Corporate report

Newsletter April 2024

Published 23 April 2024

Dear Stakeholder,

This newsletter provides an update on our work, plans and priorities. We are keen to hear your views, so please get in touch if you wish to discuss any issue raised below. We hope you will find this short newsletter helpful in giving you a taster of what the SSRO is currently doing.

Procurement Act

It is a time of change for the regulatory framework, with the Procurement Act and secondary legislation introducing new measures such as alternative pricing and componentisation, which will provide a greater choice of pricing methods and allow contract prices to better reflect risk-sharing between the MOD and defence contractors.

The SSRO is helping to ensure these new arrangements are well understood and implemented successfully.

Following the publication of the new Regulations, we published three pricing guidance documents and have consulted stakeholders. We have also published updated reporting guidance and a consultation document explaining the updates we have made to the guidance and to the Defence Contract Analysis and Reporting System (DefCARS). The consultation is available here.

We have hosted a series of Teach Ins and Q&A sessions, to support contractors who are (or may be) subject to the regulatory framework. These sessions helped them familiarise themselves with the key changes to pricing and reporting provisions.

The final session, which covers reporting, will be held on 8 May at a central London location and via Microsoft Teams. If you would like to attend, please send your name and which company your represent to helpdesk@ssro.gov.uk, stating whether in person or via Teams.

Corporate Plan 2024-27

We are currently finalising our Corporate Plan for 2024-27, which will identify the strategic priorities and projects we will pursue to deliver our statutory functions. The Plan will include four areas of strategic focus, which will be incorporated into our work and engagement in future: relevance, visibility, accessibility and trust. It will set out multi-year projects and annual activities to be delivered in 2024-27, which will include:

• Enhancing the utility of our guidance, in response to feedback from engaging directly with users.

• Service improvements that ensure we provide more effective and timely responses to complex queries from our stakeholders.

• Quicker formal opinions, when relevant matters are referred to the SSRO.

• Support for further use of Management Information.

• An enhanced communications approach.

Please do let us know if would like to discuss the SSRO’s forthcoming work programme with any of the team; we would be happy to meet.  

Non-Referral Advice Service

Through our new ‘Non-Referral Advice Service’ you can now get confidential, independent and authoritative advice on queries about how the regulatory framework applies to your proposed or existing contract. We expect this will help speed up contract negotiations and enable the parties to qualifying contracts to resolve disagreement without the need for a formal opinion or determination.

Building on stakeholder feedback gathered through a public consultation on proposals, the new Non-Referral Advice Service supplements the SSRO’s existing Helpdesk and Referrals functions to deliver a more comprehensive flexible and accessible range of support to stakeholders.

For advice on applying the regulatory framework please contact the SSRO’s Helpdesk:

• by phone via 020 3771 4785 (9am to 5pm Monday to Friday); or
• by email to helpdesk@ssro.gov.uk

To help stakeholders understand how we deal with queries and referrals, we have also published a new Code of Practice setting out the high-level principles which guide our approach to responding to queries about the regulatory framework.

Recent site visits

The SSRO Chair, Chief Executive and Board members have recently accepted invitations to visit the facilities of several defence companies, including:

• Airbus Defence and Space, Portsmouth, on 13 February.
• General Dynamics’ Merthyr Tydfil and Oakdale sites, on 5 March.
• Babcock, Royal Naval Dockyard, Devonport on 17 April.
• Lockheed Martin UK, RNAS Culdrose, Cornwall on 18 April.

Late last year, Board members also visited MBDA, Edgar Brothers and BlackTree Technologies.

Such site visits provide a great opportunity for our Board members to gain an overview of each company, its structure, capabilities and business, and to hear its perspective. It also allows us to engage in discussion about a company’s experience of working with the single source procurement framework and how the SSRO can further support them and the MOD.

We are always grateful for invitations to visit defence company’s facilities.

Baseline Profit rate

The Secretary of State for Defence announced (15 March 2024) his determination of the baseline profit rate and capital servicing rates and we welcome his decision to accept our recommendation. The baseline profit rate for 2024/25 is 8.24 per cent, 0.05 percentage points down on last year and the capital servicing rates are on average up by 0.96 percentage points to 2.66 per cent. These rates will apply to qualifying contracts entered into from 01 April 2024 and can be found in The Gazette and in the SSRO’s guidance on the baseline profit rate and its adjustment. At a time when UK defence has many active priorities, especially in Ukraine and the Middle East, the SSRO’s annual profit rate assessment helps ensure pace and agility in the way that single source contracts can be priced.

This year’s assessment uses the SSRO’s established methodology, which provides a predictable and stable basis for the MOD and its suppliers to agree profit rates for single source defence contracts.

In making this year’s assessment, we have also considered current economic conditions, such as higher inflation and interest rates, and have taken measures to ensure these are reflected fairly in the rates. For example, we are recommending higher capital servicing rates to reflect the higher borrowing costs for industry. Limited change in the BPR this year supports a stable ongoing position that helps industry plan and promotes investment, consistent with the defence and security industrial strategy. We believe that our assessment is both robust and appropriate and supports the SSRO’s aims to ensure good value for money in government expenditure and fair and reasonable price for contractors.

For more information read this article on the SSRO website.

Statistics bulletin

We recently published: Quarterly qualifying defence contract statistics: Q3 2023/24 - GOV.UK (www.gov.uk)

The bulletin is part of a regular published series of statistical reports, containing analysis of key QDC/QSC information.

Increasing the visibility of our work

We are looking at ways to increase the accessibility of our services and the visibility of our work to stakeholders and to ensure the value we bring to the sector and defence procurement outcomes are well communicated. 

There are many ways we are already doing this: through our engagement at both operational and senior level both with industry and the MOD, and through being more visible on the ground, for example through providing enhanced support and encouraging users to exploit the data in DefCARS. We are increasing our accessibility: making our services, support and guidance easier to engage with.

We have increased our presence on LinkedIn and X:

• https://twitter.com/SingSourceRegs.
• https://www.linkedin.com/company/single-source-regulations-office/.  

If you use these platforms, please do follow us for up-to-date information about our work.