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In this article, Ray Engley, public affairs manager at the Road Haulage Association (RHA), discusses how to calculate fuel surcharges.

Getting a fair rate for the job is a key challenge in road haulage - and many firms are finding it has never been as hard as it is proving to be this year. No surprise there, when fuel prices go up 8% in three weeks, as they just have done, and more than 50% since early 2007. Rules of thumb are being rewritten as fuel soars  as a percentage of operating costs. A firm on 60 days' payment and laying out £5,000 per truck on fuel a year ago suddenly faces laying out almost £8,000 a truck. The strain on cash-flow and the cost of funding the fuel are both increased and should not be ignored.

There is no precise recipe for the mix of skill, talent and perhaps good fortune that marks out successful rate negotiation. But there are common themes for the haulier: having a customer who understands the value for money you provide and knowing what you require and why you require it. That means understanding your costs and how they can be affected by soaring diesel prices. The RHA has separated out fuel in its annual cost movement survey and our interactive online cost tables. We also provide a fuel increase contract clause for members to use as they wish. Our Fuel Adjustment Guide stresses  that there is no catch-all formula but we do suggest a robust method:

Fix your base buying/budget price. Work out the percentage effect on the base price of a 1p/litre change in the diesel price. Determine the percentage of your total costs (or revenue) represented by diesel and apply the surcharge using one of two options: the average across your whole operation or that specific to the truck working for the customer.

Negotiations can be hard and hauliers have to be prepared on occasion to say they will decline the work - and mean it. But getting the structure right to cope with what may be a lengthy period of uncertainty and volatility is essential. The use of rate adjustors will inevitably increase and some RHA members even publish their fuel escalator on the home page of their website - a clear signal of intent.