GovWire

The SSRO has published new and updated pricing guidance, and invites your views. The guidance comes into force on 1 April 2024 (1).

The guidance includes the introduction of:

• Alternative pricing methods for contracts, which will see non-competitive defence contracts able to be priced in new ways. For example, an item could 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 will allow contract prices to better reflect risk-sharing between the MOD and defence contractors.
• Rationalisation of how the contract profit rate is to be calculated, removing two steps from the existing six step process and simplifying the agreement of contract profit rates.

The guidance issued today takes account of industry and MOD views shared in workshops and meetings, and in their responses to our working papers issued in May 2023.

There will be corresponding changes in reporting requirements, which will also come into force from 1 April 2024. We plan to consult on these from mid-February and issue details of the reporting guidance changes from mid-March (2).

The SSRO will host a series of stakeholder seminars and workshops on pricing and reporting topics. Dates and registration details will be provided on the webpages linked to below and also sent directly to stakeholders in the near future.

John Russell, SSRO Chief Executive, said:

The MOD is bringing considerable changes to the existing regulatory framework, including new provisions that can be used in single source defence contracting. These changes bring greater flexibility and speed for the MOD and the defence industry in agreeing contracts.

We will support industry, the MOD and its delivery organisations through these changes. We are updating our guidance and providing practical support. You will see us on the ground working closely with you; remaining independent but using our skills to support you in using the guidance we have developed.

We have published our guidance now to give you time to become familiar with it ahead of it going live in April. We are keen to hear your feedback, which will help us to further improve the guidance.

The consultation issued today is available here:

• Consultation on guidance changes arising from the review of legislation.

The consultation seeks views on the following new and updated pricing guidance:

• Guidance on the Alternative Pricing of contracts.
• Allowable Costs guidance (version 7).
• Baseline profit rate and its adjustment (version 8).

The consultation is open until 17 April 2024 and we welcome your views. If you would like to discuss any aspect of the guidance please contact David Goodwin (david.goodwin@ssro.gov.uk or 020 3771 4790).

Later in 2024 we will update the guidance to incorporate feedback from this consultation and will benefit from the early practical experience of the MOD and defence industry contractors as they apply the new guidance and the legislation.

Notes to Editors:

(1) The guidance has been released following the changes introduced through Schedule 10 of the Procurement Act, which builds on the Secretary of State for Defences periodic review of the Defence Reform Act 2014. The guidance also draws on the draft Single Source Contract (Amendment) Regulations 2024, which were laid for consideration in Parliament on 22 January 2024.

(2) Implementation timeline:

Due to the short time period between the legislation being presented to Parliament and when it comes into force in April 2024, the guidance will take effect during the later part of the consultation period. Given the scale of the changes to the regulatory framework, we want to ensure stakeholders have the longest possible familiarisation period with the guidance.

After the close of the consultation, the SSRO will consider the responses it receives and make updates to the guidance later in 2024. This is to minimise disruption and ensure that the SSRO is doing all it can to make it easy for those who use the framework to understand, comply with and realise the b

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