The Secretary of State for Defence (Sir Michael Fallon)
I am today announcing that I have set the baseline profit rate for single source defence contracts at 7.46%, in line with the rate recommended by the Single Source Regulations Office (SSRO). I have also accepted the methodology used by the SSRO to calculate this figure. Element 2016 rates 2017 rates Baseline profit rate (BPR) (% on contract cost) 8.95% 7.46% Fixed capital servicing rate (% on fixed capital employed) 5.08% 4.84% Working capital servicing rate (% on positive working capital employed) 1.40% 1.37% Working capital servicing rate (% on negative working capital employed) 0.73% 0.59% SSRO funding adjustment n/a -0.025%
I am also announcing new capital servicing rates and an SSRO funding adjustment as recommended by the SSRO, which can be found in table 1 below. These rates have also been published in the London Gazette, as required by the Defence Reform Act 2014, and will come into effect from 1 April 2017.
Taxpayers can be confident that we are getting value for money as our defence budget rises by 0.5% above inflation each year of this Parliament and we deliver our £178 billion equipment programme. The defence sector is important for our prosperity, supporting highly skilled jobs, and this rate provides a fair return comparable with that in other international markets.
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