Procurement News

RPI – Inflation

Watch out there’s RPI about…


Here at Aster HQ we have a consistent approach to certain contract terms and that is to remove them as quickly as possible in negotiations.

They tend to be the most contentious as you might imagine and carry the biggest risk to our customers business if they remain. RPI is one of them. For those not in the know here’s a bit of background for you to consider.

What is RPI?

It’s the Retail Price Index.

What is it used for?

It’s used as a measure of inflation, excluding the housing market. Suppliers use it as an indicator on which to increase their charges on an annual basis. In 2017 RPI was running at 4.7% and last year it had dropped to 1.2%.

Where are we today?

In February 2021, RPI was 0.8%, however with the boom in activity since the lifting of lock down, the perfect storm of Brexit, the pandemic as well as supply and labour shortages it is currently sitting at 4.8% and rising.

What does this mean for me?

We are heading into IT Support renewal season for many suppliers, here are some pointers to be prepared:
1. Determine which contracts have the RPI mechanism – what is the financial impact on your budget? Are Finance aware?
2. Negotiate – once the price rises it won’t come back down.
3. Remove it – place the new order and seek to remove RPI or replace it with a more generic clause to manage any future uplift.

We’d love to hear your RPI stories, if you need support in managing your renewal season give us a shout!

#RPI #priceinflation #suppliermanage

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