The SSRO has updated its pricing guidance following reforms announced by the Ministry of Defence (MOD) and invites your views. The guidance comes into effect on 5 June 2026.
The Minister for Defence Readiness and Industry announced reforms to the Single Source Contract Regulations on 14 May, in line with the Defence Industrial Strategy and Strategic Defence Review, to closely link supplier profit to delivery performance. By increasing the potential profit available for achieving faster delivery and greater productivity, the changes aim to drive innovation and accelerate capability to the frontline, maximising value from defence spending.
Under the revised framework, the maximum incentive adjustment for qualifying defence contracts is increasing from two percentage points to ten percentage points to incentivise improved contractor performance. New statutory safeguards have also been introduced to govern the design and application of incentive arrangements, alongside clarification of the SSRO’s role in providing opinions on pricing matters, including the incentive adjustment.
The SSRO has issued updated guidance to support the MOD and contractors in applying the new framework in practice. The guidance provides a principles-based approach to designing and implementing incentive adjustments when agreeing contract profit rates for qualifying defence contracts. The SSRO has also updated its wider suite of pricing and reporting guidance to reflect the amended Regulations, including clarifications on contract-level incentive adjustments, reporting requirements and the revised maximum adjustment.
The guidance issued today is informed by the SSRO’s engagement with industry and the MOD. The SSRO’s guidance plays a vital role in ensuring consistent, transparent and proportionate use of the incentive adjustment so that the intended benefits of the reforms can be realised. Alongside the MOD, the SSRO will be keeping under review the impact of these reforms to ensure that they deliver the public value intended.
Ben Johnson, SSRO Head of Pricing and Economics, said:
“The Minister for Defence Readiness and Industry has announced reforms to the existing regulatory framework, the first of which relates to the incentive adjustment to closely link supplier profit to delivery performance. The SSRO is working closely with the MOD and industry to support the implementation of these reforms, drawing on its experience of how the regulatory framework operates in practice. We will support both industry and the MOD by updating our guidance and providing practical support. We are keen to hear your feedback, which will help us to further improve the guidance.”
- View the consultation document.
- View the updated Contract Profit guidance v8.4
- View the updated Alternative Pricing guidance v1.4
- View the updated FPA calculator v1.2
The consultation is open until 24 August 2026 and we welcome your views. If you would like to discuss any aspect of the guidance please contact the SSRO helpdesk at helpdesk@ssro.gov.uk or call 020 3771 4785 (9am to 5pm Monday to Friday, excluding UK bank holidays).
Later in 2026 we will update the guidance to incorporate feedback from this consultation alongside the early practical experience of the MOD and industry contractors. The SSRO will continue to work closely with the MOD and industry to monitor the impact of the reforms and support their implementation.