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% |
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