MINISTER OF DEFENCE PROCUREMENT ON BEHALF OF SECRETARY OF STATE FOR DEFENCE
THE IMPLEMENTATION FROM 1 APRIL 2024 OF NEW PROFIT RATES FOR SINGLE SOURCE DEFENCE CONTRACTS
As required by Section 19(4) of the Defence Reform Act 2014, the Minister of Defence Procurement on behalf of the Secretary for Defence has announced that he has set the baseline profit rate for single source defence contracts at 8.24%, based on an underlying rate of 8.09%. This is in line with the rate recommended by the Single Source Regulations Office (SSRO). It will come into effect from 1 April 2024.
This includes accepting the SSRO’s recommendation on the Capital Servicing Allowance and SSRO funding adjustment to be applied to single source defence contracts. These will also come into effect from 1 April 2024.
The SSRO have removed the SSRO funding adjustment which will be abolished as part of the changes to the regulations currently before Parliament. This will contribute to the simplification of the procurement process.
TABLE 1: SSRO’S RECOMMENDED RATES AGREED BY MINDP ON BEHALF OF THE SECRETARY OF STATE FOR DEFENCE
| Element | 2023/24 rates | 2024/25 rates |
| Baseline Profit Rate (BPR) (% on contract cost) | 8.29% | 8.24% |
| 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) | 0.038% | 0% |
| Fixed Capital Servicing Rate (% on Fixed Capital employed) | 2.9% | 3.26% |
| Working Capital Servicing Rate (% on positive Working Capital employed) | 1.67% | 3.1% |
| Working Capital Servicing Rate (% on negative Working Capital employed) | 0.51% | 1.61% |
| SSRO Funding Adjustment | 0.038% | N/A |