Allowable costs guidance (version 7.2)
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 Allowable Costs guidance is issued alongside an update to the SSRO’s baseline profit and its adjustment guidance 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 8.2
- Guidance on alternative pricing types – Version 1.2
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 1 April 2025.
Independent and authoritative advice on any matter related to the interpretation and application of the regulatory framework for single source defence contracts can be provided through the SSRO’s non-referral advice service. Alternatively, referrals to the SSRO can be made for an opinion or determination on such matters. Guidance queries, non-referral advice requests and referral requests should be addressed to helpdesk@ssro.gov.uk.