- September 20, 2018
- Posted by: Chris Holzgraf
- Category: Buyers and Sellers Hub, Industry Insights
One major change that came along with the transition to the FedEx ISP business model was the agreement. The FedEx ISP Transition Workbook defines the ISP Agreement as a “negotiated, legally-binding contract between the contracted service provider (CSP) and FedEx Ground. It includes a range of individually negotiated financial and non-financial terms that are unique to the CSP’s business, with a term of up to three years. An ISP Agreement outlines the service-level results that CSPs agree to provide and the regulatory compliance requirements they agree to meet for the term of the agreement. In return, FedEx Ground compensates CSPs for services rendered as mutually agreed upon during ISP Agreement negotiations.”
Main Components of an ISP Agreement
(The following includes excerpts from the FedEx ISP Transition Workbook)
Key Financial Terms & Election
- Package Charge — Charge paid to an ISP for each package picked up or delivered when the ISP makes a stop.
- Stop Charge — Charge paid to an ISP for each stop to a customer location where a package is picked up or delivered.
- Surge Stop Charge – Charge paid weekly to an ISP for any stop performed above the negotiated “Daily Stop Threshold” during the period defined as Peak from the Saturday immediately preceding Thanksgiving through the Friday that falls on or immediately after December 31.
- Per Stop Fuel Surcharge – Surcharge, indexed to the price of fuel, paid weekly to an ISP for each daily stop to a customer location where a package is picked up or delivered. Additional information about Per Stop Fuel Surcharge is in the Workbook Appendix.
- Service Charge — Charge paid weekly to an ISP for providing service.
- Shuttle Charges — Charge(s) paid to an ISP for providing “Shuttle” service.
- New Account Start-up — Fee paid to an ISP for an initial visit to a new customer that has been requested by FedEx Ground and appears on the ISP’s pickup listing.
- Customer Service Incentive (CSI) — Incentive paid to an ISP for providing superior customer service performance. Additional information about CSI is in the Workbook Appendix.
- Period Safety Incentive (PSI) — Incentive paid to an ISP based on agreed-upon Safety performance results. Additional information about PSI is in the Workbook Appendix.
- Brand Promotion Program — Weekly fee paid to an ISP that chooses to have all of its personnel assigned to provide services wear apparel that meets agreed-upon terms. Additionally, an ISP can elect to have some or all of its vehicles display logos that meet agreed-upon terms. Additional information about the Brand Promotion Program is in the Workbook.
Key Non-Financial Terms
- Daily Stop Threshold — The negotiated number of stops for which an ISP agrees to provide service. An ISP can exercise its Right to Decline for stops above the Daily Stop Threshold. During Peak, an ISP may be eligible to receive the negotiated Surge Stop Charge for servicing stops above its Daily Stop Threshold.
- Number of Load Positions — Dedicated vehicle loading positions that will be available to the ISP in each station from which the ISP provides service.
- Length of Agreement — Length of an initial term for an ISP Agreement typically will be up to three years, but an ISP and FedEx Ground may agree on a shorter or longer term.
- Expiration Date — End date of an ISP Agreement as determined by the negotiated length of term.
ISP Negotiation Process Overview
The process for negotiating an ISP Agreement begins once an ISP candidate’s CNDA is executed and its RFI Response is accepted. A FedEx Ground Negotiator will be assigned and will contact the ISP Negotiator (the authorized officer or other employee of the corporation authorized to negotiate on behalf of the ISP candidate).
The CSP will need to decide whether to prepare and submit a Proposal or have FedEx Ground make the first Proposal. The Proposal is an initial offer on the key financial, non-financial, and elections of an ISP Agreement and any other terms an ISP candidate wishes to propose. The first offer submitted may or may not be the final offer, just as the first counter offer submitted may or may not be a final offer.
Negotiations will end in one of two ways:
- If an agreement is reached, the parties will execute an ISP Agreement provided all other conditions are met
- If an agreement cannot be reached by the deadline or if the parties reach impasse, FedEx Ground may seek Proposals from multiple CSPs in addition to the CSP currently operating the proposed CSA. If the CSP currently operating the proposed CSA is not able to reach an agreement before its current Operating Agreement expiration date, the Operating Agreement will expire according to its terms.
The negotiation process of an ISP Agreement can be difficult for contractors without previous contract negotiation experience. Our expert route consultants have years of experience dealing with FedEx ISP negotiations and can assist you with your negotiation process. Contact Us for more information.