Choosing a Trucking Company: Trust… but Verify

As my stream of articles has pointed out, trust is the first and leading factor for choosing a trucking company. Contracts can be: studied, verified, signed and even notarized but without trust is ultimately just a piece of paper. Contracts don’t place scruples on scoundrels.

For over 15 years I’ve analyzed and tracked company operator contracts. Many are very similar in nature. There are standard terms (clauses) such as: clearly establishing the relationship between both parties (contractor NOT employer/employee) or the requirement that the operator manage their truck in accordance with all federal, provincial and state laws. Most contract terms are “standard” however, (as the saying goes) the devil is in the details.

Though most terms are reasonable and universal some “details” are grossly slanted in favor of the trucking company. A few months ago I mentioned my favorite “…we reserve the right to deduct any amount at any time, for any reason without notice…”. Fortunately these types of detailed clauses are rare. However, just because they aren’t physically present doesn’t mean companies don’t try operating as if they are.

The relationship between company and operator is based primarily on trust (sometimes even blind trust). Both the operator and company know that any contract conflict must be negotiated privately. Small claims court is not an option when the operator is still driving for the company. He would simply be starved to death. Even AFTER the operator leaves, legal action is rarely utilized. The cost factor is usually prohibitive (due to downtime and/or legal fees).

The operator is almost always at a critical disadvantage in negotiating conflicts. The company has his money and he has to make his case why they should release it, all without burning a bridge. Even when he IS successful, too often the operator feels humiliated, as if he was “begging for a handout” rather than settling an account for completed work. The situation too often reflects more of a master-slave relationship than a contractor-sub-contractor business.

Though survival requires trust, it need not be blind trust. The settlement statement must reflect the contract details. Blind trust would mean the operator accepts the statement as presented… every time… without question… not a wise business principle. It’s common sense to verify miles, drops and pickups, fuel insurance etc. but what about the dozens of different situations?

Ronald Regan popularized a saying: TRUST… BUT VERIFY.

I had a client who purchased fuel in Georgia: 110 gallons $409.10 on the U.S. invoice. When the statement came it showed 110 gallons but the deduction was $417.62 (2.1% more). On June 29/2011 the spot Canadian dollar was $1.015 (June’s Canadian dollar average was well over $.02 more than the US) so the amount deducted should have been LESS than $409.10, or at least even… not more! The contract was clear there was NO markup… so what happened?

It appears the “company exchange rate” had a margin of about 3-5% above market. Their practice was “take the worst monthly spot price, and add a specific margin”. Viewed at each invoice it produces a minuscule income to the company (from the pocket of the operator). Over a year, however, it adds up to considerable coin.

Is this acceptable? Was this a term agreed upon at the time of signing? Usually NOT! Each operator must determine their position for themselves. At the very least the operator must communicate to the company they know what’s going on.

Quality integrity based companies don’t hide these types of hidden expenses. Costs are transparent, transferred penny for penny, operator by operator or at the very least openly acknowledged as an administration fee.

If the unethical company develops numerous amounts of these hidden sources of margin, they can develop a competitive advantage over companies that are integrity based. If anyone wants to truly level the playing field in the industry each individual point of margin from the pockets of operators must be exposed and accounted for.

The responsibility lies on the operator. They must employ a systematic method of checking each statement for accuracy in both revenue and expenses. The failure of operators to verify may produce pointless losses and voluntarily provide an unjust enrichment to the trucking company. It’s not only bad for individual operators but bad for the entire industry as well.

If you don’t look after yourself don’t assume someone else will… especially someone who benefits from your loss. Being an operator means your in business to make money, failure to verify simply means you can’t be bothered to ensure you collect it.