracts run for 12 months with some at 6 months (quarterly). Auto-renewal clauses are common — read them carefully. Termination typically requires 30-day written notice from either party. Some contracts include 90-day termination clauses that can trap you in unprofitable lanes.
Rate Structure
The contract specifies a base rate per mile plus a fuel surcharge formula tied to the DOE diesel index. Some contracts use an all-in rate that bundles base and fuel. Always negotiate for a separate fuel surcharge — it protects you when diesel prices spike.
Volume Commitment
The shipper commits to a specific number of loads per week or month. Watch for "estimated volume" language versus "committed volume" — estimated means the shipper can reduce freight without penalty. Push for minimum volume guarantees with a deadhead or shortfall penalty if the shipper does not provide the agreed freight.
Service Requirements
Contracts define expected on-time pickup/delivery percentages (usually 95%+), tender acceptance rates (90%+), communication protocols (tracking updates, check calls), and claims handling procedures. Failing to meet these KPIs can trigger contract termination or rate reductions.
Insurance & Liability
Minimum insurance requirements ($1M auto liability, $100K cargo is standard). Contracts specify who bears liability for freight damage, delays, and accessorial charges. Read the indemnification clause carefully — some contracts try to shift all risk to the carrier regardless of fault.
Payment Terms
Standard payment is net-30 days from delivery. Some contracts push net-45 or net-60. If your cash flow cannot handle 30-60 day payment delays, plan to use a factoring company. Verify the shipper's payment history before committing to long payment terms.
For the complete guide to evaluating and negotiating contract terms, see our freight contract terms guide.
Read Before You Sign
How to Bid on Freight Contracts
Contract bidding is a skill that separates profitable carriers from struggling ones. Here is what shippers evaluate in your bid:
Competitive rate — Your bid must be competitive but profitable. Calculate your true cost per mile first, then add your target margin. Never bid below cost to win a contract — you will lose money on every load.
Safety record — Shippers check your CSA scores, safety rating, and insurance history. Clean safety records win contracts over cheaper carriers with violations.
Service history — On-time delivery percentage, tender acceptance rate, and claims history. Shippers want carriers with a proven track record, not just a low price.
Capacity commitment — Can you actually cover the volume? Shippers have been burned by carriers who win bids and then reject tenders because they over-committed. Only bid on volume you can realistically cover 90%+ of the time.
Technology compatibility — Can you integrate with their TMS for electronic tendering, tracking, and invoicing? Many large shippers require EDI (Electronic Data Interchange) or API connections. Smaller carriers can often use web portals or broker platforms instead.
For a step-by-step bidding guide, see our how to bid on freight contracts guide.
2026 Contract Freight Rates
After the freight recession of 2023-2024 pushed contract rates to multi-year lows, the market has been recovering since Q3 2025. Here are current contract rates as of February 2026:
| Equipment Type | Feb 2026 Contract | Feb 2026 Spot | YoY Change |
|---|---|---|---|
| Dry Van | $2.71/mi | $2.45/mi | +7.5% |
| Reefer | $3.15/mi | $2.94/mi | +9.4% |
| Flatbed | $3.02/mi | $2.58/mi | +9.8% |
Contract rates currently sit above spot rates across all equipment types, which is typical in the early stages of a market recovery. As capacity continues to tighten through 2026, analysts expect spot rates to rise toward and potentially exceed contract rates by Q3-Q4 2026. For the latest market analysis, see our 2026 freight market and contract rates outlook.
Negotiate Rate Reopeners
Risks & Pitfalls of Contract Freight
Contract freight is generally lower-risk than spot, but there are pitfalls that trap inexperienced carriers:
Rate lock during rising markets — If you sign a 12-month contract and the market surges 20%, you are stuck at the lower rate. Mitigate with rate reopener clauses or shorter contract durations during market inflection points.
Volume shortfalls — Shippers sometimes commit to volumes they cannot deliver. If the contract says "estimated 10 loads/week" and they only tender 4, your revenue plan collapses. Insist on minimum volume guarantees with compensation for shortfalls.
