The Commercial Toolkit
Pricing – Variation of Price – Full Guidance – Last Updated 01/02/2011
Pricing - Variation Of Price
Constraints
None.
Authoritative Guidance Summary
1.
The Defence Analytical Services Agency Directorate of Economic Statistics and
Advice (DASA DESA) Price Indices branch must be consulted on all contracts that
are likely to contain a Variation of Price (VOP) clause. For competitive contracts
their advice should be sought before invitation to tender and for non-competitive
contracts it should be sought before any negotiations on variation of price
commence. Commercial judgement and the constraints of negotiation may mean
that the advice offered by DASA DESA is not implemented in every case. The
rationale for not adhering to the VOP recommendations made by DASA DESA should
be tested as part of the commercial assurance process. Where a new contract or an
amendment contains a VOP clause commercial staff must complete either Form
VOPD1 (new contracts) or Form VOPD2 (amendments).
2.
Variation of Price (VOP) clauses are negotiated into some contracts to cover
the risk of changes in the level of inflation. Defence inflation occurs when the
wages and prices of all goods and services making up the defence budget increase.
MOD is committed to limiting defence inflation to the level of general inflation in the
economy as measured through the Gross Domestic Product (GDP) deflator.
3.
MOD policy is to use FIRM prices for the first 5 years of any contract. As such,
all contracts less than 5 years should be FIRM priced. Commercial Staff may decide
to reduce the FIRM period if the contract appears to be highly dependent on more
erratic factors such as fuel prices. However this requires agreement at B2 level or
above.
4.
Inflation is a risk that industry may seek to cover by the inclusion of
contingencies in bid prices for the FIRM period of a contract. VOP is the mechanism
accepted by MOD to cover the risk of inflation in the FIXED price period of long-term
contracts. The use of VOP removes the need for any contingency for the estimated
effects of inflation to the base price during the FIXED price period.
5.
The procurement strategy must clearly explain how inflation risks are to be
managed in the contract and pricing teams are mandated to seek specialist advice
from the Price Indices branch of DASA DESA (DASA DESA-PI) and Commercial
Project Enabling Team (Cost Assurance and Analysis Service) (CPET(CAAS)).
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Pricing – Variation of Price – Full Guidance – Last Updated 01/02/2011
6.
Pricing arrangements for longer term contracts should be exposed to
investment appraisal to identify the approach that offers best value for money.
Justification for the selection of the chosen pricing approach should be documented
with any supporting investment appraisal outcome clearly referenced. The
Appraisal and Evaluation branch of the Directorate of Economic Statistics and Advice
(DASA DESA-PI) are able to advise on Investment Appraisal.
7.
VOP is applicable to non-competitive and competitive contracts and should be
agreed at the outset in cases where it is deemed that unreasonable inflationary risk
exists.
8.
The main constituents of a VOP formula are the Base Price, the price indices
that will be applied to the Variable Element and the Non-Variable Element (NVE).
There are two types of indices, OUTPUT and INPUT. An OUTPUT index is one which
reflects the cost of a finished item or service in a competitive market. It therefore
encompasses all production/delivery costs including INPUT costs, an element of
productivity gain, and profit. An INPUT index is one which reflects the inputs in to
the production process. This includes labour, materials and fuels.
9.
To ensure negotiators have freedom to secure the most advantageous
commercial terms no one index is mandated, although MOD policy is to use OUTPUT
indices. INPUT indices should not be used, unless they can be shown to offer better
value for money than OUTPUT indices. The use of INPUT indices under these
conditions must be accompanied by a Non Variable Element of 20%-30%.
10. In the context of No Acceptable Price, No Contract (NAPNOC), VOP
arrangements together with the contract price and related terms such as, interim
payments and liquidated damages must form part of the initial contract agreement.
VOP settlements and any interim VOP settlements should be related to the
contractual work programme.
11. The commercial officer should certify all contractors' VOP claims. However, in
some circumstances the contractor may self-certify in which case separate provision
must be made for spot checking the claims. DASA DESA-PI offer an advisory
service to help calculate VOP payments or check the contractors' claims.
12. The House of Commons Defence Committee requires DASA to produce a
measure of defence inflation that draws upon the known level of price variation in
fixed price contracts. To achieve this DASA DESA is creating and maintaining a
database of all VOP clauses. Commercial staff are required to notify DASA DESA-PI
of any new or amended VOP agreements, by completing Form VOPD1 (new
contracts) or Form VOPD2 (amendments).
