2.5  Phasing in of the Unitary Charge (UC)

2.5.1  Due to the nature of housing projects, PFI payments (Unitary Charge) will be lower until the refurbishment or development period is complete, which is usually within the first five years. The UC will increase year on year as properties become available under full specification standard until 100% availability is achieved. This is often referred to as the ramp up of Unitary Charge. The Model takes account of this, allowing the user to input phasing assumptions during this initial development period.

2.5.2  To incentivise the service provider to deliver 100% of the service as agreed in the contract, and not stop just short of complete service delivery, a Handover Reserve is sometimes used. This has the effect of reducing the Unitary Charge (UC) by a given percentage (say 5%) during the refurbishment or development period. Upon completion of this period, and subject to complete service delivery, the Handover Reserve is returned to the contractor in the form of a balloon UC. The Model provides for the user to input Handover Reserve assumptions.