Single source baseline profit rate methodology

The SSRO is today launching a consultation on the approach to the 2023/24 baseline profit rate assessment.

During the 2022/23 rates recommendation, the SSRO applied its established methodology, giving particular attention to the effects of the COVID-19 pandemic. The SSRO’s recommendation used a four-year average of the underlying annual rates, rather than the usual three. This was in response to the heightened variability in the data which we found during the period of the pandemic.

In determining the rates for 2022/23, the Secretary of State went further than the SSRO to remove the effects of COVID-19 by excluding data from the most recent year. The baseline profit rate and the capital servicing rates remained at the same level as in 2021/22. In a written statement to Parliament, the Minister for Defence Procurement said:

I have asked the SSRO to engage with industry and my officials in returning (next year) to a market based benchmark based on their established methodology that reflects my intention to remove the impact of Covid-19.[1]

This consultation aims to support delivery of the Secretary of State’s intent, and seeks stakeholder input on proposals for the 2023/24 rates assessment, that the SSRO will consider before deciding its approach.

The objective for the 2023/24 rates assessment is, as in past years, to recommend predictable stable rates that support value for money for the government in its expenditure on qualifying defence contracts and fair and reasonable prices for contractors.

This consultation is open to all interested persons. We particularly welcome comments from individuals or organisations with an interest in single source defence procurement and ensuring that good value for money is obtained in government expenditure on qualifying contracts and that the prices paid under these contracts are fair and reasonable.

The consultation runs until 5.00 pm Friday 16 August 2022. Written responses should be sent:

• by email to: consultations@ssro.gov.uk (preferred),

• by post to: Baseline profit rate consultation responses, SSRO, Finlaison House, 15-17 Furnival Street, London, EC4A 1AB,

• by telephone including arranging an appointment to speak to the SSRO about the consultation: 020 3771 4767

[1] https://questions-statements.parliament.uk/written-statements/detail/2022-03-28/hcws726