Skip to main content

Baseline Profit Rate 2018-19

Volume 637: debated on Thursday 15 March 2018

I am today announcing that I have set the baseline profit rate for single source defence contracts at 6.81%, 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.

I am also announcing new capital servicing rates and an SSRO funding adjustment as recommended by the SSRO, which can be found at table 1 below. These rates have also 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 2018.

Table 1: Recommended Rates agreed by the Secretary of State for Defence.

Element

2017 rates

2018 rates

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

7.46%

6.81%

Fixed Capital Servicing Rate (% on Fixed Capital employed)

4.84%

4.38%

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

1.37%

1.21%

Working Capital Servicing Rate (% on negative Working Capital employed)

0.59%

0.53%

SSRO Funding Adjustment

-0.025%

-0.024%

[HCWS550]