Single Source Defence Contracts 2023-24: Baseline Profit Rate
(Limited Text - Ministerial Extracts only)
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The Secretary of State for Defence (Mr Ben Wallace)
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%. 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%
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.
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