2023 contract profit rate

Under the Defence Reform Act 2014, the Single Source Regulations Office (SSRO) is required to provide the Secretary of State each year with an assessment of the appropriate baseline profit rate, SSRO funding adjustment and capital servicing rates used to determine the contract profit rate for qualifying defence contracts (QDCs) and qualifying sub-contracts (QSCs).

The Secretary of State for Defence has announced his determination of the rates and we welcome the Secretary of State’s decision to accept our assessment. These rates will apply to qualifying contracts entered into from 1 April 2023 and can be found in The Gazette and in the SSRO’s guidance on the baseline profit rate and its adjustment.

This year’s assessment uses the SSRO’s established methodology and permanently excludes company profit data for the financial year 2020/21 from the benchmark. This exclusion covers the period where we found there to be an adverse impact on the data used in the methodology as a result of the pandemic. We consider that this is the best way to remove the impact of COVID-19. The inclusion of more recent data is supported by evidence of a return to pre-pandemic rates of profit in our benchmark data and wider macroeconomic indicators. The baseline profit rate is the starting point for the application of the six steps, which allows for a range of contract profit rates.

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