Guidance

4. Reporting and DefCARS queries

Updated 31 October 2024

4.1 For the purposes of reporting sub-contracts within contract reports, is there a difference between a sub-contract and a purchase order?

Published April 2023. Updated May 2024.

The Regulations require that contract reports contain certain information about sub-contracts. Where a sub-contract has a value of £1 million or greater, the QDC or QSC contractor must report information about those sub-contracts. Where sub-contracts have been assessed as having a value of £15 million or greater and have not been assessed as a QSC, information about the assessment must be provided. Table 22 in the contract reporting guidance explains these requirements in the context of the initial reports. The same legal requirements of contract formation apply to a sub-contract. Broadly, a contract will be considered a sub-contract where the sub-contractor is performing some of the primary contractor’s obligations under the primary contract. In the context of the regulatory framework we might, for example, expect to see a sub-contract being reported where a primary contractor under a QDC enters into a contract with another party (the sub-contractor) through which it is agreed that the sub-contractor will perform some of the primary contractor’s obligations under the QDC. Equally, a sub-contractor with a QSC may enter into a further sub-contract under which the further sub-contractor performs some of the sub-contractor’s obligations under the QSC. In principle, there is no reason a PO could not be a sub-contract. This response is not to be taken as legal advice about contractual matters. Parties should seek their own legal advice where it proves difficult to determine whether a PO is a contract or sub-contract.

4.2 Where a QDC or QSC is contracted in a currency other than GBP, how are contract costs to be converted into GBP for calculating the value of the contract and for reporting purposes?

Published July 2023. Updated May 2024.

Regulation 5 provides that, in determining the contract value, the contracting authority must “convert any amounts payable under the contract in a foreign currency to sterling, using a rate consistent with the contracting authority’s policies or where no such policies exist, a rate of exchange derived on a just and reasonable basis”. For QDCs, the relevant contracting authority will be the MOD. For first-tier QSCs, the relevant contracting authority will be the primary contractor.

Regulation 22(8) states that “Except where otherwise provided in this Part, any reference to money in a report must be expressed in sterling”.

Should the QDC or QSC be contracted in a currency other than sterling, the contracting authority’s exchange rate should be used (the MOD’s for QDCs and the primary contractor’s for QSCs) for the purposes of reporting. The contractor should use a rate consistent with the contracting authority’s policies or where no such policies exist, a rate of exchange derived on a just and reasonable basis.

Paragraph 3.18 of the SSRO’s contract reporting guidance confirms the approach explained above.

4.3 Should contract amendments between the end of a quarterly period and the Quarterly Contract Report (QCR) due date for that period be reflected in that report?

Published July 2023

No. A QCR should reflect the contractual position as at the end of the calendar quarter to which the report relates. Any contract amendments that occur after the end of the calendar quarter should be reflected in the following QCR or Contract Completion Report. For example, where the relevant calendar quarter ended on 30 June, and an amendment took place on 15 July, a QCR submitted on 31 July (in relation to the calendar quarter ending 30 June) would not reflect this amendment, but it would be reported in the next one submitted by 31 October.

4.4 Can the submission deadline for the initial reports be extended?

Published July 2023

The Single Source Contract Regulations 2014 require the first three reports to be submitted within one month of the contract being entered into (Regulation 22(10)(c)(ii)) or, for a QDC by amendment, within one month after the date of the amendment (Regulation 22(10)(c)(i)). The Regulations do not provide for the suspension of, or extension to, submission deadlines in relation to any contract reports.

4.5 Should more than one DPS template be used where a QDC or QSC provides for goods or services that is applicable to more than one DPS template category?

Published July 2023

Only one category of DPS template should be submitted per QDC or QSC. Where a contract provides for goods, works or services that can be reflected in more than one of the 16 DPS templates, the DPS template that covers the largest proportion of goods, works or services being provided under the QDC or QSC should be used. Any items not covered by the template should be reflected in the “other” sections of the DPS. The SSRO Helpdesk can provide guidance on selecting an appropriate DPS template for specific QDCs or QSCs.

4.6 Where a report requires information to be given based on ‘annual profiles’, does this mean the financial year of the contract entered into date or the financial year prior to the contract entered into date?

