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REV: 03-16-18 MI ATTY/AGR/2018.054/RECOLOGY OF SAN MATEO Page 88 of 119 ARTICLE 11 3618 CONTRACTOR’S COMPENSATION AND RATES 3619 11.01 OVERVIEW 3620 A. Contractor’s Compensation includes three components: 3621 1. Annual Cost of Operations. These include the cost of labor, equipment, materials 3622 and supplies, fuel, insurance, bonds, taxes, overhead and all other costs 3623 necessary to perform all the services required, in the manner required, by this 3624 Agreement, with the exception of costs identified in subsection A.3. 3625 2. Profit. Contractor’s profit is determined by applying the Operating Ratio of ninety 3626 and one-half percent (90.5%) to annual costs of operation described in subsection 3627 A.1. 3628 3. Contractor Pass-Through Costs. These consist of costs that Contractor is 3629 obligated to pay but on which Contractor does not earn a profit and consist of: (i) 3630 interest expense, and (ii) adjustments to compensation to reflect Agency-specific 3631 Agreement changes (labeled in Attachment N as “Contract Changes to Specific 3632 Agencies”). 3633 B. Attachment N includes baseline financial and operational information that shall be 3634 used to calculate Contractor’s Compensation for 2021. The projected 2021 Annual 3635 Costs of Operation, Profit, and Contractor Pass-Through Costs shown on Attachment 3636 N: (i) were prepared by Contractor; (ii) were allocated among Member Agencies 3637 based on the allocations used for Contractor’s Application for Rate Year 2017; and, 3638 (ii) have been adjusted to reflect refinements in the scope of services and decisions 3639 by individual Member Agencies as to specific programs, levels of service, or other 3640 unique factors affecting only their jurisdiction. 3641 C. Contractor’s Compensation for Rate Year Eleven (2021) shall be determined as 3642 provided in Section 11.02.A. Annually thereafter, Contractor’s Compensation shall 3643 be adjusted as provided in Section 11.02.D. 3644 D. After the conclusion of each Rate Year, SBWMA will conduct a revenue reconciliation 3645 process as provided in Section 11.03. The purpose of this procedure is to reconcile 3646 Net Revenues Billed by Contractor for a Rate Year with the approved Contractor’s 3647 Compensation for that Rate Year. Adjustments to Contractor’s Compensation will be 3648 made in a subsequent Rate Year to recover any excess revenue from Contractor or 3649 to compensate Contractor for a revenue shortfall. 3650 E. However, no adjustments to Contractor’s Compensation will be made for differences 3651 between total costs of operation or Contractor Pass-Through Costs as calculated for 3652 the Rate Year and as actually incurred, with the exception of cost differences due to 3653 changes in scope of services (Section 15.12) or as authorized by a special 3654 compensation review (Section 11.05) or an adjustment under Section 3.03.B. If 3655 Contractor’s actual annual cost of operations, actual profits and actual Contractor’s 3656 Pass-Through Costs are more or less than the amounts included in the annual 3657 calculation of Contractor’s Compensation, Contractor is neither entitled to an increase 3658 in compensation, nor subject to a reduction in compensation, in future Rate Years. 3659 6.2.B. - Page 101