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Authoritative Guidance
Strategy Considerations
13. Inflation in the economy as a whole is measured through the Gross Domestic
Product (GDP) deflator. The GDP deflator is published quarterly and is subject to
retrospective corrections. As such it is not considered suitable for VOP clauses. The
Retail Price Index excluding mortgage interest payments (RPIX) is the accepted
proxy for the GDP deflator.
14. Defence inflation occurs when wages and prices of all goods and services
making up the defence budget increase. If contracts incur inflation above that of
the GDP deflator the Department get less output from our expenditure resulting in
less capability for the Armed Forces.
15. MOD policy is to use FIRM prices for the first 5 years of any contract. As such,
all contracts less than 5 years should be FIRM priced. Commercial Staff may decide
to reduce the FIRM period if the contract appears to be highly dependent on more
erratic factors such as fuel prices. However this requires agreement at B2 level or
above.
16. Inflation is a risk that industry may seek to cover by the inclusion of
contingencies in bid prices for the FIRM period of a contract. VOP is the mechanism
accepted by MOD to cover the risk of inflation in the FIXED price period of long-term
contracts. The use of VOP removes the need for any contingency for the estimated
effects of inflation to the base price during the FIXED price period.
17. The provision for inflation negotiated through the VOP arrangements will
depend on a number of factors such as:
a.
the nature of the procurement;
b.
the length of the contract;
c.
the current rate of and prognosis for future inflation;
d.
the relative strength of the parties' bargaining positions; and
e.
where known, the contractor's track record in managing to keep his costs
below the levels reflected in the indices.
18. The procurement strategy must clearly explain how the inflation risks are to be
managed.
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19. FIXED prices subject to VOP arrangements should be negotiated where the
duration of the contract (or other risks such as potential legislative change in longer
term contracts or the volatile market cost of constituent elements) would otherwise
lead to the inclusion of high levels of contingency in price proposals. In all such
arrangements the aim should be to use VOP as an incentive to contain cost growth
rather than as a device to compensate for it.
20. Specialist advice should be sought from DASA DESA-PI regarding the
treatment of inflation and the choice of the most appropriate indices for the VOP
arrangements. DASA DESA-PI advise on all aspects of price indices and VOP,
including: VOP clauses in Invitations To Tender (ITT), evaluating contractor's VOP
proposals, rebasing indices, forecasting future costs, and checking VOP payments.
21. Pricing arrangements for longer term contracts should be exposed to
investment appraisal to identify which approach: FIRM or FIXED (and in the case of
the latter also which indices) offers best value for money. Justification for the
selection of the chosen pricing approach should be documented with the supporting
investment appraisal outcome clearly referenced. The Appraisal and Evaluation
branch of DASA DESA provide advice on Investment Appraisal.
VOP Formula
22. The VOP formula is made up of three main elements, the Base Price, the index
(or indices) to be applied to the Variable Element and the Non-Variable Element
(NVE). The main points appertaining to each are addressed in paragraphs 23 to 39
below. Model conditions and formulae for use with OUTPUT indices, INPUT indices
and in subcontracts are at Annex A, Annex B and Annex C. MOD policy is to use
OUTPUT indices that are representative of the nature of the contract.
Base Price
23. For FIXED pricing, the Base Price should not include any contingency for
inflation (sometimes referred to as 'escalation contingency') or any adjustment to
mitigate the effects of the agreed VOP clause. Any firm-priced or bought-out
element of the contract should be removed from the sum the VOP is applied to. The
Base Price should reflect only the element that is subject to price change through
the VOP mechanism.
24. The VOP provisions should be related to the base date or dates on which the
FIXED Base Price was agreed. In many cases there will be an interval between the
quotation base date and contract placement. In these circumstances, wherever
possible and practicable, Base Prices should be re-valued.
25. For a contract covering a consistent item with a five year FIRM period, the Year
6 price should be based on the Year 1 Base Price uplifted by the VOP clause. The
Year 6 price should not be based on uplifting the Year 5 price as may exaggerate
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the contractor’s risk built in to the FIRM pricing. By basing the Year 6 price on the
Year 1 price, the FIXED price will be inline with the actual contract inflation
(measured by the VOP formula).
Indices
26. For VOP clauses the price indices should be official statistics as they are
compiled in a rigorous and independent manner. For the UK, suitable indices are
published by the Office for National Statistics (ONS) and Department of Business,
Enterprise and Regulatory Reform (BERR). Industry related indices (such as
Building Cost Information Service (BCIS), British Electrotechnical and Allied
Manufacturers' Associations (BEAMA), CEL, etc) are unsuitable for VOP clauses
because they are produced by industry for industry. They tend to be more volatile
and are not freely available. DASA DESA-PI can advise on the appropriateness of
indices for use in a VOP clause.
