5  Effect on Annual Unitary Charge of an Accrual or De-Accrual

5.1  With effect from the Accrual Date, an Accrual Adjustment shall be made to the [Monthly]1 Unitary Charge as follows:  

(a)  to the extent that the parties agree (acting reasonably), that any Y value(s) relates to, or is otherwise appropriate to an Accrued Project Network Part(s), then such Y value(s) shall be used for the purposes of calculating the Accrual Adjustment in respect of the Month in which the Accrual Date occurs in accordance with paragraph [2.1] of the Payment Mechanism and if the parties fail to agree either party may refer the dispute to the Dispute Resolution Procedure and paragraph 5.1(c) shall apply;  

(b)  where it is agreed or determined that there is no appropriate Y value(s), then:

(i)  the Y value which shall be used for the purposes of calculating the Accrual Adjustment in respect of the Month in which the Accrual Date occurs shall be a reasonable estimate by the Service Provider (acting reasonably) of the cost having regard to all relevant factors, including the existing Y values set out in Appendix 1 of this Schedule 14 and supported by a commentary on pricing assumptions, including costs of labour, actual costs of materials, overheads and any other relevant pricing assumptions;

(ii)  the Authority shall consider the Service Provider's proposal for the additional Y value and the parties shall (acting reasonably) endeavour to agree an additional Y value(s); and

(iii)  if the parties fail to agree an additional Y value(s) within ten (10) Business Days of the date of the Accrual Confirmation Notice then the matter shall be referred to the Dispute Resolution Procedure.

(c)  where a dispute occurs pursuant to paragraph 5.1(a) or paragraph 5.1(b), the Authority shall use what the Authority considers to be a reasonable additional Y value(s) for the purposes of calculating the Accrual Adjustment in respect of the Month in which the Accrual Date occurs until the time as such additional Y value(s) is agreed or determined pursuant to the Dispute Resolution Procedure following which, a reconciliation of any difference in the amount paid by the Authority and the agreed or determined additional Y value(s) shall take place in the following Monthly Payment.  

5.2  If the Authority (acting reasonably) considers that an Accrual of any Project Network Part(s) has arisen from or in connection with works referred to in paragraph 4.1(a) and as a result there has been a financial saving to the Service Provider and/or a Service Provider Party which has not been reflected by the application of the Y value, then the [Annual] Unitary Charge shall be adjusted downwards to reflect the reduction in costs any provisions of Schedule 22 (Revision of Base Case) shall apply.2

5.3  With effect from the De-Accrual Date, an Accrual Adjustment shall be made to the Monthly Unitary Charge as follows:

(a)  to the extent that the parties agree (acting reasonably) that Y value(s) relates to, or is otherwise appropriate to such De-Accrued Project Network Part(s) or applicable Y value(s) have been agreed pursuant to paragraph 5.1 then such Y value(s) shall be used for the purposes of calculating the Accrual Adjustment in respect of the Month in which the De-Accrual Date occurs in accordance with paragraph [♦] of the Payment Mechanism;

(b)  where no appropriate Y value(s) is agreed, then for the purposes of calculating the Accrual Adjustment in respect of the Month in which the De-Accrual Date occurs,

(i)  the Service Provider shall, as soon as reasonably practicable (and in any event within five (5) Business Days of the De-Accrual of the relevant De-Accrual Project or Project Network Part(s)) notify the Authority of the Service Provider's proposed additional Y value(s) which shall be a reasonable estimate by the Service Provider (acting reasonably) of the cost having regard to all relevant factors, including the existing Y value(s) set out in Appendix 1 of this Schedule 14 and supported by a commentary on pricing assumptions, including costs of labour, actual costs of materials, overheads and any other relevant pricing assumptions.

(ii)  the Authority shall consider the Service Provider's proposal for the additional Y value(s) and the parties shall (acting reasonably) endeavour to agree an additional Y value(s); and

(iii)  if the parties fail to agree an additional Y value(s) within ten (10) Business Days of the date of the Service Provider's notice referred to in paragraph 5.3(b)(i) then the matter shall be referred to the Dispute Resolution Procedure.

5.4  If and to the extent that the Service Provider is no longer required to incur Capital Expenditure in respect of certain Project Network Parts arising as a result of a De-Accrual, the [Annual] Unitary Charge shall be adjusted downwards to reflect the reduction in costs and the provisions of Schedule 22 (Revision of Base Case) shall apply.3

5.5  For the avoidance of doubt, any dispute between the parties in respect of compliance with the standards and specifications referred to in the Accrual Notice and in respect of the appropriate Y value(s) shall not prevent the Accrual of the Project Network Part(s) pursuant to paragraph 3 on the Accrual Date or De-Accrual of the Project Network Part(s) pursuant to paragraph 4 on the De-Accrual Dates.

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1 Depending on the provisions of the Payment Mechanism this could be a revision of the annual Unitary Charge, with a one off calculation of the amount due in the first month if that is not a complete month.

2 The basis for the adjustment would need to be agreed.

3 The basis for the adjustment would need to be agreed.