Indexation, or “rise and fall” is a hidden charge that is often included in long term preventive maintenance programs.
It is normally calculated by using a complex formula using the ABS (Australian Bureau of Statistics) where the rise in the cost of all wages and the rise in the cost of all products are combined to come up with a combined rise amount (expressed as a percentage). This percentage is compounded annually. The percentage is not linked with CPI.
Sometimes our competitor will provide a “cap” on the level of the indexation, which eliminates some of the risk to the client.
Why does it exist?
It is designed to provide an independent of CPI way to calculate the annual price increases for long term preventative maintenance contracts. CPI is easily manipulated by external factors not related to the building and construction industry, so indexation was developed to be fairer and more specific.
Why doesn’t First Response use it?
We want to be open and transparent with our costings. We have indexation, however, we build it into our proposals so our customers can see in advance of making a decision on exactly what the works will cost each year.
How do I compare proposals to find out exactly how much I will be paying for a maintenance contract?
The easiest way is to find out exactly how much a maintenance contract might cost is to use our indexation calculator.