Defence procurement reform: The single source contract regulations

The Ministry of Defence spends billions each year buying new equipment and supporting existing equipment for the armed forces.

A significant portion of the budget is spent on contracts that are not competed. Most commonly this is for national security reasons, or because there is only one specialist supplier available. Over a third (39%) of contracts placed by the Ministry of Defence were awarded without competition in 2022-23. These are known as single source contracts.

Creation of a framework to regulate non-competed contracts

The framework for regulating single source defence contracts was created in the Defence Reform Act 2014. The detailed regulations are set out in secondary legislation, in the Single Source Contract Regulations 2014. The Single Source Regulations Office oversees the single source contract framework.

When do the regulations apply?

The regulations apply when a defence contract with a value of over £5 million is awarded without being competed, unless it is specifically excluded from the regulations. Exclusions include government to government sales.

Reviewing and amending the regulatory framework

The framework is subject to statutory review.

The government reviewed the regulations most recently in 2022 and published its proposed reforms in a command paper: defence and security industrial strategy: reform of the Single Source Contract Regulations. This set out a series of reforms based around three main themes:

• providing more choice and flexibility
• speeding up and simplifying how the framework is used
• stimulating innovation and exploiting technology

The MOD then published the reaction from stakeholders, including the SSRO and industry, and its own response in May 2022.

Legislative changes

The proposed reforms required legislative action:

• The Procurement Act 2023 amended the Defence Reform Act 2014.
• The Single Source Contract (Amendment) Regulations 2024 (SI 2024/420) amended the 2014 regulations.

These changes came into effect in April 2024. The legal firm Bird & Bird describe the changes as constituting “the most significant reform to the single source regime since it was originally introduced a decade ago”.

Further amendments to the regulations are expected to be forthcoming.

This briefing briefly explains what single source procurement is, the regulatory framework, which contracts come under the framework and legislative changes. It was first published in June 2022 and has been updated to reflect the legislative changes.

Further reading

• Commons Library briefing Defence procurement reform provides an overview of the regulatory framework for defence contracts, both competed and non-competed.
• Defence procurement: The Procurement Act 2023 and the Defence and Security Public Contracts Regulations 2011 – explains how the Procurement Act 2023 replaces the regulations that oversee competitive defence procurement