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 DefenceElement | 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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