15.1.1 The Contract will set out the Unitary Charge for the entire Contract term. However, due to the uncertainties of inflation rates and certain operating costs over a long-term contract, it is usually in the interests of both Authority and Contractor to set out provisions for varying the Unitary Charge in certain specified circumstances. The Contractor should always be encouraged to control its costs, but if there are mechanisms for addressing unforeseeable changes in costs, the Contractor can reduce the contingency in its bid price for such risk. Similarly, although the Authority should ensure it obtains a competitive price initially by holding a well-run competition, it will take additional comfort if there is some means of ensuring the price it has agreed to pay in future years will not be in excess of future market prices for such Services.
15.1.2 The Contract must achieve the right balance between the provisions for change in law (see Section 14 (Change in Law)), indexation and value testing; these are inherently interrelated, particularly in relation to the allocation of operating-cost risk. Contractors will be more willing to take risk in relation to certain changes in law, or in relation to cost increases above the relevant indexation rate, if they have some protection through the value testing provisions (i.e. they can bear certain risks for the period up to value testing as the extra costs are likely to be covered to an extent following value testing). The Authority should consider such inter-relationships when preparing its bid documents.