In RWTPs, construction commencement may be deferred after contract close for a number of reasons (e.g. awaiting the determination of a planning application).
Where the deferral period (i.e. the period between contract signature and construction commencement) is relatively short it may be that a fully fixed price for the facilities may still represent value for money and any risk premium in the Contractor's bid should be marginal.
In other cases, depending on the length of the deferral period, a fixed price or a combination of fixed price over a period of time followed by indexation may be used. The Authority should ensure it understands how the indexation mechanism impacts on the balance sheet treatment and should assess whether the balance sheet treatment is actually material to its assessment of the affordability of the project bearing in mind that International Financial Reporting Standards (IFRS) may potentially be introduced for the public sector from 1 April 2009.