Published July 2023

Regulation 22(5) requires annual profiles to be “of financial years from that in which the contract was entered into until that in which the contract completion date falls or is expected to fall”. The annual profile therefore begins from the financial year in which the contract was entered into. For example, if the contract was entered into on 5 May 2020 and the contract completion date is 30 June 2023, an annual profile would be required for the years from 2020/21 to 2023/24.

Chapter 3 of the SSRO’s contract reporting guidance assists contractors in identifying the correct contract entered into date and contract completion date.

4.7 If a Target Cost Incentive Fee (TCIF) or final price adjustment (FPA) is not being applied, is the contractor still required to submit a forecast of that adjustment as required in update reports?

Published February 2024. Updated May 2024.

A TCIF adjustment or FPA may be applied to any qualifying contract or one or more components of it that meets the relevant conditions in the Regulations.

The requirement to report a forecast of any TCIF adjustment or FPA which the contractor expects will be made applies to the Quarterly Contract Report, lower value Interim Contract Report and the Contract Completion Report. The contractor should report a value of 0 in the relevant field if it does not anticipate that one of these adjustments will be applied to the price of the contract. Contractors may provide an explanation as to why no adjustment is anticipated to apply – this might include, for example, if certain profit or loss thresholds are not met, or if the pricing method is out of scope of the legislative provisions for that adjustment. If the forecast amount of either adjustment is not zero, such that the contractor anticipates the conditions will be met for an adjustment to be applied, then that forecast must be included in the reports set out above.

The SSRO will consider a review of its reporting guidance to better reflect this position.

4.8 Can I give DefCARS access to a temporary employee who is working for our contracting company?

Published February 2024

Contractors must ensure that they comply with the DefCARS Shared Service Security Policy v6 and DefCARS Security Operating Procedures v8 and that access is given only to those individuals who should have it - which may include temporary employees. Those individuals should be informed that they are subject to Schedule 5 of the Act, which imposes criminal liability for disclosure of certain information which is not permitted. All DefCARS Administration Users must review the accounts of those who have access to the system on a regular basis, ensuring that only authorised persons can access the data. 

Where a contractor is uncertain of whether they should grant access to someone working for them, they may instead consider downloading the information which they have drafted in DefCARS and sharing a copy with the individual. The usual protections around sharing information, and any applicable information security classification, should be considered when adopting this approach.

4.9 What is the QDC workbook and why do I have to complete it if I am providing data in DefCARS?

Published February 2024

As part of the tendering process for a single source contract, the MOD may issue a QDC workbook to contractors to complete as supporting documentation for the price which is agreed between the contractor and the contracting authority. The workbook will contain details of the Allowable Costs of the contract, the contract profit rate which is applied, as well as other pricing information which the MOD requires. The workbook is issued under the MOD’s Commercial Policy and does not form part of the reporting requirements set out in the Regulations or the SSRO’s reporting guidance. Some information contained in the workbook is also required in the initial set of reports which a contractor must submit and can be populated within DefCARS if it is consistent with the price payable under the contract. The contractor may wish to attach the agreed QDC workbook to the submission of their initial reports, although there will likely be information contained in the workbook which is not required.

4.10 If a sub-contract is enabling multiple QDCs do I report the full price of the sub-contract or the proportion of the price which relates to the QDC being reported?

Published February 2024

Regulation 26(6)(k)(viii) requires a contractor, in their Quarterly Contract Report, to provide the (actual or estimated) price payable under the relevant sub-contract to the QDC or QSC. Where the sub-contract enables the performance of more than one QDC or QSC, our reporting guidance provides that it should be reported in respect of each QDC or QSC that it enables.

The Regulations do not limit the information a contractor is to report only to the portion of the sub-contract which enables the performance of the QDC or QSC. That means that, where the contractor is required to report the “price payable under the sub-contract”, that is the entire price payable – notwithstanding that the same price payable under the sub-contract may be reported against the other QDCs or QSCs which are enabled by the sub-contract. The contractor may want to explain in their report what other QDCs or QSCs a particular sub-contract is providing goods, works or services for.

