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Written statement made by Michael Fallon (Conservative) on Monday, 14 March 2016 in the House of Commons, on behalf of the Ministry of Defence.

Single Source Contracts

I am today announcing that I have set the baseline profit rate for single source defence contracts at 8.95% in line with the rate recommended by the Single Source Regulations Office (SSRO). I am asking the SSRO further to develop the methodology used to calculate the baseline profit rate over the next year.

I am also announcing revised Capital Servicing Rates as recommended by the SSRO at Table 1 below. These rates will come into effect from 1st April 2016.

Table 1: SSRO’s Recommended Rates agreed by the Secretary of State for Defence

Element

2015 rates

2016 rates

Baseline Profit Rate (BPR) (% on contract cost)

10.6%

8.95%

Fixed Capital Servicing Rate (% on Fixed Capital employed)

5.94%

5.08%

Working Capital Servicing Rate (% on positive Working Capital employed)

1.72%

1.40%

Working Capital Servicing Rate (% on negative Working Capital employed)

1.03%

0.74%

Taxpayers can be confident that we are getting value for money for single source defence contracts as we deliver our £178 billion equipment programme. This profit rate provides a fair return to industry while delivering savings that will be reinvested in defence.

Secondary information

Type
Written statement
Reference
HCWS618 
Session
2015-16
Subjects
Defence Procurement Profits Prices Single Source Regulations Office
Contains statistics
Yes
Link
View this Written statement on www.parliament.uk