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6.1J Page 5 3. Q = Quantity in tons of paving asphalt that was used in producing the quantity of asphalt concrete purchased. The adjustment in price for the English Tons of asphalt concrete purchased shall be shown on the payment invoices. 4. The California Statewide Paving Asphalt Price Index is determined each month on the first business day of the month by the California Department of Transportation (CaITrans) using the median of posted prices in effect as posted by Chevron, Mobil, and Unocal for the BuenaYista, Huntington Beach, Kern River, Long Beach, Midway Sunset, and Wilmington Fields. 5. In the event that the companies discontinue posting their prices for a field, CalTrans will determine an index from the remaining posted prices. CalTrans reserves the right to include in the index determination the posted prices of additional fields. D. ANNUAL ADJUSTMENT This contract will cover three (3) consecutive fiscal years. The compensation for changes to the base bid items, separate from the asphalt pricing index, for each subsequent fiscal year shall be subject to annual adjustment as set forth below. 1. The San Francisco-Oakland-San Jose Consumer Price Index. All Items. 1982- 84=100 for All Urban Consumers (CPI-U) published by the U.S. Department of Labor, Bureau of Labor Statistics (the "Index") shall be used for the purpose of calculating annual compensation increases. The maximum percentage increase for any subsequent year shaH be 3% increase over the individual bid item rate for the initial or preceding contract year. 2. The "Beginning Index" shall be the index published for the initial year prior to the commencement of the subsequent "Extension" year. The "Extension Index" shall be the index for May published by June 30th of the current year, prior to the commencement of each subsequent Extension Year. To calculate the annual compensation for each subsequent year, the Extension Index shaIJ be divided by the Beginning Index, and the resulting factor, not to exceed 3%, shall be multiplied by the annual compensation of the expiring period. 3. City shall notify Contractor of each CPI increase by mailing a written statement setting forth the calculation of the compensation. The annual adjustment to the base bid items shall be approved by City Council amendment ot this agreement. If the format or components of the Index change materially, or if the Index is discontinued, then City shall substitute an index published by the U.S. Department of Labor, Bureau of Labor Statistics or similar agency which is most nearly equivalent to the Index in effect on the commencement date of the Second Extension. 4, City shaIJ notify Contractor of the substituted index and shall use the substituted index in the calculation of the City's compensation unless Contractor objects in writing within fifteen (15) days after its receipt of City's notice. If Contractor objects, then the substitute index shall be determined in accordance with the rules and Atty/Agr/2006.002 050106 3