2.7  Calculation of Indexation of Monthly Unitary Charge

2.7.1  The Annual Unitary Charge relevant to the Payment Period (APy) is calculated by applying indexation to the Base Annual Variable Element (VEb) on the Base Date by reference to changes in RPI(X) in accordance with the following formula:

Where:

APy = the Annual Unitary Charge relevant to the Contract Year (y);

VEb = the Base Annual Variable Element for the year relevant to the Payment Period (m) that is provided in the Schedule of Charges in the Project Agreement (taken as 30% of APy)12, stated at price levels pertaining to the Base Date;

FEb the Base Annual Fixed Element of the UP that is not indexed (taken as 70% of APy13  for illustrative purposes) for the year relevant to the Payment Period (y) that is provided in the Schedule of Charges in the Project Agreement, stated at price levels pertaining to the Base Date;

RPI(X)y = the value of the RPI excluding mortgage repayments (RPI(X)) as at the date when the indexation is to be given effect;

RPI(X)b = the value of RPI(X) in respect of the Base Date.

2.7.2  The relevant index to be applied is the Retail Price Index all items excluding mortgage interest payments (RPI(X)). RPI(X) statistics are provided by the Office for National Statistics, Consumer Prices and General Inflation Division and are released monthly (Table RP05 - National Statistics).

2.7.3  Indexation will be applied annually on the anniversary of the Base Date to the relevant base Annual Unitary Charge contained in the Schedule of Charges as amended from time to time through a Benchmarking Exercise or through change implemented under clause 60 (Authority and Contractor Changes).

2.7.4  If the Schedule of Charges is amended through a Benchmarking Exercise or through change implemented under clause 60 (Authority and Contractor Changes), all Base Date in-year figures shall be re-based to the Base Date using the RPI(X) indices as a deflator. The restated base figure shall then be used to determine the on-going Unitary Charge following the Benchmarking or Change which may arise as a result of Compensation Events, Qualifying Changes in Law, Refinancing and Variations.

2.7.5  If the RPI(X) for any month in which part of the Annual Unitary Charge is required to be indexed has not yet been published, then the indexation of such part of the Annual Unitary Charge for the relevant Contract Year shall be based on the most recently published available RPI(X) figure prior to the month required. The indexation will be calculated in accordance with paragraph 2.7.1. Such indexation will take effect from the anniversary of the Base Date with any under or overpayment of the Annual Unitary Charge by the Authority accruing because of the indexation in accordance with paragraph 2.7.1 to be included as an adjustment to the Monthly Unitary Payment in the subsequent monthly invoice.

2.7.6  For the avoidance of doubt, the cost of non-domestic rates and Utilities is not included in the Annual Unitary Charge for the purpose of calculating the indexation. The payment of Utilities is dealt with in Part IX of this Schedule.

2.7.7  Changes to the Index

(a)  If there is a material change in the nature or basis of any index required for this Part II, or if any index is discontinued, the Parties shall agree upon an alternative index which as closely replicates RPI(X) as is possible. Any consequential changes shall be made to the indexation calculations provided for in this Part II as are necessary to ensure that all payments [to be made pursuant to this Agreement] shall be the same as if such change had not occurred.  Any dispute regarding changes in the index or changes to the calculations may be referred by either party to the Dispute Resolution Procedure.

(b)  If there is any error or mistake in the published figures for RPI(X) or in the subsequently agreed index, ("Incorrect Figures") which have been used at any time in any calculation in this Schedule 6 or any amount required to be indexed in accordance with this Agreement which is subsequently duly acknowledged and corrected ("Correct Figures") by the Office of National Statistics, Consumer Prices and General Inflation Division then the Authority and the Contractor agree that any calculations on which the Incorrect Figures were based for the adjustments of any part or parts or the Unitary Charge shall be recalculated based upon the Correct Figures.  Any overpayment or underpayment by either party to the other which has occurred as a result of the Incorrect Figures shall be paid or repaid by the party to the other within thirty (30) Business Days of the recalculation being agreed or determined. Any dispute in relation to this clause may be referred at the request by either party to the Dispute Resolution Procedure.

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12  30% is based on an assumed value of services which may change depending on what the actual service value is within the financial model.

13  70% is based on an assumed value of services which may change depending on what the actual service value is within the financial model.