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.
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.