Operation of the Payment Mechanism

The Unitary Charge is the payment that would be made if all the performance standards were fully complied with.  In submitting Bids, Bidders should note that they must assume that there are no deductions under Performance Standards 2 to 8, i.e. the Unitary Charge that the Bidder should assume they will receive is only subject to an adjustment in relation to Performance Standard 1 and there will be no adjustments made once the Core Investment Programme is complete.  The Monthly Unitary Charge will be one twelfth of the Unitary Charge except for in part months where it will be determined by the number of days the service is to be provided in that month.

If the payment mechanism generates total deductions (excluding deductions levied under Performance Standard 1) in excess of [25%] of the Monthly Unitary Charge in any one month then a Service Default Termination Point shall be awarded to the Service Provider.  If the payment mechanism generates total deductions (excluding deductions levied under Performance Standard 1) in excess of [20%] of the Monthly Unitary Charge over a period of 3 consecutive months then a Service Default Termination Point shall be awarded to the Service Provider.  Where the Service Provider has accrued 3 or more Service Default Termination Points in any 13 month period the Authority may terminate the Contract.

Full details of the invoicing and payment arrangements can be found in Clause [26] of the Model Contract.  The arrangements are based around a process where the Service Provider invoices for the Unitary Charge for one month less any adjustments related to the previous month.  The Authority is required to pay that part of the invoice that is not disputed within 20 Business Days of receipt. Authorities may wish to adjust the payment terms to fit in with their standard invoicing procedure or to reduce the payment period if it believes it would offer better value for money.