# SSRO Recommended Profit Rate 2015

### SSRO Recommended Profit Rate 2015

Single Source Regulations Office baseline profit rate and capital servicing allowance for 2015 recommendation accepted by the Defence Secretary.

### Secretary of State for Defence accepts SSRO’s recommended profit rate

Single Source Regulations Office baseline profit rate and capital servicing allowance for 2015 recommendation accepted by the Defence Secretary.

The Secretary of State for Defence has accepted the baseline profit rate and capital servicing allowance for 2015 recommended by the Single Source Regulations Office (SSRO) [1]. The baseline profit rate is paid to defence contractors by the MOD in single source defence contracts.

The new baseline profit rate for 2015, which is lower than that currently in force, will come into effect from 1 April 2015. The SSRO recommended a baseline profit rate of 10.60% for 2015, a 0.10% reduction on the rate for 2014. The 2015 baseline profit rate as a percentage of cost of production in 2013/14 is 9.88%, down from 10.92% in the previous year.

The baseline profit rate is common across all single source contracts and is the starting point for determining the contract profit rate to be applied in the pricing formula, after a series of adjustments have been made. A full description of this process can be found in the SSRO’s 2015 Contract profit rate.

The table below shows the changes to the 2015 contract profit rate:

Element 2014 rates 2015 rates
Baseline Profit Rate (BPR) (% on contract cost) 10.70% 10.60%
Fixed Capital Servicing Allowance (% on Fixed Capital employed 6.20% 5.94%
Working Capital Servicing Allowance (% on positive Working Capital employed) 2.07% 1.72%
Working Capital Servicing Allowance (% on negative Working Capital employed 1.25% 1.03%

The details of the rate for 2015 have been published in the London Gazette.

In addition to recommending the baseline profit rate, Section 18(1) of the Defence Reform Act 2014 specifies that the SSRO may issue guidance in relation to any of the steps set out in Section 17(2), and that contractors and the MOD must have regard to this guidance, unless there are good reasons not to.

The adjustments to the baseline profit rate, on which the SSRO is soon to publish guidance, are: