SSRO launches enhanced pricing guidance for non-competitive defence contracts

The Single Source Regulations Office (SSRO) has unveiled new and improved pricing guidance, set to take effect from April 1, 2024. This update aims to enhance the regulatory framework surrounding non-competitive defence contracts, introducing greater choice, flexibility, and simplicity.

The key features of the guidance include:

1. Alternative Pricing Methods: Non-competitive defence contracts can now be priced using alternative methods, such as referencing competitive markets. This streamlines the procurement process, making it more efficient.

2. Flexibility Through Componentisation: Contracts can be divided into different components or parts, each with its own profit rate and price. This componentisation allows for better reflection of risk-sharing between the Ministry of Defence (MOD) and defence contractors.

3. Streamlined Contract Profit Rate Calculation: The guidance simplifies the calculation of the contract profit rate by reducing the existing six-step process to a more concise format.

These changes result from industry and MOD input gathered through workshops, meetings, and responses to working papers issued in May 2023.

Corresponding alterations to reporting requirements will accompany the pricing guidance, set to be enforced from April 1, 2024. A consultation on these changes is scheduled from mid-February, with details expected in mid-March.

The SSRO is providing support through Teach Ins and Q&A sessions to help contractors navigate the updated regulatory framework, understand the key changes in pricing and reporting provisions, and seek assistance for specific contract queries.

John Russell, SSRO Chief Executive, emphasised the significant improvements to the regulatory framework, offering greater flexibility and speed in contracting for both the MOD and the defence industry. The SSRO aims to support stakeholders through the changes, remaining independent while providing practical assistance.

The consultation on the guidance changes is open until April 17, 2024, welcoming feedback from stakeholders. The SSRO plans to incorporate this feedback in later updates to the guidance, scheduled for later in 2024, ensuring continuous improvement based on practical experiences in applying the new guidance and legislation.