Worked example
Worked buying file: an independent boarding school with changing demand
A fictional bursar tests a small price advantage against a planned reduction in imports. The completed comparison shows how a volume clause can outweigh an attractive tariff.
The fictional school and the tax boundary
FICTIONAL WORKED EXAMPLE. Every school description, supplier, offer, response, quotation timestamp, approval and result in this dossier is invented for teaching. No real school, supplier offer, approved deal, interview, live tariff or professional sign-off is represented.
The example is a fee-funded boarding school whose electricity portfolio is represented as one combined quoted requirement. It uses 500,000 kWh annually, with a proposed three-year supply term and 365 days per modelled year. Boarding, a pool, sports, teaching and lettings operate on different schedules. A planned change in operating demand is assumed to reduce purchased electricity to 400,000 kWh in years two and three. These are simplified teaching totals, not a forecast or guaranteed reduction for a real school.
The independent-school teaching calculation assumes 20% VAT on both electricity supply and direct TPI fees, with a separate illustrative assumption that 75% of that VAT is recoverable. These are finance inputs, not a claim about this type of school’s actual tax position or an eligibility ruling.
Actual treatment depends on each supply, activity and date and must be documented. Procurement valuation and gross liability do not fall because some VAT may be recovered. The bursar must obtain the real tax and recovery assessment by supply, activity and date.
Completed bursar brief
| Brief item | Fictional completed record |
|---|---|
| Legal customer | The contracting school company/charity is identified. The board’s delegation names the bursar as project lead and an authorised officer as signatory. Public-procurement status is considered on the actual entity; private-school branding alone is not the test. |
| Meter and use map | Teaching, boarding/residential, pool, kitchen and commercial lettings are mapped to meters. The school retains the underlying time profile despite the simplified combined example. |
| Forecast change | An approved change in operating demand is assumed to reduce purchased electricity by 100,000 kWh from year two. Timing, continuing evening/winter use and the risk of a delayed reduction are included in the brief. |
| Required service | Written supplier terms, complete remuneration, invoice validation, usable interval data, query ownership and a named handover process. |
| Approval requirement | The board receives base and changed-demand scenarios, clause risks, gross commitment, tax assumptions and a recommendation it can challenge. Charitable trustees follow their own decision duties. |
One TPI, a coverage record and a separate supplier check
The school appoints one TPI after examining references, remuneration, market access, conflicts and sample reports. Its authority permits information and quotations only. The adviser records four suppliers approached, two complete responses and two documented refusals. A direct independent supplier check is obtained separately. All receive the same forecast, including the planned demand reduction.
Fictional direct supplier C offers 25.4p/kWh, £7/day standing and no included validation service, giving £129,555 annually before tax at 500,000 kWh. That check is retained with its service exclusion; it is not described as perfectly comparable until the missing service and school workload have been assessed. The school does not pretend that a broker panel proves every suitable supplier was considered.
The base comparison is close
Both A and B include a 0.2p TPI uplift in the quoted rate. A is 25p/kWh, £8/day standing and £1,500/year direct TPI service. B is 24.7p, £10/day and £1,800/year direct TPI service. At unchanged use, B is £470/year cheaper before tax. That is an arithmetic advantage within this fictional comparison, so the recommendation must explain any decision to pay more.
| Unchanged-use base | A | B |
|---|---|---|
| Annual energy | £125,000.00 | £123,500.00 |
| Annual standing | £2,920.00 | £3,650.00 |
| Annual direct TPI service fee | £1,500.00 | £1,800.00 |
| Annual total before tax | £129,420.00 | £128,950.00 |
| Three-year total before tax | £388,260.00 | £386,850.00 |
| Three-year gross at assumed 20% | £465,912.00 | £464,220.00 |
The clause review finds the important difference
The invented A clause permits annual consumption between 80% and 120% of the 500,000 kWh reference without the particular shortfall charge modelled here. The invented B clause uses 90% to 110%. B also charges 5p for each kWh below its lower boundary. These are sample teaching terms, not common market wording or a statement about any real supplier.