One-sided contract terms — Many shipper contracts are written entirely in the shipper's favor: unlimited liability for the carrier, no minimum volume commitment from the shipper, 90-day termination notice. Always negotiate. If they will not negotiate, consider whether the freight is worth the risk.
Bidding below cost — New carriers sometimes bid aggressively to win their first contracts, then realize they are losing money on every load. Know your true cost per mile before bidding. A contract that loses money is worse than no contract at all.
How Our Team Manages Contract Freight
Contract freight management is a core part of our dispatch operations. Here is how we approach it for the carriers we serve:
Contract rate benchmarking
Before a carrier bids on any contract, we benchmark the proposed rate against current DAT contract averages, historical lane rates, and the carrier's specific cost per mile. This ensures every bid is competitive enough to win but profitable enough to sustain.
Tender management and acceptance
We monitor tender flow from contract shippers and ensure acceptance rates stay above 90%. When a carrier cannot cover a tender (breakdown, HOS timing, etc.), we coordinate with the shipper immediately rather than silently rejecting. Proactive communication preserves the relationship even when you cannot cover a load.
Contract-spot blending
We build freight plans that blend contract and spot freight for maximum annual revenue. Contract loads fill the base schedule, and spot loads fill gaps at premium rates. This approach has consistently outperformed pure-contract or pure-spot strategies for our carriers.
Contract Freight FAQ
Common questions about contract freight in trucking
What is contract freight in trucking?
Contract freight is a pre-negotiated agreement between a shipper (or broker) and a carrier where the rate per mile, volume commitment, and service terms are locked in for a defined period — typically quarterly or annually. Instead of negotiating each load individually like the spot market, the carrier agrees to haul a certain number of loads at the contract rate, and the shipper agrees to tender that volume. Contract freight gives carriers revenue predictability and shippers guaranteed capacity.
What is the difference between contract and spot freight rates?
Contract rates are fixed for the contract period (usually 3-12 months) and negotiated in advance. Spot rates change daily based on real-time supply and demand. In a tight market where trucks are scarce, spot rates rise well above contract rates. In a soft market with excess capacity, spot rates fall below contract rates. Over a full year, contract rates tend to average 5-10% higher than annual spot averages because they include a stability premium — shippers pay slightly more for guaranteed capacity.
How do you bid on freight contracts?
Most freight contracts are awarded through a Request for Proposal (RFP) or mini-bid process. Shippers publish their lane requirements (origin, destination, volume, equipment type, schedule), and carriers submit bids with their rates and service capabilities. Bid season typically peaks in Q4 (October-December) for the following year. To win bids, carriers need competitive rates, strong safety records (CSA scores), on-time performance history, appropriate insurance, and the ability to commit to the required volume consistently.
What are typical contract freight terms?
Standard contract freight terms include: duration (quarterly or annual), rate per mile with fuel surcharge formula, volume commitment (loads per week/month), service requirements (on-time percentage, communication protocols), payment terms (usually net-30), equipment specifications, insurance minimums, and termination clauses (typically 30-day notice). Most contracts also include a rate adjustment clause tied to market conditions and a force majeure provision for extraordinary circumstances.
Should owner-operators pursue contract freight?
Yes, if they can commit to the volume. Contract freight provides the revenue stability that owner-operators need for truck payments, insurance, and living expenses. However, owner-operators with one truck should be careful about committing to more volume than they can handle. A realistic approach is securing contract freight for 3-4 days per week and keeping 1-2 days open for spot market loads or maintenance. Many owner-operators access contract freight through dispatch services or broker relationships rather than bidding directly with shippers.
What are contract freight rates in 2026?
As of February 2026, average contract rates are: dry van $2.71/mile (up from $2.52 in early 2025), reefer $3.15/mile (up from $2.88), and flatbed $3.02/mile (up from $2.75). Contract rates have been rising since Q3 2025 as the freight market rebalances after the 2023-2024 downturn. Most analysts expect 2026 contract rates to remain 8-12% above 2025 levels, with the strongest increases in reefer and flatbed segments where capacity is tighter.
Need Help Building a Contract Freight Portfolio?
Our dispatch team benchmarks contract rates, manages tender acceptance, and blends contract and spot freight for maximum annual revenue. Let us help you build a stable, profitable freight portfolio.