In the waste sector, the Authority should be aware that because the sector is dominated by a relatively small number of Contractors, the Contractors' or their affiliates' costs have a significant influence on the extent of change in sector specific indices (that is, they can actually affect the index by increasing their price, e.g. landfill). The Authority should take this into consideration in the selection of indices which are waste sector specific.
When selecting an appropriate index, it is important to note the difference between inflation risk (i.e. RPI or RPIx) and real cost change risk (i.e. sector specific indices). It is usual that the public sector accepts "inflation risk", but it is less common for the public sector to accept real increases in the Contractor's cost base, which is normally allocated to the Contractor. Further guidance on this is provided in footnote 39 of the HMT guidance on indexation and in Section 15.2 of SoPC4.