New guidance on the final price adjustment
We are consulting on new guidance on the Final Price adjustment (FPA), which allows excess profits or losses arising on a qualifying defence contract or qualifying sub-contract to be shared, rather than falling entirely to the contractor or the MOD.
Where cost over- or underruns occur on non-competitive defence contracts this can lead to excess profits or loss arising for the contractor. The FPA allows these profit and losses to be shared between the contracting parties rather than falling entirely to the contractor or the MOD. The Single Source Regulations Office is seeking views on its new guidance for contractors and the MOD on the FPA. This guidance will help contracting parties understand what the final price adjustment is, and when and how it can be applied.
The Procurement Act 2023 granted new powers to the SSRO to issue guidance in relation to the application or interpretation of any area of the law governing single source defence contracts: the SSRO is no longer confined to issuing guidance only on specific areas. The FPA is the first topic on which the SSRO is issuing guidance under these new powers, in response to MOD and industry feedback that it is an area requiring additional support and our first-hand experience providing advice on the topic. We frequently receive queries from contracting parties regarding the FPA, and the guidance is focused on helping parties to understand and navigate the process; addressing common questions; and enabling swifter and easier resolution of issues for both parties.
The SSRO has taken a new approach to developing this guidance by:
- Providing more real-world scenarios to assist user’s understanding and help with known common issues.
- Reducing the need to cross reference between multiple documents, such as the guidance and the Regulations.
- Improving signposting for how to access further information or assistance if you have further questions or need additional clarification.
The guidance will help contracting parties to understand:
- when a contract may be eligible for an FPA;
- the statutory timelines for an FPA, including when notification must be made to the other party;
- how calculate the amount of an FPA correctly; and
- how to resolve common issues and where to get help.
The consultation runs until 5.00 pm Thursday 14 November 2024. Written responses should be sent to:
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consultations@ssro.gov.uk (preferred); or
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FPA Guidance consultation responses, SSRO, 100 Parliament Street, London, SW1A 2BQ.
If you wish to discuss the guidance or consultation, please contact us on 020 3771 4767.