The SSRO was jointly referred a request by the MOD and a contractor for an opinion in respect of a proposed Qualifying Defence Contract (QDC). The referral sought the SSRO’s opinion on whether work undertaken at risk, ahead of the agreement of the contract through negotiation, may in principle represent Allowable Costs under the contract once it is in place.
The summary sets out the SSRO’s opinion, in light of the circumstances of this referral, assumptions made and considerations set out, that costs incurred at risk prior to entering into the contract may be Allowable once the contract is in place.
The SSRO’s opinion is subject to the pre-contract at risk costs meeting the requirements of the regulatory framework before they are included in the price of the proposed QDC. The SSRO’s opinion that pre-contract costs at risk may be Allowable is therefore subject to whether such costs are considered by the MOD and the contractor (or by the SSRO by way of determination) on or after entering into the contract, as meeting the AAR test, having regard to the SSRO’s Single Source Cost Standards.
The summary sets out the key considerations that the SSRO has had regard to in forming the opinion.