My right hon. Friend, the Secretary of State for Defence (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 6.81%, in line with the rate recommended by the Single Source Regulations Office (SSRO). I have also 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 also been published in the London Gazette, as required by the Defence Reform Act 2014.
All of these new rates will come into effect from 1 April 2018.
Table 1: Recommended Rates agreed by the Secretary of State for Defence
Element | 2017 rates | 2018 rates |
Baseline Profit Rate (BPR) (% on contract cost) | 7.46% | 6.81% |
Fixed Capital Servicing Rate (% on Fixed Capital employed) | 4.84% | 4.38% |
Working Capital Servicing Rate (% on positive Working Capital employed) | 1.37% | 1.21% |
Working Capital Servicing Rate (% on negative Working Capital employed) | 0.59% | 0.53% |
SSRO Funding Adjustment | -0.025% | -0.024% |
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