Helping defence contractors fulfil their new statutory reporting obligations
We have released a consultation that explains forthcoming changes to our reporting guidance and to the Defence Contract Analysis and Reporting System (DefCARS).
These changes will allow contractors to meet their reporting obligations in response to the new reporting requirements in the Single Source Contract Regulations, which come into force on 1 April 2024 (1).
We are consulting stakeholders, ahead of formally issuing the new reporting guidance for consideration in March.
The guidance covers the new reporting implications following the introduction of:
- Alternative pricing methods for contracts, which will see non-competitive defence contracts able to be priced in new ways. For example, an item could be priced by reference to competitive markets: simplifying and speeding up procurement.
- More flexibility and transparency through broadening the ability for a contract to be split into different components or parts, each with its own profit rate and price (known as componentisation). This will allow contract prices to better reflect the risk-sharing between the MOD and defence contractors.
- Rationalisation of how the contract profit rate is to be calculated, removing two steps from the existing six step process, and simplifying the agreement of contract profit rates.
The consultation issued today takes account of industry and MOD views shared in workshops and meetings, and in their responses to our working papers issued in 2023.
Akhlaq Shah, Head of Compliance and Reporting, said:
“The MOD is bringing considerable changes to the existing regulatory framework to increase transparency within the regime, including new provisions that update the information which contractors are required to report on.
We will support industry and the MOD in the implementation of these reporting changes and facilitate efficient reporting through our Defence Contract Analysis and Reporting System (DefCARS).
Our engagement on the reporting guidance will be ongoing while contractors make use of the guidance and as a result we will be providing practical support as stakeholders navigate the new legislation. You will see us on the ground working closely with our stakeholders to ensure that these reporting changes are understood and to support contractors so that reports are provided in a timely manner. We are keen to hear your feedback, which will help us to better support you.”
The consultation is available here.
The consultation runs until 28 June 2024 and we welcome your views.
To discuss any aspect please contact Akhlaq Shah (akhlaq.shah@ssro.gov.uk or 020 3589 4550).
The SSRO is hosting a series of Teach In and Q&A sessions for stakeholders on reporting topics. Dates and registration details are provided on the webpages linked below and have also been sent directly to stakeholders.
The guidance will be further updated later in 2024 - to incorporate feedback from this consultation. The early practical experience of both the MOD and defence industry contractors as they apply the new guidance and the legislation will also feed into this updated guidance.
Notes to Editors:
(1) The consultation has been released following the changes introduced through Schedule 10 of the Procurement Act, which builds on the Secretary of State for Defence’s periodic review of the Defence Reform Act 2014. The guidance also draws on the draft Single Source Contract (Amendment) Regulations 2024, which were laid for consideration in Parliament on 22 January 2024.
(2) Implementation timeline:
| 24 January 2024 | Consultation opened on new and updated pricing guidance. |
| 19 February 2024 | Consultation opens on changes in reporting requirements |
| 20 February 2024 | Pricing Guidance Teach In and Q&A session. Topics include: the new features of pricing contracts, including what componentisation means and the seven new alternative pricing methods. |
| 12 March 2024 | Stakeholder Teach In and Q&A session on reporting guidance consultation. Topics include: a focus on the new legislation; SSRO’s new and updated reporting guidance; and changes to DefCARS. |
| 25 March 2024 | Details of reporting guidance changes issued |
| 1 April 2024 | New and updated pricing and reporting guidance comes into force |
| 10 April 2024 | Pricing Guidance Teach In and Q&A session. Topics include: the changes to existing features of pricing contracts, including the cost risk adjustment and POCO; and responding to areas of interest raised at the 20 February Teach In / subsequent feedback from stakeholders. |
| 17 April 2024 | Consultation on new and updated pricing guidance closes |
| 8 May 2024 | Stakeholder Teach In and Q&A session on reporting guidance consultation. Topics include: responding to areas of interest raised at 12 March Teach In / feedback from stakeholders; and clarification of any aspects of the guidance. |
| 28 June 2024 | Consultation on changes in reporting requirements closes |
| Later in 2024 (currently forecast Oct 24) | Updates to pricing and reporting guidance, incorporating consultation feedback and guidance user experience |
Due to the short time period between the legislation being presented to Parliament and when it comes into force in April 2024, the guidance will take effect during the early part of the consultation period. Given the scale of the changes to the regulatory framework, we want to ensure stakeholders have a familiarisation period with the guidance.
After the close of the consultation, the SSRO will consider the responses it receives and make updates to the guidance later in 2024. This is to minimise disruption and ensure that the SSRO is doing all it can to make it easy for those who use the framework to familiarise themselves, understand, comply with and realise the benefits from the changes.