27. There are two types of indices, OUTPUT and INPUT. An OUTPUT index is one
which reflects the cost of a finished item or service in a competitive market. It
therefore encompasses all production / delivery costs including INPUT costs, an
element of productivity gain, and profit. An INPUT index is one which reflects the
inputs in the production process. This includes labour, materials and fuels.
28. In selecting an appropriate index for use in a contract VOP clause some indices
will have greater relevance than others, reflecting the different types of work to be
performed. Every opportunity should be taken to use indices that by virtue of the
commodity or sector, offer greatest commercial and value for money advantage. A
summary of the most commonly used OUTPUT and INPUT price indices can be found
at Annex D.
29. MOD policy is that VOP arrangements should be based upon the use of OUTPUT
indices wherever possible. INPUT indices do not reflect any improvements in the
efficiency with which manufacturers utilise their 'inputs' to achieve productivity
improvements and efficiency gains. It follows that INPUT indices will invariably
require the negotiation of an NVE of 20%-30% in order to constrain, as far as
possible, inflationary growth beyond the GDP deflator benchmark level. INPUT
indices should not be used, unless they can be shown to offer better value for
money than OUTPUT indices.
30. The Office for National Statistics (ONS) continually reviews the quality of the
OUTPUT Producer Price Indices (PPIs). As a result, ONS may apply B or F markers,
or suppressions to particular index values that are considered less reliable due to
their lack of market coverage or because they are based on too few quotes.
31. New contracts should not make use of any indices that have been published
with a B or F marker, or with a suppressed value in the last 3 years. Nor should
new contracts make use of indices which represent subsets of these indices. MOD
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policy is to use relevant higher level indices if proposed indices are affected by
markers or suppressions.
32. If an existing contract contains a price index which has had an F marker or
suppression in the last 3 years then the VOP clause needs to be reviewed in
consultation with the DASA DESA-PI. A price index that has only been affected by B
markers can continue to be used in an existing contract.
33. If an index (or series of indices) appropriate to the nature of the contract
cannot be identified then the VOP clause should be based on the Retail Price Index
excluding mortgage interest payments (RPIX). The RPIX is an OUTPUT index that
measures general inflation in the economy and is a good proxy for the GDP deflator.
The GDP deflator should not be used in a contract due to it being subject to regular
revisions.
34. To ensure negotiators have freedom to secure the most advantageous
commercial terms no one index is mandated, although MOD policy is to use OUTPUT
indices. INPUT indices should not be used, unless they can be shown to offer better
value for money than OUTPUT indices. The use of INPUT indices under these
conditions must be accompanied by a Non Variable Element of 20%-30%.
35. The indices to be used for VOP in overseas contracts will normally be the
appropriate OUTPUT indices published by an official source which may be the
government of the country where the work is to be performed. This approach is
notwithstanding any separate arrangements that may be appropriate to take
account of variations in exchange rates. Note that for contracts placed with a US
element, a US-based company is more likely to request the use of INPUT indices
because the US Department of Defense tend to place contracts with INPUT indices.
Non Variable Element (NVE)
36. It is important that VOP is not applied to any part of the contract price that
relates to:
a.
work already completed;
b.
supplies already purchased;
c.
elements of work not subject to inflation;
d.
subcontracts for which FIRM prices have been included; or
e.
subcontracts in which possible cost variations have already been taken
into account.
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37. The use of an OUTPUT index will go a long way towards ensuring MOD shares
in the benefits of productivity gains made by Industry through management
decisions on issues such as component and material sourcing, the use of capital,
labour and plant, and reactions to the pressures inherent in an efficient and
competitive market. However, there may still be cases where an NVE with an
OUTPUT based VOP clause remains appropriate, for example where:
a.
due to technological advance, the rate of productivity growth of the
individual company is likely to exceed that for the general industrial sector
from which the OUTPUT indices being used is obtained; or
b.
where for reasons related to a particular contract, significant elements of
cost in a price are not affected by price rises and a greater proportion of costs
are FIRM; or
c.
where a proportion of the contract is not subject to inflation. DASA
DESA-PI can advise on the appropriateness and level of NVE to be sought
when agreeing a VOP clause using an OUTPUT index.
