Guidance on the application of the final price adjustment (FPA)
Guidance on the final price adjustment, when it should be used and the methodology for calculating the adjustment.
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Where cost over- or underruns occur on qualifying defence contracts this can lead to excess profit or losses arising for the contractor. The FPA allows these profits and losses to be shared between the contracting parties rather than falling entirely to the contractor or the MOD. The Single Source Regulations Office has published new guidance to help contracting parties understand the final price adjustment, when it should be used and how it should be applied.
The Procurement Act 2023 granted new powers to the SSRO to issue guidance in relation to the application or interpretation of any area of the law governing qualifying defence contracts. The FPA is the first topic on which the SSRO is issuing guidance under these new powers, in response to both MOD and industry feedback that it is an area requiring additional support and based on our experience of providing advice frequently on this topic.
This FPA guidance is focused on helping parties to understand and navigate the FPA process; addressing common questions; and enabling swifter and easier resolution of issues for contracting parties.
The SSRO has taken a new approach to how the guidance is structured, which includes:
- Providing more real-world scenarios to assist users’ understanding and help with known common issues.
- Reducing the need to cross reference between multiple documents, such as the guidance and the Regulations.
- Improving signposting for how to access further information or assistance.
The guidance helps contracting parties to understand:
- when a contract may be eligible for an FPA;
- the statutory timelines for an FPA, including when notification must be made to the other party;
- how to calculate the amount of an FPA correctly; and
- how to resolve common issues and where to get help.
This guidance takes account of stakeholder feedback as part of our consultation which ran between 3 October 2024 and 14 November 2024. We thank all respondents for their input. We are always interested to hear about the experience of users of our guidance to help us to understand how it may be further improved.
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 matters relating to an FPA.
The SSRO publishes its Responses to Commonly Asked Questions on a quarterly basis, which may include more recent questions and answers regarding the FPA. These will be added to this guidance periodically, where appropriate.