Consultation outcome

Consultation on Contract Profit Rate Guidance 2016

This consultation has concluded

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Detail of outcome

Section 17(2) of the Defence Reform Act 2014 sets out the six steps to be used when determining the contract profit rate for a qualifying defence contract.

The SSRO may issue guidance in relation to any of these steps and contractors and the MOD must have regard to it, as specified in Section 18(1) of the Act. The six steps are described in the SSRO’s guidance:

  • Step 1 – baseline profit rate;
  • Step 2 - cost risk adjustment;
  • Step 3 - profit on cost once;
  • Step 4 - SSRO funding adjustment;
  • Step 5 - incentive adjustment; and
  • Step 6 - capital servicing adjustment.

On 25 January 2016, the SSRO published a consultation on its Guidance on adjustments to the Baseline Profit Rate. The consultation closed on 29 February 2016.

The SSRO has considered all responses received, and has updated and published its final Guidance on adjustments to the Baseline Profit Rate following the consultation. The responses received, and the SSRO’s response to points made in the consultation are published here.

Original consultation

This consultation ran from to

Summary

The SSRO is consulting on changes to its ‘Contract Profit Rate Guidance’, which sets out the principles and methodologies that contractors and the Ministry of Defence (MOD) must have regard to when entering into a qualifying defence contract.

Documents

Consultation description

The document, which contains guidance on adjustments to the Baseline Profit Rate, was originally published on 26 March 2015 following a public consultation.

Section 18(1) of the Defence Reform Act 2014 specifies that the SSRO may issue guidance in relation to any of the steps set out in Section 17(2), and that contractors and the MOD must have regard to this guidance.

The six steps to be used when determining the contract profit rate are described in the guidance:

  • Step 1 – baseline profit rate;
  • Step 2 - cost risk adjustment;
  • Step 3 - profit on cost once;
  • Step 4 - SSRO funding adjustment;
  • Step 5 - incentive adjustment; and
  • Step 6 - capital servicing adjustment.

In the revised document, the SSRO has amended Step 2, Step 6 and the section on ‘Opinions and Determinations’. Following our consideration of responses to the consultation, we will publish the final guidance document by the end of March 2016.

This is a public consultation held over a five week period. It is open to anyone with an interest in defence single source procurement.

Please respond by 29 February 2016.