At 400,000 kWh, A is exactly at its 80% boundary. B’s lower boundary is 450,000 kWh, leaving a 50,000 kWh shortfall and a £2,500 charge for each affected year. The bursar first asks B to rebase the agreed volumes to the disclosed demand forecast or remove the shortfall term. The fictional supplier refuses. Only then is the unamended B offer evaluated as unsuitable for the stated plan. Another school with different terms or demand could reach a different result.
Completed changed-demand scenario
A's changed-demand total is £4,190 lower before tax, £5,028 lower gross and £4,399.50 lower after the simplified VAT-recovery assumption. The reason is the stated volume clause, not a claim that A has the lowest base tariff. The school does not count the assumed reduction in purchased energy as a procurement saving. Any separately authorised cost of achieving the demand change would need its own assessment.
| Amount before tax | A | B |
|---|---|---|
| Year 1 / 500,000 kWh | £129,420.00 | £128,950.00 |
| Year 2 / 400,000 kWh before shortfall charge | £104,420.00 | £104,250.00 |
| Year 2 / specific shortfall charge | £0.00 | £2,500.00 |
| Year 3 / 400,000 kWh including shortfall charge | £104,420.00 | £106,750.00 |
| Three-year changed-demand total | £338,260.00 | £342,450.00 |
| Gross at assumed 20% | £405,912.00 | £410,940.00 |
| VAT recovery at assumed 75% of VAT | £50,739.00 | £51,367.50 |
| Economic cost after that assumed recovery | £355,173.00 | £359,572.50 |
Fees, the valuation estimate and an adverse demand test
With 1,300,000 kWh imported across the changed-demand scenario, each 0.2p uplift produces £2,600 total embedded remuneration. At an unchanged 500,000 kWh each year it would be £3,000. The difference follows consumption; neither amount is added again to the energy costs. The separate direct TPI service fees total £4,500 under A and £5,400 under B. Total expected TPI remuneration before tax in the changed-demand scenario is therefore £7,100 under A and £8,000 under B. At unchanged baseline demand it would be £7,500 and £8,400 respectively.
The board sees A’s £405,912 changed-demand gross total and its £465,912 unchanged-demand gross total. For this worked record it also documents a maximum expected quantity scenario of 600,000 kWh each year, producing £154,420 before tax annually and £555,912 gross over the term under the stated teaching VAT assumption. These are estimates under named assumptions, not a contractual liability cap. The legal customer’s actual procurement status, appropriate valuation methodology and any wider aggregated need must be assessed separately.
The bursar tests a one-year delay in the demand reduction. A then costs £363,260 before tax over three years; B costs £364,650 with only one £2,500 shortfall charge. A remains £1,390 lower in that scenario. With no demand reduction, B is £1,410 lower over the term. This makes the forecast dependency visible rather than hiding the outcome that favours B.
Specimen board recommendation and conditions
“Approve fictional A subject to final contract review, confirmed signing authority and completion of our applicable buying procedure. B is £470/year cheaper at unchanged demand, but its unamended minimum-volume terms conflict with our disclosed demand forecast. A's term accommodates the modelled reduction and has the lower completed scenario cost. Record that the outcome changes if the demand reduction does not occur. The tax and recovery factors are illustrative and must be replaced with our documented treatment before a real decision.”
The board retains the demand evidence, bidder responses, written refusal to amend B, comparison, conflicts record and approval minute. The actual signatory checks supply identifiers, dates, conditions and remuneration against the evaluated version. An independent school’s own process remains distinct from academy-specific declarations. No school endorsement or actual approval is implied by this specimen.
First-bill and service record
At 40,000 kWh over 30 days, A’s expected charge before tax is £10,000 energy + £240 standing + £125 monthly service = £10,365. At the illustrative 20% VAT rate, gross is £12,438; any assumed recoverability belongs in the finance record rather than reducing the supplier bill. A duplicate £80 meter charge not in the agreed schedule would be investigated, not silently accepted as a pass-through.
Monthly review links usage to the boarding calendar, pool operation and lettings. The expected date of the change in operating demand becomes a formal contract-review trigger. The TPI confirms that volume terms, metering and purchased-energy forecasts remain valid and supplies the school-owned data export. Any measured consumption reduction is assessed against an appropriate baseline and reported separately from tariff effects and historic recoveries.