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Single Defence Contracts: Baseline Profit Rate 2019-20

Volume 656: debated on Friday 15 March 2019

I am today announcing that I have set the baseline profit rate for single source defence contracts at 7.63%, in line with the rate recommended by the Single Source Regulations Office (SSRO). I have 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 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 2019.

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

Element

2018 rates

2019 rates

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

6.81%

7.63%

Fixed Capital Servicing Rate (% on Fixed Capital employed)

4.38%

3.98%

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

1.21%

1.18%

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

0.53%

0.53%

SSRO Funding Adjustment

-0.024%

-0.042%

[HCWS1417]