Consumer price index schedule

This article explains how to create, delete, review, and process consumer price index (CPI) schedules. A CPI schedule can be used to determine the prices for consumer goods and services that you add as billing schedule lines. The CPI schedule can then be used with escalation and discount pricing on a billing schedule, or it can be manually processed to update the billing amounts on billing schedules. You can manually enter CPI schedules, or you can import them by using the CPI schedule composite entity.

To add a CPI schedule, follow these steps.

1. On the Consumer price index schedule page, select New.
2. In the Consumer price index schedule field, enter a unique name.
3. In the Description field, enter a description.
4. On the Consumer price index schedule tab, select Add.
5. In the Consumer price index date field, specify the date when the new CPI schedule becomes active.
6. In the Consumer price index schedule field, enter the name that you entered in step 2.
7. Select Save.

To delete a CPI schedule date, follow these steps.

1. On the Consumer price index schedule page, select one or more lines that you want to delete, and then select Remove.
2. To delete the whole CPI schedule, on the Action Pane, select Delete. You can't delete the selected CPI schedule if it's associated with any billing schedule.
3. On the Action Pane, select Process to update the billing schedules that use the selected CPI schedule. The latest CPI dates and schedule amounts will be used to update the billing schedule prices.
4. On the Consumer price index process FastTab, review the updated Billing schedule number, Item number, Billing start date, Billing end date, Escalation date, and Escalation frequency fields.

After CPI schedules are set up, they can be used for escalation and discount price changes on billing schedules.

CPI calculation

For these examples, the period is from January 1, 2020, through December 31, 2022. The base CPI rate (the CPI value when the contract starts) is 105.65. On January 1, 2021, the current CPI is 110.5. On January 1, 2022, the current CPI is 114.25. The initial amount is $1,000.

Example 1

On the Recurring contract billing parameters page, you set the Consumer price index calculation field to Base Consumer price index.

For the period January 1, 2021, the first escalation amount is calculated in the following way, based on the initial amount:

1,000 + (110.5 – 105.65) ÷ 105.65 × 1,000 = 1,045.91

For the period January 1, 2022, the escalation amount is calculated in the following way:

1,045.91 + (114.25 – 105.65) ÷ 110.5 × 1,045.91 = 1,127.31

Example 2

On the Recurring contract billing parameters page, you set the Consumer price index calculation field to Prior consumer price index.

For the period January 1, 2021, the first escalation amount is calculated in the following way, based on the initial amount:

1,000 + (110.5 – 105.65) ÷ 105.65 × 1,000 = 1,045.91

For the period January 1, 2022, the escalation amount is calculated in the following way, based on the first escalation amount:

1,045.91 + (114.25 – 110.5) ÷ 105.65 × 1,000 = 1,081.40

Note

The escalation process always uses the latest CPI value, regardless of the index date. For example, if the escalation is in September, but the latest CPI value is for July, the July index is used. No adjustments are made after the September index is entered.

Prorated escalation

If the escalation occurs in the middle of a billing period, the amount is prorated. For example, the billing period is from August 1, 2020, through July 31, 2021. On the CPI date September 1, 2019, the CPI value is 244. On the CPI date September 1, 2020, this CPI value is 250. If the previous rate is 1,000, the following formulas are used to calculation the billing amount for the period:

• CPI changes = (250 – 244) ÷ 244 = 2.459%
• Current rate = 1,000 × 2.459% = 1,024.59
• Number of days at the current rate = July 31, 2021 – September 1, 2020 = 334
• Previous rate = 1,000
• Number of days at the previous rate = August 31, 2020 – August 1, 2020 = 31
• Total number of days in the billing period = July 31, 2021 – August 1, 2020 + 1 = 365
• Billing amount for this period = (1,000 × 31 ÷ 365) + (1,024.59 × 334 ÷ 365) = 1,022.50

Escalation that uses the CPI and percentage

Escalations can be done by using the CPI. The CPI plus a 3-percent escalation starts on January 1, 2020, and it has an annual frequency.

• The amount that is billed for January 1, 2019, through December 31, 2020, is 4,000.
• The billing period that will be escalated is January 1, 2020, through December 31, 2020.
• On the CPI date December 1, 2018, the CPI value is 205.3. On the CPI date December 1, 2019, the CPI value is 219.6.

If the previous rate is 4,000, the billing amount for this period is calculated in the following way:

• CPI changes = (219.6 – 205.3) ÷ 205.3 = 6.965%
• Current rate = (4,000 × 6.965%) – 4000 = 278.60
• Percentage changes = (4,000 × 1.03) – 4,000 = 120
• Billing amount = 4,000 + 278.6 + 120 = 4,398.6