Fuel Adjustment Factor (FAF) is a surcharge added to your transport rates to cover the cost of fuel.
Many established logistics companies will provide the FAF surcharge as an additional cost to your agreed rates. Yes it's a surcharge, however having FAF as a separate component to your agreed transport rates can actually provide advantages to your business too.
This article will explain how FAF is calculated, the advantages of keeping FAF separate to your transport rates and how Pukekohe Hiab Transport handles FAF when engaging with our clients.
How is FAF Calculated?
A FAF calculation table is commonly used to determine the FAF surcharge. The applicable fuel adjustment is based on the average pump price which is calculated from an independent source. The pump price is based on data collated from fuel purchases made every 24 hours, ensuring the Fuel Adjustment Factor is up to date and correct.
The advantages of keeping FAF separate
Fuel prices are dynamically priced and sometimes volatile, meaning the FAF surcharge constantly changes depending on current fuel prices.
You don't want to be renegotiating your transport rates every time fuel prices change, so here at Pukekohe Hiab Transport we keep your transport rates and the FAF separate, that way you enjoy:
- Transport rates with longer validity
- A shorter validity date on transport rates with higher FAF charges, accounting for any dramatic changes in the FAF
- Cost transparency - FAF built into transport rates can be higher to account for fluctuations
- Benefiting from falling fuel prices
The factors above can have a positive impact on your annual freightbill.
Pukekohe Hiab Transport and FAF
PHT have three elements of our business directly affected by fuel prices: Truck Transport, Hiab Transport and Overdimensional Load Pilot Vehicles. A FAF Surcharge is the easiest method of applying a fair charge to our transport assets. For PHT these are:
- Hiab Cranes
- Pilot Vehicles
The Hiab Cranes are affected by fuel fluctuations, however HiabCrane Hire largely occurs on site, with transport only being a minor partof the transaction. PHT therefore applies FAF at a special hourlyhiab crane rate to reflect the fuel used in transport and hiab crane use.
How PHT calculates FAF
We calculate FAF by using the average pump price, obtained from PriceWatch (www.pricewatch.co.nz).