Price Escalation and Index Clause Calculator — Compare Five Uplift Mechanisms Against Your Signature Discount

Description
The discount is negotiated in the room. The uplift is agreed in a schedule, three weeks later, by somebody else. Almost nobody puts the two numbers next to each other, and that is why multi-year indirect contracts so often deliver a smaller saving than the announcement claimed.

This model puts them next to each other. Enter the list price, the discount you have been offered, the term and your own index assumption. It calculates the price paid in every year under five mechanisms — fixed price, uncapped index, index capped at your cap, a collar with both cap and floor, and a fixed annual uplift — with the compounding done properly rather than approximated.

It then produces the number that settles the argument: the value of the signature discount over the whole term, minus the cost of the uplift mechanism over the same term. In the worked example supplied, a five per cent discount on a five-year contract is worth 125,000 and an uncapped index at four per cent takes back 197,753. The net position is negative, and the cell turns red. That is not an unusual result; it is the normal one.

The model also isolates what the cap alone is worth, which matters because the cap is a smaller ask than the discount, it is easier to obtain, and it is frequently worth more.

There are no index forecasts in this file and none are suggested. The assumption is yours, labelled as an input. Run the same term twice, at a low and a high assumption: the gap between the two runs is the risk you are being asked to carry.
Every formula is visible and editable. Nothing is password-protected.