The Unitary Charge is determined by reference to Performance Standards that, in some cases, apply to performance measured over a full Contract Year. For example, the Unprocessed Landfill Performance Target defines the percentage of Contract Waste that may be landfilled in the Contract Year. The arrangements for the Monthly Payment of the Annual Unitary Charge should not convert such annual targets into monthly targets.
Instead the approach should be to forecast the Annual Unitary Charge each month 21 based on the actual performance to date and the forecast performance over the remainder of the Contract Year. The forecast annual performance should be updated monthly on the basis of the data available from the previous month.
In some instances, it may not be possible for a Contractor to provide the final monthly tonnage and performance data available in time to be reflected in its monthly invoice. Given cashflow requirements, rather than waiting for final monthly data before invoicing, it may be more appropriate for the Monthly Payment to be invoiced promptly each month based on the best possible forecast annual tonnages.
As monthly tonnage data is finalised, this information can be substituted for forecast tonnages so that every month, the annual forecast is updated. The monthly invoice can then be based on the difference between the new annual estimate, and the annual estimate from the prior month. By a fixed date after the end of a Contract Year, the actual tonnages and performance level for that Contract Year will be known and a final invoice can be issued to ensure the amount paid by the Authority reconciles to the amount payable based on actual tonnages and performance for that Contract Year.
The initial forecast for the Contract Year should be agreed between the Contractor and the Authority a pre-determined number of months in advance of the Contract Year. There should be a schedule to the Contract, which sets out how such forecasts are prepared and agreed on a periodic basis throughout the Contract Period.
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21 Forecasts of certain aspects of the Unitary Charge do not necessarily have to be updated every month. In some cases quarterly forecast updates may be appropriate. However, for the Base Payment and Performance Deductions monthly forecast updates are recommended.