4.11 Can the MOD agree that some of my statutory reports are not required?

Published February 2024

The MOD cannot agree that the submission of mandated contract or supplier reports are not required. The contractor needs to determine which contract reports it is required to submit, which is based on the value and duration of the contract. The contractor also needs to determine whether they have met the £50 million on-going contract condition (OCC) and are therefore required to submit strategic supplier reports. Additionally, overhead reports will become due for any Qualifying Business Unit where the value of work being undertaken by that unit for any qualifying contract is at least £10 million. Although the MOD cannot agree that supplier reports are not required in circumstances where the legislation mandates them, it may exempt a contract from counting towards the OCC.

4.12 Do Interim Contract Report (ICR) requirements apply retrospectively if the duration of a contract is extended as a result of an amendment?

Published February 2024. Updated May 2024.

ICR reporting obligations do not apply retrospectively in the event a contract or component of a contract is amended. If, for example, a contract or component of a contract is extended and the duration of the extension affects what would have been past reporting requirements, past ICRs which would have been due do not automatically become required at a new time of agreement. This is not the case, however, where a contractor fails to submit an ICR of which they were unaware owing to a failure to update their Contract Reporting Plan (CRP) to reflect a new time of agreement and a new contract or component completion date. The outstanding ICR must still be submitted with information as at the relevant due date, notwithstanding that the CPR has not been updated.

The requirements are that, in the case of agreement with the Secretary of State, the first reporting date must be no more than five years following the ‘time of agreement’ for QDCs or QSCs with a value of less than £50 million and no more than three years for QDCs or QSCs with a value of £50 million or more. Subsequent dates for submission of ICRs before the expected contract completion date will be as agreed between the primary contractor and the Secretary of State and in any case no more than five years (<£50 million) or three years (≥£50 million) after the previous reporting date.

Where there is no agreement, contract level reports are more frequent as prescribed by the Regulations. Additionally, where there is no agreement with the MOD, any component level information must also be submitted at the same frequency as contract level submissions.

Regulation 2(1) defines the ‘time of agreement’ (for contracts other than QDCs by amendment) as either the date a QDC or QSC or component of a qualifying contract is entered into or, if the price of the contract or component is subsequently re-determined on amendment, the date of that re-determination. In this case the contract price has been re-determined and so the time of agreement has changed.

4.13 How does a contractor report Variation of Price clauses in their contract?

Published July 2024

A Variation of Price (VoP) clause is a term in a contract which can result in an adjustment to the price of a contract and is most often used to manage the risk of cost inflation for the contractor. VoP clauses, if used, will be applied in contracts using the fixed default pricing method.

Where a contract price for a contract or component has been determined in accordance with Regulation 10, a contractor must report in a contract pricing statement their facts, assumptions and calculations which are relevant to each element of the allowable costs. VoP clauses which when triggered adjust the contract price in a specified way, would seem relevant facts to be reported.

In the Defence Contract Analysis and Reporting System (DefCARS) the Contract Initiation Report includes an inflation assumptions page. Paragraphs 4.74 to 4.76 of the SSRO’s contract reporting guidance provides advice on completing this page. It may be appropriate for the contractor to report details of their VoP clause on this page, or they may wish to attach a file to the page if the information about these clauses is not set out in the data structure provided on the inflation assumptions page.

4.14 Can a QSC be delivered by two contractors and what are the implications for reporting?

Published July 2024

It is possible that a qualifying sub-contract could be awarded to two or more contractors to jointly deliver the contract. However, to date this approach has not been common. Where there are two contractors delivering a sub-contract jointly, they may decide that one of them will take responsibility for submitting the statutory reports for the contract. This would require one contractor to provide information to the other contractor to ensure the reports include all the required information. For commercial sensitivity reasons this arrangement may not be possible, in which case both contractors would submit their respective ‘parts’ of the statutory reports in DefCARS and the SSRO would present the information analytically as one contract. Each contractor would not be able to see the other contractor’s information in DefCARS.

4.15 What are the implications of the transitional provisions on reporting?

Published July 2024

The new regulations apply prospectively to existing contracts in the same way that they apply to new contracts in their entirety, except that in a limited number of cases the new regulations have a delayed or altered effect for existing contracts (those entered into before 1 April 2024). These cases are listed in Regulation 44 of the Single Source Contract (Amendment) Regulations 2024 and are referred to as the “transitional provisions”.

