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 permitted alternative 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 2026/27 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 guidance for allowable costs, on alternative pricing and covering the final price adjustment, the latest versions of which should be read in conjunction with this document:
- Allowable costs guidance – Version 7.3.
- Guidance on alternative pricing types – Version 1.3
- Final price adjustment – Version 1.1
These documents have been reissued to reflect updates made in response to feedback and discussions with guidance users over the past year. A summary of changes is available here.
Those with an interest in the regulatory framework should familiarise themselves with these documents. The SSRO is always interested to hear about the experiences of users of its guidance to help inform further improvements.
This guidance applies to qualifying defence contracts and qualifying sub-contracts entered into or amended on and after 1 April 2026.
The SSRO publishes its Responses to Commonly Asked Questions on a quarterly basis. These will be added to the guidance periodically where appropriate.
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 to either contracting party or both 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.
