I would like to find out about the SSRO and the regulatory framework

Question

Accepted Answer

About the SSRO and the regulatory framework

The Single Source Regulations Office (SSRO) is an executive non-departmental public body, sponsored by the Ministry of Defence (MOD).

We oversee the regulatory framework for non-competitive defence contracts, which are certain contracts awarded in the absence of a competitive process. This non-competitive / single source route is used by the MOD in a number of circumstances when there is only one potential supplier (for example building nuclear submarines) or when equipment or a service is needed urgently (for example to supply munitions for operational campaigns). Contracts which become subject to the regulatory framework are referred to as qualifying defence contracts (QDC) or qualifying sub-contracts (QSC).

The framework places controls on the pricing of qualifying contracts and requires transparency on the part of defence contractors. It was put in place to ensure value for money in public expenditure and fair prices for industry in relation to the £9bn per year that the MOD spends on non-competitive defence procurement.

The SSRO’s role includes:

ensuring value for money in public expenditure while ensuring fair prices are paid to industry;
assisting those subject to the regulatory framework in understanding and applying the legislation by issuing statutory guidance in relation to certain aspects of it;
giving opinions and making determinations on specified matters relating to qualifying contracts or proposed qualifying contracts, which may clarify how the legislation is to be interpreted or applied; and
keeping under review the provision made by the relevant legislation and, as it considers appropriate, recommending changes to the Secretary of State.

Our statutory functions

The SSRO’s functions include giving guidance on each of these aspects of the regulatory framework. Our guidance plays an important role in supporting the MOD and contractors to apply the regulatory framework and realise the benefits that the Act and Regulations seek to achieve.

Guidance	Publishing documents to: - give clarity on which costs can be charged in a contract: Allowable Costs guidance. - be used when parties determine the profit rate in a qualifying contract: Contract Profit Rate guidance. - help contractors submit their statutory reporting requirements and help them to use our Defence Contract Analysis and Reporting System (DefCARS): DefCARS and Reporting guidance. - show where the Secretary of State can issue penalties on a contractor for failing to comply with their obligations under the Act and Regulations: penalties guidance.
Referrals	Where there is a dispute between parties in relation to a qualifying contract, we can be asked to help resolve the matter by issuing an opinion or giving a determination.
Contract Profit Rate	Recommending the appropriate baseline profit rate and capital servicing rates for use in calculating contract profit rates annually to the Secretary of State.
Review	Keeping the regulatory framework under review and making recommendations for changes to the Secretary of State.
Compliance	Keeping under review the extent to which reporting requirements are being complied with.
Analysis	Analysing reported data on request for the Secretary of State.
Records	Keeping an up-to-date record of qualifying contracts and receiving statutory reports from defence contractors under the regulatory framework.

To contact the SSRO with a query, call 020 3771 4785 (9am to 5pm Monday to Friday) or email helpdesk@ssro.gov.uk

Our structure

The SSRO is an organisation of 38 people. We have a Chair and a Board of five Non-Executive Members, a Chief Executive Officer and a Chief Regulatory Officer. The senior leadership team leads on our operational and corporate activities.

Our Governance

Corporate aims

Four areas of strategic focus are incorporated into our work programme and our engagement with stakeholders.

Relevance: Our work will be focused on the most important strategic issues. We will provide insights, guidance and information that is useful to industry and the MOD and contributes to meaningful improvements in defence procurement.
Visibility: We will communicate our work, and the value we bring to the sector and defence procurement outcomes.
Accessibility: We will ensure that our services and guidance are easy to engage with.
Trust: We will build our stakeholders’ confidence in the SSRO through the skills, knowledge and experience we bring to bear.

I have my first qualifying contract – what do I do?

Assessing a contract to determine if it is a Qualifying Defence Contract (QDC)

Section 14 of the Defence Reform Act 2014, together with the Single Source Contract Regulations 2014, set out the criteria for a contract to be a QDC, which includes that the contract is single source and exceeds a value threshold of £5 million . The Ministry of Defence (MOD), or someone acting as the contracting authority on behalf of the MOD (for example a contracting company), must assess the value of the contract and regulation 5 describes how the value is assessed. Once assessed as a qualifying contract the relevant requirements of the regulatory framework will apply to the contract.

It is good practice for the contracting authority to notify the contractor that they have a QDC, as some reporting requirements are determined by the value assessment which only the contracting authority will otherwise know.

If a contract is a QDC, then there are legal obligations on the contractor which they need to fulfil for example the contract should be priced using the pricing methods described in the Regulations and contract reports must be provided. The contracting authority and the contractor need to have regard to SSRO guidance when pricing a QDC. A lack of awareness that a contract is a QDC does not prevent the MOD from taking enforcement action against the contractor in the event they fail to comply with their legal obligations. If a contractor is not clear whether they have a QDC they should speak to the person in the MOD managing their contractor or to the SSRO. The SSRO must maintain a record of all QDCs and their duration and report regularly on compliance with specified elements of the regulatory framework to the MOD.

Getting familiar with the regulatory framework

The SSRO offers on-boarding meetings to contractors who have or will have a QDC or QSC for the first time. These meetings are designed to help contractors understand the regulations, their obligations under them and how to prepare and submit reports using the Defence Contract Analysis and Reporting system (DefCARS). The meetings include a demonstration of DefCARS and use a standard slide pack (available on request ahead of the on-boarding meeting). Companies who already have qualifying contracts can also request on-boarding meetings to further develop their understanding or to induct new team members who may lack previous experience with single source procurement. To request a meeting or initial information about the SSRO and the regulatory framework, please email helpdesk@ssro.gov.uk.

It is important for contractors to understand their reporting obligations at an early stage, because the first contract reports are due for submission within one month of a qualifying contract being entered into. DefCARS enables contractors to develop draft reports for potential contracts in advance of contract signature and discuss them with the MOD before the contracts are entered into and reports formally submitted.

Please see our separate pages on:

Qualifying Sub-Contract (QSC) assessment notifications

A QDC may have sub-contracts which are also awarded on a single source basis. Where these sub-contracts have an assessed value of £25 million or greater and the notification requirements have been followed, they will be qualifying sub-contracts (QSCs) and will be subject to the regulatory framework. A QSC may also have other QSCs associated with it where further sub-contracting takes place. Contractors with QSCs need to be notified by the QDC or QSC holder that they have assessed their sub-contract as a QSC. Further information on the assessment and notification process, including notification templates, is available on the SSRO support page of our website.