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Written statement made by Earl Howe (Conservative) on Friday, 15 March 2019 in the House of Lords, on behalf of the Ministry of Defence.

Baseline Profit Rate 2019-20 for Single Source Defence Contracts

My right hon. Friend the Secretary of State for Defence (Mr Gavin Williamson) has made the following Written Ministerial Statement.

I am today announcing that I have set the baseline profit rate for single source defence contracts at 7.63%, in line with the rate recommended by the Single Source Regulations Office (SSRO). I have accepted the methodology used by the SSRO to calculate this figure.

I am also announcing new Capital Servicing Rates and an SSRO funding adjustment as recommended by the SSRO, which can be found at Table 1 below. These rates have been published in the London Gazette, as required by the Defence Reform Act 2014.

All of these new rates will come into effect from 1st April 2019.

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

Element

2018 rates

2019 rates

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

6.81%

7.63%

Fixed Capital Servicing Rate (% on Fixed Capital employed)

4.38%

3.98%

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

1.21%

1.18%

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

0.53%

0.53%

SSRO Funding Adjustment

-0.024%

-0.042%

Secondary information

Type
Written statement
Reference
HLWS1386 
Session
2017-19
Subjects
Defence Finance Procurement Profits Prices Single Source Regulations Office
Contains statistics
Yes
Link
View this Written statement on www.parliament.uk