2018 contract profit rate
2018/19 baseline profit rate, capital servicing rates and SSRO funding adjustment
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Under the Defence Reform Act 2014 (the Act), the Single Source Regulations Office (SSRO) is required annually to review the figures used to determine the contract profit rate for pricing qualifying defence contracts (QDCs) and qualifying sub-contracts (QSCs). Section 19(2) of the Act requires us to provide the Secretary of State with an assessment of the appropriate baseline profit rate, SSRO funding adjustment and capital servicing rates for that year.
The Secretary of State for Defence announced on 15 March 2018 that, for 2018/19, the baseline profit rate for qualifying single source defence contracts will be 6.81 per cent. The profit rate was decided following a recommendation from the SSRO, and we welcome the Secretary of State’s decision to accept our recommendation.
On 15 March 2018 we reissued our methodology for the baseline profit rate and capital servicing rates, and funding adjustment, which were recommended to the Secretary of State in January this year. The publication updates dates and references where necessary, and provides additional transparency on the validation of this year’s comparator groups. The practical application of methodology remains unchanged on last year.
As in previous years, the SSRO has published information on how we identify the comparable companies, how this data is analysed and information to aid those who may wish to scrutinise or replicate the approach taken. We are confident that the methodology is correct, and that our stakeholders will consider it to be robust.