Defence

Single Defence Contracts: Baseline Profit Rate 2019-20

1. 

   The Secretary of State for Defence (Gavin Williamson)

   ConservativeStone, Great Wyrley and Penkridge
   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 1 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%

   [HCWS1417]