Research and analysis

Developing the SSRO’s approach to calibrating profit rates in single source contracts

This discussion paper sets out how the SSRO plans to use the data provided in statutory reports by single source defence contractors to monitor profits in qualifying defence contracts.

Documents

Developing the SSRO's approach to calibrating profit rates in single source contracts: Discussion paper

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Details

The SSRO has published a discussion paper describing how it plans to use the data provided in statutory reports by single source defence contractors to monitor profits in contracts that are subject to the Single Source Procurement Regulations (qualifying defence contracts). The discussion paper also highlights technical issues that the SSRO needs to consider further in order to interpret the levels of profitability it observes. Monitoring of contract profits forms part of the SSRO’s wider work to examine the operation of the single source regime to ensure that contract prices are fair and reasonable for contractors and delivering value for money for taxpayers.

An initial version of the discussion paper was shared with the Ministry of Defence and its main contractors in February 2017. Following comments received from stakeholders, the published paper has been updated to:

  • provide a summary, for each section, of the feedback received from stakeholders on the proposals and issues raised; and
  • include a new section summarising how the SSRO will take forward further work and stakeholder engagement on the issues: through its planned work on Allowable Costs and the profit rate methodology; through the study on risk in single source contracts; and (where relevant) through the SSRO’s review of the legislation.

The SSRO looks forward to engaging with stakeholders further on the issues identified in this paper as part of its ongoing work programme in 2017/18.

Published 15 June 2017