For reporting purposes, the transitional provisions have implications for the submission of the Contract Pricing Statement, Contract Reporting Plan, Quarterly Contract Report and Interim Contract Report. They are:

• For contracts entered into, or any amendment agreed to such a contract, before 1 April 2024, the amendments made to regulation 23 (the Contract Pricing Statement) and regulation 24 (the Contract Reporting Plan) do not apply. Instead, contractors are required to report in accordance with the earlier regulations, meaning in broad terms that those reports need not cover the amendments relating to components or alternative pricing.
• For contracts entered into before 1 April 2024, the amendments made to regulation 26 (the Quarterly Contract Report) do not apply until 1 April 2025. Until that time, contractors are instead required to report in accordance with the earlier regulations, meaning in broad terms that the report need not cover the amendments relating to components or alternative pricing.
• For contracts entered into before 1 April 2024, the requirement to report cost recovery base information under regulation 27(4A)(e) and (g)(ii) within the Interim Contract Report does not apply.

Where a contract has been entered into before 1 April 2024 and components are present (for example, where two different pricing methods were used to price the contract) the contractor would, under the transitional provisions, not need to submit an on-demand Contract Pricing Statement or Contract Reporting Plan to report the component information. However, the SSRO recommends that the contractor does submit an on-demand Contract Reporting Plan, completing the contract entered into and completion dates in the ‘contract’ page as well as the reporting profile in the ‘reporting plan’ page, so it is clear what component information is due to be submitted and the associated due date for each individual component.

4.16 In which Quarterly Contract Report (QCR) do I report my first set of component level information, the one due at the end of April 2024 or the end of July 2024?

Published October 2024

The transitional provisions (regulation 44 of the Single Source Contract (Amendment) Regulations 2024) provide that the new reporting requirements for QCRs under regulation 26 (including those in relation to components) do not apply to contracts entered into before 1 April 2024 until 1 April 2025. This means that the first QCR which would be required to contain component level information would be the one due by the end of July 2025, if applicable.

For qualifying contracts entered into on 1 April 2024, the first QCR submission would be due at the end of October 2024 (covering the period from 1 April to 30 September 2024).

For qualifying contracts entered into after 1 April 2024, the first QCR submission will be due with reference to the initial reporting date.

4.17 Can obligations be added to a component after the component completion date?

Published October 2024

Regulation 4(1A) provides that the “component completion date” means:

1. the date on which the contractor completes all obligations under that component which entitle it to final payment in respect of that component; or
2. if that component is terminated, but any other part of the contract is not terminated, before the date in (a) above, the date on which the component is terminated.

If the component has completed in either of these circumstances then any new obligations would not form part of the completed component, but instead would either be a new component or form part of an existing component that has not yet completed.

4.18 If the value of my contract is below £50m and so I am not required to submit QCRs, does the creation/addition of a component with a value over £50m mean that I now need to provide component level information on a quarterly basis?

Published October 2024

No. Regulation 26(5) confirms that a QCR (which includes component level QCR information) is not required for contracts with a value of less than £50 million. Since the contract value assessment is not re-visited when new components are added, the contract value will remain unchanged and QCR information would not be required to be reported at either contract or component level.

4.19 What happens if I report incorrectly?

Published October 2024

Contractors are expected to understand the Regulations which apply to their contracts. The SSRO can provide support to assist contractors to develop their understanding, but it is the contracting parties who must meet their legal obligations and ensure that reports are submitted on time and correct. The MOD has the power to undertake enforcement action for breaches of the reporting requirements.

In relation to the reporting of component level information only, the MOD has confirmed that in order to allow contractors time for familiarisation with the new Regulations that came into force on 1 April 2024, it does not intend to take enforcement action in respect of breaches of those reporting requirements which occur before April 2025. 

4.20 Is there a data structure I should follow when submitting a Contract Costs Statement?

Published October 2024

The Contract Costs Statement (CCS) is a free-form report with no defined data structure provided in DefCARS. This allows the contractor and the MOD to discuss the data which should be included in the report to meet the reporting requirements of regulation 29 and to allow a final price adjustment to be calculated where one applies. It also recognises the diversity of contractors and contracts entered into by the MOD. CCS reports are usually submitted in Excel format to allow calculations to be understood.