The Annual Compliance Report comments on compliance with the Defence Reform Act 2014 and the Single Source Contract Regulations 2014 by the MOD and by defence contractors.
The SSRO’s Annual Compliance Report 2015 encompasses the SSRO’s work over the past year to assess compliance by the Ministry of Defence and single source suppliers to the provisions of the Defence Reform Act 2014 and the Single Source Contract Regulations 2014. This work is carried out under the Act, Regulations and the Framework Document agreed between the Ministry of Defence and the SSRO.
The 2015 report covers the period 18 December 2014 to 31 December 2015. Given the low volume of QDCs and the small number of QDC reports received and analysed during this time, the SSRO has decided that its first Compliance Report will be a narrative report, focusing on compliance trends and themes. It does not include ratings, as publishing individual compliance scores for 2015 could create a disproportionate focus on early QDCs.
This report sets out:
the SSRO’s observations from compliance assessments conducted during the first compliance period;
wider observations on how the Act and the Regulations have been functioning, to improve stakeholder understanding and ultimately lead to better compliance; and
an overview of the referral to the SSRO for an Opinion in September 2015, to highlight any lessons of relevance for future QDCs and parties to those QDCs.
Wherever possible the SSRO has worked with contractors so that they become compliant with the Act and the Regulations. The SSRO intends for the first Compliance Report and all further reports to encourage compliance and provide insight into how the Act and the Regulations are working.
The key points from the 2015 report include:
In 2015 the SSRO found almost £100,000 of agreed savings and identified over £20 million of potential savings. A further £5.7 million of possible savings are also currently under investigation on the first six QDCs. In addition, the existence of the regime itself has created unquantified savings by providing more opportunities for the MOD to act as an intelligent customer and seek efficiencies.
Whilst contractors have in some cases provided insufficient information that certain costs should be included in the contract, they have been willing to remove non-Allowable Costs identified by the SSRO once this information has been provided. Examples include charging to rectify faulty workmanship, contingency funding not actually used and marketing costs.
There is evidence of differing levels of knowledge and understanding of the Act and Regulations in the MOD and challenges in meeting the reporting and verification requirements. The SSRO expects, with the establishment of the MOD’s Single Source Advisory Team, the MOD’s compliance should increase significantly over 2016.