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3691 ARTICLE 11 3692 CONTRACTOR'S COMPENSATION AND RATES 3693 11.01 OVERVIEW 3694 A. Contractor's Compensation includes three components 3695 1. Annual Cost of Ooerations. These include the cost of labor, equipment, 3696 materials and supplies, fuel, insurance, bonds, taxes, overhead and all other 3697 costs necessary to perform all the services required, in the manner required, by 3698 this Agreement, with the exception of costs identified in subsection A.3. 3699 2. Profit. Contractor's profit is determined by applying the Operating Ratio of ninety 3700 and one-half percent (90.5%) to annual costs of operation described in 3701 subsection A.1. 3702 3. Contractor Pass-Throuah Costs. These consist of costs that Contractor is 3703 obligated to pay but on which Contractor does not earn a profit and consist of: (i) 3704 interest expense, and (ii) adjustments to compensation to reflect Agency -specific 3705 Agreement changes (labeled in Attachment N as "Contract Changes to Specific 3706 Agencies"). 3707 B. Attachment N includes baseline financial and operational information that shall be 3708 used to calculate Contractor's Compensation for 2021. The projected 2021 Annual 3709 Costs of Operation, Profit, and Contractor Pass -Through Costs shown on 3710 Attachment N: (i) were prepared by Contractor; (ii) were allocated among Member 3711 Agencies based on the allocations used for Contractor's Application for Rate Year 3712 2017; and, (ii) have been adjusted to reflect refinements in the scope of services 3713 and decisions by individual Member Agencies as to specific programs, levels of 3714 service, or other unique factors affecting only their jurisdiction. 3715 C. Contractor's Compensation for Rate Year Eleven (2021) shall be determined as 3716 provided in Section 11.02.A. Annually thereafter, Contractor's Compensation shall 3717 be adjusted as provided in Section 11.02.D. 3718 D. After the conclusion of each Rate Year, SBWMA will conduct a revenue 3719 reconciliation process as provided in Section 11.03. The purpose of this procedure 3720 is to reconcile Net Revenues Billed by Contractor for a Rate Year with the approved 3721 Contractor's Compensation for that Rate Year. Adjustments to Contractor's 3722 Compensation will be made in a subsequent Rate Year to recover any excess 3723 revenue from Contractor or to compensate Contractor for a revenue shortfall. 3724 E. However, no adjustments to Contractor's Compensation will be made for 3725 differences between total costs of operation or Contractor Pass -Through Costs as 3726 calculated for the Rate Year and as actually incurred, with the exception of cost 3727 differences due to changes in scope of services (Section 15.12) or as authorized by 3728 a special compensation review (Section 11.05) or an adjustment under Section 3729 3.03.B. If Contractor's actual annual cost of operations, actual profits and actual 3730 Contractor's Pass -Through Costs are more or less than the amounts included in the 3731 annual calculation of Contractor's Compensation, Contractor is neither entitled to an REV: 03.16-18 MI Page 90 of 126 ATTY/AGR.2018.054/Recology of San Mateo