Where cost over- or underruns occur on qualifying defence contracts this can lead to excess profit or losses arising for the contractor. The FPA allows these profits and losses to be shared between the contracting parties rather than falling entirely to the contractor or the Ministry of Defence (MOD). The SSRO has published new guidance to help contracting parties understand the final price adjustment, when it should be used and how it should be applied.
The Procurement Act 2023 granted powers to the SSRO to issue guidance in relation to the application or interpretation of any area of the law governing qualifying defence contracts. The FPA is the first topic on which the SSRO is issuing guidance under these powers, in response to both MOD and industry feedback that it is an area requiring additional support and based on our experience of providing advice frequently on this topic.
This guidance helps parties to understand and navigate the FPA process; addresses common questions; and enables swifter and easier resolution of issues for contracting parties.
In developing the guidance, the SSRO has sought to improve the user experience by:
- Providing more real-world scenarios to assist users’ understanding and help with known common issues.
- Reducing the need to cross reference between multiple documents, such as the guidance and the Regulations.
- Improving signposting for how to access further information or assistance.
The guidance helps contracting parties to understand:
- when a contract may be eligible for an FPA;
- the statutory timelines for an FPA, including when notification must be made to the other party;
- how to calculate the amount of an FPA correctly; and
- how to resolve common issues and where to get help.
This updated version of the guidance on final price adjustment is issued alongside an update 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 allowable costs – version 7.3
- 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.