38. VOP clauses using INPUT indices should not be agreed without the inclusion of
a NVE. The advice of DASA DESA-PI should be sought as to the percentage level of
NVE appropriate to the circumstances. As a guide, we would expect an INPUTbased VOP clause to include a NVE of 20%-30%. The NVE should be constant and
agreed in the negotiation stage, failure to do so may weaken the relative strength of
the MOD bargaining position.
39. Whenever an NVE is agreed care should be taken that no adjustment is made
in the Base Price to compensate for the NVE.
Invitation To Tender (ITT)
40. The Price Indices branch of DASA DESA (DASA DESA-PI) must be consulted on
any ITT that are likely to contain bids with VOP clauses before inviting tenders.
ITTs that invite bids with a VOP must fully specify the structure and content of the
VOP for compliant bids, which includes specifying the exact price index to be used.
To establish a fair comparison of tenders, all tenderers must quote against the VOP
arrangements described in the ITT. Bids with alternative VOP arrangements may be
invited. Commercial officers may wish to consider including this requirement in any
marking scheme.
41. Single and competitive tenders may ask for both FIRM and FIXED price offers
and an accompanying yearly spend profile where such information is considered to
help establish value for money.
42. ITTs should, wherever practicable, specify the use of OUTPUT indices, the base
date to be used, the level of the NVE and the contract condition based upon
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Annexes A or C, tailored to the particular circumstances of the requirement. In
competitive tenders, where there may be doubt as to the value for money
judgement to be made, bids with alternative VOP arrangements may be invited. In
the case of non-competitive requirements, the full detail of the VOP element should
be visible as part of normal price negotiation and equality of information
requirements.
43. The ITT should ask the tenderer to indicate how he proposes to price his
subcontracts because the VOP arrangements finally negotiated and included in the
contract should be clear and unambiguous and take account of contractors'
proposed purchasing / manufacturing plans for the work to be performed and
applicable pricing arrangements. It is important that VOP is not applied to any part
of the contract price where the contractor has already paid a subcontractor or has /
will accept a FIRM price quotation i.e. exclude all FIRM priced elements and bought
out supplies from the Base Price to which the VOP is applied.
44. VOP conditions should provide for an adjustment of the contract price at the
agreed point of delivery or contract completion. In longer-term contracts, where
interim payments are included, it may be appropriate for VOP increases to be paid
as part of those arrangements.
Subcontracts
45. The MOD expects prime contractors to use OUTPUT indices with
subcontractors. If INPUT indices are used then the prime contractor should not
expect the MOD to replicate these terms.
46. Where appropriate, VOP arrangements may be applied in the same manner as
in the prime contract. Pricing arrangements not finalised at the outset should be
treated as FIRM price elements, until such time as the contractor has demonstrated
otherwise. Exceptionally, separate subcontract variation provisions may need to be
established for example in the case of major subcontracts where the index-linked
VOP arrangements for the prime contract are not appropriate, or where foreign
indices are appropriate. See model condition at Annex C.
47. IPTs may wish to invoke a clause requiring a disclosure of the prime
contractors VOP arrangements with their subcontractors. This is a discretionary
clause but it can be used to identify inconsistencies in pricing. DASA DESA-PI can
advise on this.
Target Cost Incentive Fee (TCIF) Contracts
48. The primary use of VOP arrangements in TCIF contracts is to inflate the target
cost and fee appropriately. For a TCIF the VoP arrangements still need to comply
with MOD commercial policy. That is, the Target Costs should be firm priced for the
first 5 years and fixed priced with relevant OUTPUT indices for subsequent years.
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49. VOP arrangements are used for the purpose of uplifting target costs against
the pre-agreed schedule, and not actual delivery dates. Actual costs should be
recorded separately and VOP must never be applied to these costs.
50. Where the TCIF contract is likely to be long running, it may be appropriate to
consider periodic adjustment to payments made against the payment plan (i.e.
where the difference between the certified actual costs and the payments made
under the VOP arrangement vary by more than a percentage). In that way the
difference between final certified actual costs and target cost plus VOP provision
become less disconnected.
51. It may be appropriate to consider the inclusion of a payment regulator
condition in the contract whereby the contractor is required to claim the agreed sum
in the payment plan or the actual cost, whichever is the lower.
Negotiation
52. In the context of No Acceptable Price No Contract (NAPNOC), VOP
arrangements together with the contract price and related terms such as, interim
payments and liquidated damages must form part of the initial contract agreement.
