Common use of Recurring Revenue Clause in Contracts

Recurring Revenue. Indicative revenue costs are shown in table FC03 with further detail attached (Appendix FC03). They include an assumed £750,000 investment in community care staff across all three change options. Pay Costs Secondary Care Staff Community Care Staff £12.8m £10.9m £12.6m £11.6m £12.6m £11.6m £12.6m £11.6m Non Pay Costs Direct Clinical/Care Costs Non Direct Clinical/Care Costs £12.0m £1.0m £12.0m £1.0m £12.0m £1.0m £12.0m £1.0m Building Occupancy / Running Costs £0.9m £1.1m £1.2m £1.1m Income Contribution / Costs (£0.4m) (£0.6m) (£0.6m) (£0.6m) To provide the above indicative costs at this Initial Agreement stage, the following assumptions have been made: • An optimum bias of 26.9% has been applied to each option. This has been calculated in accordance with Scottish Capital Investment Manual guidance; • Land purchases are included where relevant but any proceeds from disposals are assumed to be returned to Scottish Government in line with guidance rather than being offset against capital requirements; • Demolitions costs have been included where appropriate; • External advisors’ costs (included within capital cost figures) are based on estimates from similar recent projects undertaken in NHS Highland; • Discounted cash flow (used to calculate NPV figures) use a discount rate of 3.5% to 30 years adjusting to 3% thereafter in line with guidance; • Capital cost options are based on the accommodation schedules, feasibility sketches and assumptions outlined in the site option appraisal using Building Cost Information Service (BCIS) Tender Price Indices from 2025, as detailed in Appendices EC10 to EC14; and • Revenue and capital costs for Option 1 are in line with current activity and bed numbers.

Recurring Revenue. Indicative revenue costs are shown in table FC03 with further detail attached (Appendix FC03). They include an assumed £750,000 investment in community care staff across all three change options. Pay Costs Secondary Care Staff Community Care Staff £12.8m £10.9m £12.6m £11.6m £12.6m £11.6m £12.6m £11.6m Non Pay Costs Direct Clinical/Care Costs Non Direct Clinical/Care Costs £12.0m £1.0m £12.0m £1.0m £12.0m £1.0m £12.0m £1.0m Building Occupancy / Running Costs £0.9m £1.1m £1.2m £1.1m Income Contribution / Costs (£0.4m) (£0.6m) (£0.6m) (£0.6m) Total Recurring Costs £37.2m22 £37.7m £37.8m £37.7m To provide the above indicative costs at this Initial Agreement stage, the following assumptions have been made: • An optimum bias of 26.9% has been applied to each option. This has been calculated in accordance with Scottish Capital Investment Manual guidance; • Land purchases are included where relevant but any proceeds from disposals are assumed to be returned to Scottish Government in line with guidance rather than being offset against capital requirements; • Demolitions costs have been included where appropriate; • External advisors’ costs (included within capital cost figures) are based on estimates from similar recent projects undertaken in NHS Highland; • Discounted cash flow (used to calculate NPV figures) use a discount rate of 3.5% to 30 years adjusting to 3% thereafter in line with guidance; • Capital cost options are based on the accommodation schedules, feasibility sketches and assumptions outlined in the site option appraisal using Building Cost Information Service (BCIS) Tender Price Indices from 2025, as detailed in Appendices EC10 to EC14; and • Revenue and capital costs for Option 1 are in line with current activity and bed numbers.