SSRO updates non-competitive defence contracts' pricing and reporting guidance
Image courtesy SSRO
In January 2024 the SSRO published new pricing guidance to support the implementation of changes to the single source regulatory framework, which came into force on 1st April 2024. It consulted stakeholders between January and April 2024, seeking feedback on the new guidance. Following consideration of consultation responses it has published updated guidance on:
- Alternative pricing types
- Allowable Costs
- The baseline profit rate (BPR) and its adjustment
These updated guidance documents provide contracting parties with:
- Support to use alternative pricing methods for contracts which allows non-competitive defence contracts to be priced in new ways. For example, an item can be priced by reference to competitive markets: simplifying and speeding up procurement.
- More flexibility and transparency through broadening the ability for a contract to be split into different components or parts, each with its own profit rate and price (known as componentisation). This allows contract prices to better reflect the risk-sharing between the MOD and defence contractors.
- A rationalisation of how the contract profit rate is calculated, removing two steps from the previous six-step process and simplifying the agreement of contract profit rates.
Reporting guidance
Alongside the pricing guidance, SSRO published its response to the consultation on the updated reporting guidance, which helps contractors submit statutory reports following the legislative changes made on 1st April 2024. The consultation also included minor changes to the compliance methodology.
SSRO issued the guidance and the proposed change to the compliance methodology in advance of concluding this consultation to give stakeholders time to familiarise themselves as early as possible and to allow their feedback to be based on initial use. Stakeholders were generally supportive of the changes which the SSRO has made.
Following consideration of consultation responses we have published updated reporting guidance on:
- Contract reports
- Supplier reports
- DefCARS functionality
To read more about how SSRO have responded to what stakeholders said during the consultation period, see the consultation response. An explanation of the changes made across the three guidance documents are explained in Appendix 1 of the consultation response document.
Application of the guidance
This new and updated pricing and reporting guidance will apply to qualifying defence contracts and qualifying sub-contracts entered into or amended from Thursday 10th October 2024.
To assist stakeholders in understanding the guidance changes, SSRO have included in the consultation response document a table that shows where the previous guidance text has been revised.
Queries relating to the guidance should be addressed to helpdesk@ssro.gov.uk
