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Metasums offers consultancy and training to companies bidding and performing UK or US government defence and security contracts

New UK laws that govern pricing and reporting of qualifying single source defence contracts

On 17th December 2014 the single source pricing regulations and Part 2 of the Defence Reform Act came into force.

During the first quarter of 2015 the SSRO issue hurried supporting statutory guidance. Irrespective of its quality or fitness for purpose statutory guidance is required to be followed unless there are sound and agreed reasons to set it aside. Contractors need to urgently acquire the necessary understanding, training and make necessary changes to their governance and other procedures. Statutory guidance issued by the SSRO is available for download from the SSRO website (link). Statutory guidance comprises Allowable Costs (link); Reporting Templates and User Guides ; Defined Pricing Structure; Calculating the Contract Profit Rate,  and Penalties (link). Regulations are available to view (link). Part 2 (Single Source Contracts) of the Defence Reform Act (link) contains 51 sections; the supporting regulations are contained in 11 Parts and comprise some 65 regulations (link). The new law makes significant and complex changes to pricing, government access rights and reporting arrangements of higher value Single Source UK Ministry of Defence contracts and sub-contracts awarded after implementation of the regulations. These regulations and statutory guidance apply, irrespectively of location, to single source prime contractors and their supply chain sub-contractors. Not all however is straightforward e.g. the application of the Act and regulations to qualifying subcontracts and the consequential rights and responsibilities between the contracting parties looks to have been particularly inadequately considered and underdeveloped.

Pricing and reporting of new contracts which are not subject to regulations has also altered

New 810 series DEFCONs are being introduced, some existing DEFCONs are being retired, and some existing DEFCONs are being modified. These DEFCONs should not be regarded as fit for the majority of contracts in the majority of circumstances. Each should be fully considered and negotiated accordingly. Often rights and responsibilities between single source subcontractors and their customers’ will need to be addressed through special terms within the subcontracts. Pricing arrangements applicable to pricing of changes to new competitive contracts will also need careful consideration

UK and US pricing frameworks

Whilst there have always been high level similarities between the pricing and reporting requirements of UK and US government contract systems there are also very many differences, some of which are significant and potentially very damaging to ignore. Whilst a good understanding of the UK or US nation’s controls and governance system will assist the understanding of the other nation’s requirements, it can easily lead to too great an expectation of similarity. US Federal Acquisition Regulation (FAR) together with the Department of Defense FAR Supplement (DFAR) is applied to prime contractors and their sub-contractor supply chain undertaking US Government contracts.

Compliance with regulations and other requirements over pricing, contract changes, invoicing, cost accounting and reporting is essential to business performance. Metasums is there to support your company though provision of consultancy and training.

Company specific courses are offered in addition to those of a more general nature which are run in partnership with A|D|S. Details of the next A|D|S MOD Pricing workshop can be found here, and US government training can be provided by Metasums. For details of bespoke courses contact me