5.5 The following bullet points summarise some of the reasons why the unitary charge payable by an Authority may vary over the duration of a PPP project. These are generic in nature and Authorities are recommended to confirm with their own project documentation and project advisers, the specific provisions relative to their project:
o Inflation - the Project Agreement will indicate within the payment mechanism schedules by how much the unitary charge should inflate each year. This is usually a fixed percentage of the movement in the retail price index or consumer price index. The Project Agreement will also specify the date that the inflation should be applied - often the 1 April in any one year.
o Insurance Benchmarking - current SOPC guidance requires regular benchmarking of insurance costs. The guide should outline how insurance cost movements will be shared; when the insurance costs are due to be benchmarked and the approach to be adopted.
o Utilities Costs - the Project Agreement will outline how utilities costs are to be shared between a PPP Contractor and the Procuring Authority. These should be based on a sharing mechanism that incentivises both parties to be energy efficient. The Project Agreement should also indicate the level of supporting documentation a Contractor should provide to a Procuring Authority to enable monitoring and approval of utility consumption and consequent payment.
o Soft FM Benchmarking/Market Testing - the Project Agreement is likely to include provision for certain soft FM services to be benchmarked at certain times during the contract life. The Procuring Authority will need to manage these aspects of the contract carefully. Separate guidance has been developed by the Scottish Government regarding the management of benchmarking and market testing exercises. This is available on the Scottish Government website at www.scotland.gov.uk/ppp.
o Staffing Protocol - the Project Agreement will include provisions for the cost of transferring staff to be confirmed and updated within the financial model at the point of staff transfer. The guide should refer to the clauses within the Project Agreement which outline how such adjustments should be calculated and the process to be followed to update the unitary charge payable.
o Consumables - Procuring Authorities should be aware of the PPP Contractors responsibilities for the provision of consumables under the Project Agreement. This area can give rise to additional costs being incurred for areas such as hand towels, key fobs etc.. Authorities should be aware of their contractual position in relation to consumables. This will have been agreed within the specification.
o Malicious Damage - Vandalism - the Project Agreement will detail who is responsible for malicious damage risk and at which times. It is important that all parties have a clear understanding of who is responsible for this risk at any given time and how any rectification costs will be calculated. The guide should clearly detail the project requirements and who within the Procuring Authority team will be responsible for managing this.
o Small Works - the Project Agreement allows for small works to be undertaken by the PPP contractor at pre-agreed rates.
o Additional Hours - some projects include provisions for the Procuring Authority to purchase additional hours of use outwith the core hours.
o Income from the use of facilities - Third Party Income/Community Use Income. This can be a complex area and the Project Agreement should define clearly how community use and third party income is to be managed; who is responsible for managing it and how any income and related costs are to be accounted for. Some third party income - that which is underwritten in the financial model for example, catering or community facilities will not lead to change as this will be a Contractor risk.
o Other Project Agreement Provisions - the Project Agreement will include a range of other provisions which may ultimately impact upon the costs paid by the Procuring Authority. Examples of these are noted below. It is recommended that a Procuring Authority obtains advice on these during the negotiation process.
o Authority step-in
o Variations -Authority Changes
o Emergencies
o Qualifying Change in Law
o Impact of works compensation event
o Impact of services compensation event
o Others
o Waste where payments are volume not availability related?
o Pass through costs will also need to be considered for example, rates
o Ad hoc services