Allowable costs guidance (version 7.1)
Statutory guidance to which the Ministry of Defence and its contractors must have regard when determining whether costs are allowable in qualifying defence contracts.
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For a cost to be allowable in the price of a single source contract, it must meet the requirements of being appropriate, attributable to the contract and reasonable in the circumstances. It is important that parties understand these requirements and how to judge whether they have been met and ensures that that contractors are paid a fair and reasonable price as well as obtaining good value for money for taxpayers.
The SSRO has issued updated guidance to assist both the MOD and contractors to understand and apply the requirements of allowable costs when determining the price of single source contracts.
This updated version of the guidance has been amended based on stakeholder feedback to our consultation, which ran from January to April 2024. The SSRO’s response to stakeholder feedback can be found here.
This document is issued alongside an update to the SSRO’s allowable costs and alternative pricing guidance, the latest versions of which should be read in conjunction with this document:
- Guidance on the baseline profit rate and its adjustment – Version 8.1
- Guidance on alternative pricing types – Version 1.1
We encourage those with an interest in the regulatory framework to familiarise themselves with these documents. We are always interested to hear the experience of users of our guidance to help us to understand how it may be further improved.
This guidance applies to qualifying defence contracts and qualifying sub-contracts entered into or amended on and after 10 October 2024. Queries relating to the guidance should be addressed to helpdesk@ssro.gov.uk. Referrals to the SSRO can be made for an opinion or determination on such matters.