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Under the Defence Reform Act 2014 (the Act), the Single Source Regulations Office (SSRO) is required annually to review the baseline profit rate, capital servicing rate and SSRO funding adjustment used to determine the contract profit rate for pricing qualifying defence contracts (QDCs) and qualifying subcontracts (QSCs). Section 19(2) of the Act requires the SSRO to provide the Secretary of State with its assessment of the appropriate rates for each year.
The consultation proposed changes to specific aspects of the activity, company size and data quality criteria used to select companies in the assessment of the baseline profit rate.
We received eight responses to the consultation, which we have considered in finalising the changes to the methodology. The summary of consultation responses available above explains how the feedback provided by stakeholders has informed the final methodology. The revised methodology document available above explains the methodology that the SSRO will apply in making its assessment of the rates that should apply for 2020/21.
Most respondents identified aspects of the SSRO’s methodology they considered we should prioritise for review in the future and this feedback is summarised in the consultation response document. We will be engaging with stakeholders on topics to take forward as priorities for a future corporate plan in the coming months.
Section 19(2) of the Defence Reform Act 2014 requires that the Single Source Regulations Office (SSRO) provides the Secretary of State with its assessment of the appropriate baseline profit rate, capital servicing rates, and SSRO funding adjustment (“rates”) by 31 January each year for the purpose of assisting the Secretary of State in determining what those rates are for the subsequent financial year.
The SSRO is consulting on changes to the way it undertakes the assessment of the baseline profit rate. The current approach is set out in its Single Source Baseline Profit Rate, Capital Servicing Rates and Funding Adjustment Methodology.
The SSRO, in discussion with stakeholders, prioritised detailed work in 2019/20 to further refine this methodology by reviewing the activity, company size and data quality criteria used to select companies used to benchmark profits. The outcome of that work is reflected in the proposals contained in this consultation.
This consultation is open to anyone with an interest in ensuring that good value for money is obtained in government expenditure on Qualifying Defence Contracts (QDCs) and Qualifying Subcontracts (QSCs) and that the prices paid under these contracts are fair and reasonable. We particularly welcome comments from individuals or organisations with an interest in non-competitive defence procurement.
The consultation runs until 26 August 2019. A consultation response form is available. Completed response forms should be sent: a) by email to email@example.com (preferred); or b) by post to SSRO, Finlaison House, 15-17 Furnival Street, London, EC4A 1AB.
The SSRO also welcomes the opportunity to meet with stakeholders to discuss the proposals during the consultation period. If you wish to arrange such a meeting, please contact us at the earliest opportunity via firstname.lastname@example.org.