The single source regulatory framework offers a range of flexible approaches to pricing contracts. Understanding the options available and how to apply them allows the Ministry of Defence (MOD) and industry to price contracts with speed and simplicity, ensuring that value for money is obtained on qualifying contracts and that contractors are paid a fair and reasonable price under those contracts.
To support this, the SSRO issues guidance on the application of the “alternative pricing” methods, which became available to use from 1 April 2024. These methods offer an alternative to using the default pricing formula, where that method may not be best suited to the circumstances of the contract.
This guidance has been updated to reflect the changes to the incentive adjustment that were announced by the Minister of Defence Readiness and Industry and come into force on the 5 June 2026. Written statements – Reforms to the Single Source Contract Regulations. The increase in the maximum incentive adjustment for a qualifying defence contract from two to ten percentage points is now reflected in the guidance on contract level incentive adjustment available as part of the Aggregation of Components alternative pricing method. The maximum incentive adjustments for qualifying subcontracts remains at two percentage points.
The SSRO also issues pricing guidance on allowable costs, contract profit rates, contract amendments and the final price adjustment, the latest versions of which should be read in conjunction with this document):
- Guidance on the baseline profit rate and its adjustment – version 8.4
- Guidance on contract amendments Version 1
- Final price adjustment – Version 1.1
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 5 June 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.
