Guidance

Guidance on the baseline profit rate and its adjustment (version 8.2)

The SSRO’s guidance on adjustments to the baseline profit rate is statutory guidance to which the Ministry of Defence and its contractors must have regard when determining the contract profit rate for qualifying defence contracts.

• From: Single Source Regulations Office
• Published: 14 March 2025

Documents

Guidance on the baseline profit rate and its adjustment (version 8.2)

PDF, 1.75 MB, 34 pages

This file may not be suitable for users of assistive technology.

Request an accessible format.

If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email enquiries@ssro.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

Details

The contract profit rate for single source defence contracts and subcontracts is determined through a clear and transparent four-step process which helps to ensure that value for money is obtained for taxpayers on qualifying contracts and that contractors are paid a fair and reasonable price under those contracts. This guidance explains how to apply those four steps.

The four-step contract profit rate applies to contracts that use the pricing formula and sits alongside a range of alternative and flexible approaches to pricing contracts. Together these support the MOD and industry to price contracts appropriately with speed and simplicity.

This guidance has been updated to reflect the 2025/26 baseline profit rate, capital servicing rates and the government owned contractor rates. It has also been updated to reflect minor amendments.

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:

1. Allowable costs guidance – Version 7.2.
2. Guidance on alternative pricing types – Version 1.2

Those with an interest in the regulatory framework should familiarise themselves with all of these documents. We are always interested to hear the experiences 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.

Published 14 March 2025