HANSARD
Single Source Defence Contracts 2023-24: Baseline Profit Rate
- I am today announcing that I have set the baseline profit rate for single source defence contracts at 8.29%, in line with the rate recommended by the Single Source Regulations Office (SSRO). This is a decrease of 0.02 percentage points from 2022-23. I have accepted the methodology used by the SSRO to calculate these figures. The “underlying rate” has risen 0.25 percentage points from 8.19% to 8.44%.Last year, I removed financial year 2020-21 from the calculation of the profit rate to reduce the long-term effect of covid on our suppliers’ profit. The SSRO have taken the same approach this year. A full explanation of their methodology is published on their website.I am also announcing the 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 2023.Table 1: Recommended Rates agreed by the Secretary of State for Defence
Element
2022 rates
2023 rates
Baseline profit rate (BPR) (% on contract cost)
8.31%
8.29%
Baseline profit rate to apply to contracts between the Secretary of State and a company wholly owned by the UK Government and where both parties agree (% on contract cost)
0.046%
0.038%
Fixed capital servicing rate (% on fixed capital employed)
3.27%
2.9%
Working capital servicing rate (% on positive working capital employed)
1.33%
1.67%
Working capital servicing rate (% on negative working capital employed)
0.65%
0.51%
SSRO funding adjustment
0.046%
0.038%
[HCWS632]