Statement on Baseline Profit Rate 2020-21 for Single Source Defence Contracts

Saturday, 14 March 2020 08:34

Written statement by Ben Wallace (Secretary of State for Defence) I am today announcing that I have set the baseline profit rate for single source defence contracts at 8.22%, in line with the rate recommended by the Single Source Regulations Office (SSRO). The baseline profit rate is calculated on a three year rolling average of underlying profit rates. The underlying profit rate decreased from 8.50% for 2019-20 to...Request free trial

Written statement by Ben Wallace (Secretary of State for Defence)

I am today announcing that I have set the baseline profit rate for single source defence contracts at 8.22%, in line with the rate recommended by the Single Source Regulations Office (SSRO). The baseline profit rate is calculated on a three year rolling average of underlying profit rates. The underlying profit rate decreased from 8.50% for 2019-20 to 8.23% for 2020-21. I have accepted the methodology used by the SSRO to calculate these figures.

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 2020.

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

Element	2019 rates	2020 rates
Baseline Profit Rate (BPR) (% on contract cost)	7.63%	8.22%
Fixed Capital Servicing Rate (% on Fixed Capital employed)	3.98%	3.66%
Working Capital Servicing Rate (% on positive Working Capital employed)	1.18%	1.22%
Working Capital Servicing Rate (% on negative Working Capital employed)	0.53%	0.61%
SSRO Funding Adjustment	-0.042%	-0.052%