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<br /> T ABLE OF CONTENTS <br /> I. OVERVIEW OF THE COMPENSATION ADJUSTMENT PROCESS...................................... 1 <br /> OBJECTNES OF COMPENSATION ADJUSTMENT PROCESS ................................................................1 <br /> SCOPE OF THE GUIDELINES ............................................ .................................................................... 1 <br /> BACKGROUND .....................................................................................................................................2 <br /> DEFINITIONS............................................................................................................................. ........... 3 <br /> COMPENSATION ADJUSTMENT PROCESS...........................................................................................4 <br /> II. SCHEDULE AND RESPONSIBILITIES FOR COMPENSATION ADJUSTMENTS AND <br /> RA TE SE TT IN G ............. ............ ......... .............................. ................. ...... ............ ....... .............. 6 <br /> SCHEDULE..................................................................... ...................................................................... 6 <br /> RESPONSffiILITY ........... ...... ..... .......... ............ ....... ............... ....... ........... ......... ............. ....... ......... ........6 <br /> III. CALCULATION OF CONTRACTOR'S COMPENSATION ......................................................8 <br /> DETERMINING THE FUTURE ANNUAL COST OF OPERATIONS........................................................... 8 <br /> Step 1 - Determining Actual Costs.................................................................................................... 8 <br /> Step 2 - Adjustment of Actual Costs..................................................................................................8 <br /> A. Non-Allowable Expenses are briefly stated below (see Agreement for actual language)................... 8 <br /> B. Reasonable and Necessary Costs....... .............. .................... ... ............ .......... ............ ........... ............9 <br /> C. Other Expenses AllowedlDisallowed in Contractor Compensation ..................................................9 <br /> Step 3 - Forecasting Costs...... ... ............. ................................ .......... .......................... ...... ............... 10 <br /> Labor, Vehicle and Container Maintenance and Other Operating Expenses................................................. 1 0 <br /> Depreciation and Other Fixed Costs ...........................................................................................................1 0 <br /> Regional and Corporate Overhead and Other CorporateCharges.................................................. .10 <br /> Profit.......................................................................................................................... ................................ I 0 <br /> Pass-Through Expenses ............ ................. ................ ......................... ............ ......... .............. ....... ........ .... ..11 <br /> IV. PREPARATION OF COMPENSATION ADJUSTMENT APPLICATION ..............................12 <br /> REPORTING OF OPERATIONAL INFORMATION .................................................................................12 <br /> AUDITED FINANCIAL STATEMENTS....... ............. .................. ....... ........... .......... ........ ............. ........... 12 <br /> PREPARATION OF MANAGEMENT REPRESENTATION LETTER ........................................................13 <br /> PREPARATION OF EXPENSE INFORMATION ..... ........................ .......... ............. ......... ........... .............. 13 <br /> PREPARATION OF EXPENSE PROJECTIONS ............... .... ..................... .......... ............... ........ .......... .... 14 <br /> PREPARATION OF SUPPORTING DOCUMENTATION ...... ..................... ............. ...................... ............ 14 <br /> EXPENSE ALLOCATIONS ........... ...................... .......... .............................................. .... ........ ...... .... .... 14 <br /> REVISIONS TO ALLOCATION METHODS...... ...... .... ..................... ............... ........ ............. .......... ......... 17 <br /> PREPARATION OF VARIANCE ANAL YSES ......................................................................................... 17 <br /> V. PREP ARA TIO N OF REVENUE INFO RMA TIO N .....................................................................18 <br /> VI. REVIEW OF CO MPENSA TIO N ADJUSTMENT APPLICA TIO N .......................................... 19 <br /> VERIFICATION OF COMPLETENESS OF COMPENSATION ADJUSTMENT APPLICATION ...................19 <br /> A. Overview....... ......... ....... ............... ......... ................ ....................... ............... .............. .......... ................. 19 <br /> B. Compliance Review......... ........ ........... ........... ........... ..... .......... ...... ....... ...... ......... .............. ............. ...... 19 <br /> C. VerifY Operations ......................... ............................ ...... ..................... .............. ............... ............ ........ 19 <br /> D. VerifY Supporting Documents and Schedules ........................................................................................19 <br /> E. NotifY Contractor ............... .......................... ......................................................................................... 20 <br /> DETAILED REVIEW OF COMPENSATION ADJUSTMENT APPLICATION ............................................20 <br /> Application Review Process... ..... .......... ... ........... ................ .......... ............ .... ............ ........ ..............20 <br /> A. Rate Application Reconciliation.. ............ .................... ............ ................. ........... ............... ........... ........ 20 <br /> B. Review of Revenues... ....................... .......... ............................. ........................ .......... ............. .......... .... 20 <br /> C. Review of Expenses ................................. ... ................ ........... .... ............... ................. .... ...... .................20 <br /> SBWMA Compensation Adjustment Guidelines June 6, 2000 <br /> PAGEi <br />