53. The contract price will be calculated in consultation with CPET(CAS) by
examination of the cost structure, such as labour, materials, overheads and profit.
The VOP on a NAPNOC contract is solely concerned with inflating the overall price of
the contract and does not relate to the breakdown of costs.
54. CPET(CAS) advice should be sought at an early stage. They can provide
advice regarding spend profiles, productivity and efficiency gains that may be made
during the contract; such advice will be pertinent to the Base Price or level of NVE
that is negotiated.
55. VOP arrangements with OUTPUT indices should reflect the movement of price
levels between the date on which the FIXED price was based and the delivery of
milestones.
56. Expenditure by the contractor is unlikely to be regular or consistent over the
period of the contract and attention should be paid to the contractor's spend profile.
In the case of INPUT indices the later reference point for the Labour element of the
VOP formula should relate to the period over which Labour will be applied to meet
the contractual delivery programme and for the Materials element, the later
reference point should represent the time at which materials need to be purchased
to meet the contractual delivery programme. Absolute precision, however, is
neither obtainable, nor consistent with the broad-brush nature of the VOP
arrangements. It is important that adequate visibility is achieved over the
anticipated incidence of expenditure, tied to the contractual delivery programme.
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Visibility is important to protect against the inflationary cost consequences of
delayed progress, or 'windfall' profits arising from accelerated procurement.
57. Any alternative VOP arrangements proposed by tenderers should be carefully
considered and referred to DASA DESA-PI as necessary.
58. The policy sponsor may be able to provide commercial officers with post
costing data for the relevant contractor. This data in the form of a track record will
give commercial officers an indication of how close the contractors previous outturn
costs have been to the contract prices agreed with MOD.
59. Where any trade-off is negotiated involving the constituent parts of any VOP
formula and other parts of the agreed price, commercial officers should ensure that
this is noted on the contract file.
60. A checklist to give commercial officers an indication of the issues to be
considered when negotiating a VOP formula in any contract is included at Annex E.
It is not exhaustive.
Contract Administration
VOP Claims - Checking and Payment
61. Commercial officers should be responsible for checking the contractors' VOP
claims. The Financial Management Shared Service Centre (FMSSC) do NOT
undertake checks against the claim against the contract formula.
62. There may be circumstances where it is felt appropriate for the contractor to
self-certify his claims for VOP. In such circumstances, there must be separate
provision made for spot checking such claims.
63. As with final VOP settlements, interim VOP settlements should be related only
to the contractual work programme. If the contractor is late with delivery,
payments of VOP should be calculated at the point in time when the contract
stipulates delivery of the goods or service should have taken place, not against the
point in time when the contractor actually delivers. To pay against a later date
would reward delay. If delivery were made prior to the contractual delivery date,
the contractor would probably claim that payment of VOP should be against the
contracted programme. The contractor's view would be that if he is expected to
accept the risk of non-payment of VOP for periods of delay then it is reasonable for
MOD to recognise the counter argument for an earlier delivery. Acquisition teams
should relate the decision on such payments to the contractor's overall performance
on the contract.
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Changes In Base Of Agreed Indices
64. The ONS revise the base year of their index numbers regularly, usually every
five years, (e.g. redefining the index to be 100 in the year 2005). If this occurs,
which is likely in most contracts, it is incorrect to calculate any VOP payment using
a rebased index, unless a procedure converting one base to another has been
carried out.
65. There is an ONS established procedure to convert from one base to another
which should by carried out systematically, irrespective of whether it benefits the
MOD or the contractor. No previous payments should be revisited as a result
of rebasing. This policy is explained below for the rebasing of the Producer Price
Indices which occurred in October 2008.
Rebasing of the Produce Price indices (move from 2000=100 to
2005=100)
66. From October 2008, the Office for National Statistics began publishing the
Producer Price Indices (MM22 and MM19) and Average Earnings Indices under the
2005 = 100 basis, instead of 2000 = 100. The Retail Price Index (RPI), Consumer
Price Index (CPI) and BERR construction indices remain unchanged.
67. All contract payments made after October 2008 will require the
rebasing process to be carried out. The MM22 indices will be on the new
basis from July 2008 (depending on the specific series) and MM19 indices
from May 2008.
68. Under the 2005 = 100 basis, the ONS will publish the latest index value and an
artificial backseries on the new basis. This backseries represents the 2005
weightings applied to previous survey data and will differ from the historic (2000 =
100) data that has been used to make your previous contract payments. It is
incorrect to use this artificial backseries to make VOP payments or revisit past
payments.
