Consultation outcome

Pricing guidance review 2018: Consultation on changes for 2019/20

From:: Single Source Regulations Office
Published: 15 October 2018
Last updated: 31 January 2019 — See all updates

Read the full outcome

Summary of consultation responses

PDF, 476 KB, 20 pages

Detail of outcome

During 2018 the SSRO reviewed three areas of its existing statutory guidance on Allowable Costs and adjustments to the baseline profit rate. These were:

the requirements of Allowable Costs (the AAR test)
research and development costs; and
capital servicing adjustment.

We engaged with stakeholders on these aspects of the guidance during summer 2018 and consulted publicly on proposed guidance changes from October to December 2018. We received 13 responses to our consultation, which we have considered in finalising the changes to guidance published here. The summary of consultation responses available above explains how the feedback provided by stakeholders has informed the final guidance in these areas.

The revised guidance will apply to qualifying defence contracts and qualifying sub-contracts entered into on and after 1 April 2019, replacing the existing guidance in those areas. We encourage the MOD and prospective contractors to familiarise themselves with the revised guidance.

We will incorporate the changes into the SSRO’s existing guidance on Allowable Costs and adjustments to the baseline profit rate and re-publish those documents in full on our website in March 2019.

Original consultation

Consultation description

This consultation is open to anyone with an interest in ensuring that good value for money is obtained in government expenditure on QDCs and QSCs and that the prices paid are fair and reasonable to contractors. We particularly welcome comments from individuals or organisations with an interest in (non-competitive) defence procurement.

The current pricing guidance was published in spring 2018. The SSRO aims to keep its pricing guidance current and relevant and consult, as required, with stakeholders to provide additional clarity and certainty for those involved in single source defence contracting. The consultation focuses on proposed changes related to three areas reviewed in 2018:

the requirements of Allowable Costs;
research and development costs; and
the capital servicing adjustment.

To assist stakeholders in understanding the proposed changes, the consultation document clearly shows where guidance text has been revised, deleted or added, and the purpose of the changes proposed. The proposals for change have been informed by group and bilateral discussions with stakeholders and by the responses we received to working papers on the topics issued in summer 2018 to the SSRO’s Operational Working Group, whose members are from the Ministry of Defence, ADS Group Ltd and individual defence contractors. We have published a summary of the working papers and the responses we received to them alongside the consultation document.

The consultation runs until 7 December 2018.

Completed response forms should be sent: a) by email to [email protected] (preferred); or b) by post to SSRO, Finlaison House, 15-17 Furnival Street, London, EC4A 1AB.

The SSRO also welcomes the opportunity to meet with stakeholders to discuss the proposals during the consultation period. If you wish to arrange such a meeting, please contact us at the earliest opportunity via [email protected].

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