2020 contract profit rate
2020/21 baseline profit rate, capital servicing rates and SSRO funding adjustment
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Under the Defence Reform Act 2014 (the Act), the Single Source Regulations Office (SSRO) is required annually to review the figures used to determine the contract profit rate for pricing qualifying defence contracts (QDCs) and qualifying sub-contracts (QSCs). Section 19(2) of the Act of the Act requires us to provide the Secretary of State with an assessment of the appropriate baseline profit rate, SSRO funding adjustment and capital servicing rates for fixed and working capital for that year.
The Secretary of State for Defence announced his determination of the rates on 13 March 2020 following a recommendation from the SSRO, and we welcome the Secretary of State’s decision to accept our recommendations. These rates shall apply from 1 April 2020.
This year, as in previous years, the SSRO has published information on our methodology to aid those who may wish to scrutinise or replicate the approach taken. The practical application of the methodology remains unchanged from last year, except for minor changes made following a consultation. We are confident that the methodology is correct, and that our stakeholders will consider it to be robust.
In addition, the SSRO has again published a supporting information pack that sets out details of the SSRO’s recommendation to the Secretary of State alongside analysis of changes to the baseline profit rate since last year and sensitivity analysis around some of the key judgements in the methodology.
Part of the SSRO’s methodology is the categorisation of comparator companies in to four activity types: Develop and Make, Provide and Maintain, Ancillary Services, and Construction. The baseline profit rate combines results from Develop and Make and Provide and Maintain. The SSRO has published separate fact sheets for each group for information.
Last updated 16 March 2020 + show all updates
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Publication of 2020/21 baseline profit rate
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First published.