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OBAC offers contract advisory service

"Apples to apples, oranges to oranges."In other words, let's be sure that we're all talking about the same thing before we compare contracts.For owner/operators in the trucking business, this has neve...


MIKE SMITH: Voice of the O/O
MIKE SMITH: Voice of the O/O

“Apples to apples, oranges to oranges.”

In other words, let’s be sure that we’re all talking about the same thing before we compare contracts.

For owner/operators in the trucking business, this has never been more important.

The profit margins are so razor-thin and the chances for success are so dependent on absolutely everything falling into place that there is simply no room left for any unattended ‘what ifs.’

Every contingency has to be accounted for, every doubtful clause needs to be closely examined and every question asked must be answered as completely as possible.

Otherwise, the inevitable out-of-the-box series of circumstances will arise someday and, unless there has been an adequate allowance made for these situations, the owner/operator will likely find him/herself without compensation for work performed or protection from the consequences of the unforeseen eventuality.

And make no mistake about it…it’s the owner/operator who will be left holding the empty briefcase if all the loose ends are not tied up.

A few examples are in order. Many owner/operators run on a percentage-of-revenue basis.

The details of this form of compensation, at first glance, are fairly straightforward. The carrier or broker is paid a certain amount by the customer and the agreed upon percentage is, in turn, forwarded to the owner/operator…or is it?

How do you really know how much your carrier was paid for the load?

Do you get an opportunity to see the actual probill that was sent to the customer?

Is a copy of this document included with every settlement cheque which you are issued?

How are your perfectly legitimate business enquiries to the carrier greeted when you raise this matter?

If they baulk at showing you the probill then perhaps you should be suspicious. Seventy per cent of not much is still a loser’s game.

Or perhaps you have opted to work on a mileage basis with extra charges for pick-ups and drops.

Does the mileage portion reflect the actual practical road miles according to a reliable and recognized computerized model or is it based on the shortest route, the one used by the sales department when quoting a rate to a potential customer?

Are you running from ‘city hall to city hall’?

Is there an allowance for out-of-route miles that are not accounted for as part of the regular trip?

Does the portion of the rate allocated to picks and drops include the first and last?

How about insurance?

Do you have access to the fleet’s gross-revenue-based premium?

If your personal accident profile is better than the fleet’s average, can you get a better rate through the insurer?

Will the carrier take the time and trouble to break out a better premium deduction for you as an individual?

If not, will they permit you to seek an alternative insurer under your own name?

And then there’s fuel tax…

Are you saddled with the fleet fuel consumption average when the taxes are assessed?

If you are getting substantially better fuel consumption than the rest of the fleet then you could be paying too much.

Some carriers pay for forced layovers while others pass that inevitability on to the owner/operator.

Some will pay for a free wash as part of a bonus and incentive package while others offer preferred rates on shop work for the leased contractors.

Does the carrier have a safety bonus program in place?

Do they offer preferred rates for life insurance or disability insurance?

Is there a pension plan in place?

How substantial is it?

Will they offer a matching (or better) contribution alongside your deduction?

How about the ever-thorny issue of seniority?

Does the potential carrier use a first-in, first-out dispatch or do senior contractors get first crack at the ‘good’ loads?

Does the carrier have a paint scheme that you must adhere to and will they pay all or some of the cost?

What about the cost of fuel?

Can you use a company fuel account profitably or will the ‘administration cost’ make the whole deal go sour?

And how about those intangibles that never get reflected on the profit and loss spreadsheet?

Do you end up waiting around on your own time for maintenance to release a roadworthy trailer?

Do you keep having to go back to the accounts payable department for those little extras that were promised but have still not been paid?

These issues and so many more like them add up to creating the tone of an outfit…it’s either a pleasure to work there or a constant source of irritation just to get what’s properly yours.

All these details are relevant when comparing contracts between potential carriers.

The complete picture isn’t painted until the owner/operator finds out more than just the mileage rate or the percentage breakdown.

Often the renumeration between carriers may not appear to be comparable but if an owner/operator ends up spending more to achieve the same package as another ‘lower-paid’ contractor then the advantage of the so-called higher rate is lost.

But how do you know who is offering the better package?

You could simply call the carrier and ask for the breakdown but too often they will gloss over the subject with the throwaway response ‘don’t worry, all our guys are doing just fine.’

Or they may refuse to discuss the matter because of ‘company policy’ or ‘confidentiality agreements.’

And even if you do manage to get a straight answer, how much time will you have devoted to the task of getting the most complete picture possible of the many options being offered by the main players?

Part of the mandate of the Owner-Operator’s Business Association of Canada (OBAC) is to collect and disseminate as much useful data as possible to improve the profitability of its members.

OBAC proposes to solicit its members to bring in copies of the contracts being proposed by carriers with whom they might be considering working.

By comparing the details of the working arrangements of recognized industry leaders, we intend to widen our data base of the many varieties of situations that currently exist.

Our goal is to shorten the path which the owner/operator needs to take from his initial vision to the final signature.

Legitimate carriers that care about the welfare of their sub-contractors won’t be afraid to have their contracts held up to the light.

Those with a different agenda will say a great deal simply by refusing to cooperate with the owner/operator.

That first tell-tale sign of hesitation will tell most owner/operators what they need to know. OBAC’s Contract Advisory Service will do the rest. n

A long-time O/O, Mike Smith is a member of OBAC’s board of directors. He can be reached at msmith@obac.ca.


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