15-Attachment GG - CPI-W Based Price Adjustment Calculations.pdf
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- Solicitation number
- 26/0066
- Issued by
- Harris County, Texas
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This document is a pricing adjustment methodology for Harris County, Texas contract renewals that establishes a formula-based approach to annual price adjustments using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the Houston, Texas metropolitan area as published by the U.S. Bureau of Labor Statistics. Upon contract renewal in any year, the renewal pricing is calculated by adjusting the current year pricing according to the average inflationary or deflationary effect measured across six consecutive twelve-month periods prior to contract expiration. The methodology allows for contract renewal determinations to be made in the eighth month of the contract term, ensuring that all necessary CPI-W data is available five to six months before the scheduled contract expiration date.
The calculation methodology averages the inflationary or deflationary effects from six twelve-month periods by totaling the individual period adjustments and dividing by six to establish a single adjustment rate applied to current pricing. Since the BLS publishes CPI-W data for the Houston area every other month beginning in February, the document provides specific guidance on the timing of measurement periods. For example, for a contract expiring in November or December, the six measurement periods would end in June, April, February, December, October, and August, respectively, with corresponding start dates from the prior year. This approach ensures that price adjustments reflect local economic conditions in the Houston area and provides a transparent, index-based mechanism for managing inflation or deflation impacts on contract costs during renewal periods.
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CPI-W Based Price Adjustment Calculations
For any year in which a current contract is renewed, the renewal year pricing will be determined by adjusting the current year pricing by the average inflationary/deflationary effect, as reported in the Consumer Price Index of Urban Wage Earners and Clerical Workers (CPI-W) for Houston, Texas, between the current or prior year as compared to the year preceding the current or prior year of the contract. The CPI-W, as published by the U.S.
Bureau of Labor Statistics (BLS), is a measure, over time, of the average change in the compensation of urban wage earners and clerical workers.
The average inflationary/deflationary effect will be determined by totaling, and dividing by six (6), the inflationary/deflationary effects of six (6) twelve (12) month periods occurring prior to expiration of the current contract. Since the inflationary/deflationary effect for the Houston area is calculated by the BLS every other month beginning in February, and since the intention to renew a contract should be determined in the eighth month of the contract, all required data for calculating the average adjustment rate need be current only five (5) or six (6) months prior to the scheduled expiration of the current contract.
For example, assuming a contract expires in November or December, the end of the most recent twelve (12) month period will be June of the year of the current contract. The end of each of the other five (5) twelve (12) month periods will be the second month before the end of the immediately preceding twelve (12) month period.
Therefore, the six (6) twelve (12) month periods applicable to a contract expiring in November or December, 2008, are:
Period #: 1 2 3 4 5 6
From: 6/17 4/17 2/17 12/16 10/16 8/16 To: 6/18 4/18 2/18 12/17 10/17 8/17
Period #1 is from June of the first year before the contract period to June of the year of the contract period, Period #2 is from April of the first year before the contract period to April of the year of the contract period, Period #3 is from February of the first year before the contract period to February of the year of the contract period, Period #4 is from December of the second year before the contract period to December of the first year before the contract period, Period #5 is from October of the second year before the contract period to October of the first year before the contract period, Period #6 is from August of the second year before the contract period to December of the first year before the contract period.
CPI-W Based Price Adjustment Calculations
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