69. Rebasing Process:
a.
To make any future contract payments, the following official rebasing
process (as confirmed by ONS) should be applied to convert historic index
values from 2000 = 100 to the new 2005 = 100 basis.
b.
Key Steps:
(1) Select the last firm value of the 2000=100 series i.e. a value with no
provisional ‘p’ marker.
The last FIRM i.e. non-provisional value should be used as the “pivot”
between the two series. The ONS publish figures with a provisional
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marker when they are not fully confident of its value. Any provisional
values within 2000 = 100 indices will not be amended so the conversion
should therefore be based on the last non-provisional value.
(2) (Select the corresponding value from the 2005=100 series (or
nearest equivalent series, if discontinued)
(3)
Calculate a conversion factor: 2005=100 value
2000=100 value
The conversion factor should, for the majority of indices, be less than one.
(4)
Use this factor to convert 2000=100 base value to 2005=100.
c.
This approach is known as backwards rebasing and is to be used in all
MOD contracts where rebasing is required.
Cessation of published indices
70. Should the agreed indices cease to be published (e.g. because of a change in
the Standard Industrial Classification) the acquisition team should, if appropriate,
agree revised indices for use in the formula which will be expected to have
substantially the same effect as those originally established. The ONS established
procedure (explained in paras 65-68 above) should also be applied to convert from
one index to another.
Standard Industrial Classification (SIC) 2007
71. Since 1995, all Producer Price Indices (PPIs) and Average Earnings Indices
(AEIs) have been based on SIC 1992. In 2003, this was updated slightly to become
SIC 2003. Now a new classification – SIC 2007 – has been developed to reflect
changes in the world economy and to be consistent with other classification systems
(e.g. NACE). SIC 2007 is now being phased in across ONS statistical publications.
Cessation of Existing AEI and PPI Indices in 2010
72. PPIs were published under SIC 1992 for the last time in October 2010.
Similarly, from October 2010 AEIs were no longer published and have been replaced
by Average Weekly Earnings (AWE) indices.
73. Contracts with VOP clauses linked to Producer Price Indices (PPI) or Average
Earnings Indices (AEI) should be renegotiated during 2010. The advice of the DASA
DESA Price Indices branch should be sought to assist with these changes – further
information is provided at Annex H.
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Services Producer Price Indices (SPPIs) for Use in VOP
Clauses
74. Before March 2010, Services Producer Price Indices (SPPIs) were published
quarterly as experimental indices by the ONS. From March 2010, the UK Statistics
Authority has designated them as National Statistics and no longer experimental.
Therefore, SPPIs are now suitable indices for use in VOP clauses in most MOD
service contracts.
Variation of Price Database and Defence Inflation
75. In order that MOD can maintain and improve the database of experience on
the use of VOP, commercial officers are required to complete the Form VOPD1 for
each contract placed that contains VOP arrangements (competitive and noncompetitive), (or Form VOPD2 for amendments), and attach a copy of the formula
(including any definitions) from the contract. These documents should then be
forwarded to DASA(ES) and the policy sponsor.
76. For more guidance on this matter, please consult DASA DESA-PI-SnrCons on
Abbey Wood (030 679) 32100 or DASA DESA-PI-HOB on Abbey Wood (030 679)
34524.
Associated Documents
Annex A
Model Condition For OUTPUT Price Index Related VOP
Annex B
Model Condition For INPUT Price Index Related VOP
Annex C
Model Condition For Inclusion In Prime Contract Where Separate
VOP Conditions Apply To Subcontract
Annex D
Recommended Indices for VOP
Annex E
VOP Negotiation Checklist
Annex F
Recommendations For Output Indices With Suppressions Or Markers
Annex G
Rebasing Example
Annex H
Changes to AEI and PPI indices – 2010
Essential Reading
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Contract Amendments topic
13 of 14
Source: Commercial Toolkit
Available via http://www.aof.dii.r.mil.uk or http://www.mod.uk/aof
The Commercial Toolkit
Pricing – Variation of Price – Full Guidance – Last Updated 01/02/2011
Further Reading
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Pricing - Team Approach topic
Pricing - NAPNOC topic
Pricing - Subcontracts topic
Pricing - Target Cost Incentive Fee topic
Pricing - Charging Rates topic
PFI topic
Defence Analytical Services Agency website
MOD/Industry Commercial Policy Steering Group (CPSG) website
14 of 14
Source: Commercial Toolkit
Available via http://www.aof.dii.r.mil.uk or http://www.mod.uk/aof