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Single Source Contracts

Volume 607: debated on Monday 14 March 2016

I am today announcing that I have set the baseline profit rate for single source defence contracts at 8.95% in line with the rate recommended by the Single Source Regulations Office (SSRO). I am asking the SSRO further to develop the methodology used to calculate the baseline profit rate over the next year.

I am also announcing revised capital servicing rates as recommended by the SSRO at Table 1 below. These rates will come into effect from 1 April 2016.

Table 1: SSRO’s Recommended Rates agreed by the Secretary of State for Defence


2015 Rates

2016 Rates

Baseline Profit Rate (BPR) (% on contract cost)



Fixed Capital Servicing Rate (% on Fixed Capital employment)



Working Capital Servicing Rate (% on positive Working Capital employment)



Working Capital Servicing Rate (% on negative Working Capital)



Taxpayers can be confident that we are getting value for money for single source defence contracts as we deliver our £178 billion equipment programme. This profit rate provides a fair return to industry while delivering savings that will be reinvested in defence.