For a cost to be allowable in the price of a single source contract, it must meet the requirements of being appropriate, attributable to the contract and reasonable in the circumstances. It is important that parties understand these requirements and how to judge whether they have been met. The guidance helps to ensure that contractors are paid a fair and reasonable price as well as obtaining good value for money for taxpayers.
The SSRO has issued updated guidance to assist both the MOD and contractors to understand and apply the requirements of allowable costs when determining the price of single source contracts.
This updated version of the Allowable Costs guidance is issued alongside updates to the following SSRO guidance (the latest versions of which should be read in conjunction with this document):
- Guidance on the baseline profit rate and its adjustment – version 8.3
- Guidance on the alternative pricing of contracts – version 1.3
Anyone with an interest in the regulatory framework may wish to review 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.
