The Single Source Regulations Office (SSRO) – a non-departmental public body overseeing non-competitive procurement – has updated changes to its pricing guidance, due to come into force from 1 April 2024.
Ultimately, this will expedite the pace at which the UK Ministry of Defence (MoD) acquires new and innovative systems from single source contractors in the commerical sector.
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“Currently the regulations provide for qualifying contracts to be priced only by applying a specified price formula which has proved in some circumstances to be inflexible, as exemptions may only be granted with the direct approval of the Secretary of State and are time-consuming for all parties,” an MoD spokesperson explained.
With the new changes, “it will now be possible, in appropriate circumstances, to set aside the pricing formula, and use specified alternative methods to price a qualifying contract,” the MoD added.
“This will have the effect of enabling fairer and more appropriate pricing, so bringing more single source contracts under the protection of the regulations.”
In addition, the MoD points out that more flexibility and transparency will be achieved by broadening the ability for a contract to be split into different components or parts. Each part will be allocated its own profit rate and price (known as ‘componentisation’).
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By GlobalDataThis will allow contract prices to better reflect risk-sharing between the MoD and defence contractors: a common complaint raised by lesser known, emerging suppliers offering unique capability solutions.
The British military and their suppliers too often find themselves debating how far either side must risk spending on demonstrating a prospective concept before the MoD takes the plunge in securing a contract.
UK procurement reform
Since the Defence Command Paper was published in July last year, the MoD began its campaign to deliver military capabilities much faster than it has done in previous years. The document asserted:
‘….we must buy simpler platforms more quickly and design into them the capacity to upgrade at speed…’ and ‘[we] must force ourselves to accept solutions that are good enough…’
At the time of the policy was released, the British security think tank, the Royal United Services Institute, suggested that further detail and clearer plans will be required to measure progress towards achieving these goals. One such detail of its new, fast-moving delivery process will involve institutional changes such as scrapping the price formula.
