Qualifying defence contracts (QDCs)
Section 14 of the Defence Reform Act 2014 (the Act), together with the Single Source Contract Regulations 2014 (the Regulations), set out the criteria for a contract to be a QDC, which includes that the contract is single source and exceeds a value threshold of £5 million. The Ministry of Defence (MOD), or someone acting as the contracting authority on behalf of the MOD (for example a contracting company), must assess the value of the contract and regulation 5 describes how the value is assessed. Once assessed as a qualifying contract the relevant requirements of the regulatory framework will apply to the contract. A primary contractor delivering a QDC will assess whether any of their sub-contracts are qualifying sub-contracts (QSCs) where the value threshold is £25 million. The SSRO provides specific guidance for contractors who have entered into contracts which are QSCs.
Pricing contracts
The Act and the Regulations include provisions for how qualifying defence contracts (QDCs) and qualifying sub-contracts (QSCs) are to be priced. These provisions place controls on the pricing of these contracts to ensure that good value for money is obtained in government expenditure on these contracts and that contractors are paid a fair and reasonable price.
The price of a QDC or QSC must be determined in accordance with the default pricing methods (by applying the pricing formula) or alternative pricing methods. We provide guidance on determining rates of profit and allowable costs when applying the price formula, and guidance on the use of alternative pricing methods that were introduced on 1 April 2024.
Our guidance aims to help contractors and the MOD to agree the price of QDCs or QSCs in a way that is consistent with the Act and the Regulations.
All guidance provided by the SSRO can be found at: Guidance provided by the SSRO.
Queries relating to the guidance should be sent to helpdesk@ssro.gov.uk. More complex queries on applying the Regulations and guidance in specific circumstances may be dealt with through our non-referral advice service, or, where permitted, through a formal referral for an opinion or determination.
Statutory reports
The statutory requirements for contract and supplier reporting are established through the Act and the Regulations 2014. The Defence Contract Analysis and Reporting System (DefCARS) is an online, web-enabled system which facilitates submission of statutory reports by contractors to the SSRO and the MOD.
There are two types of reports which are submitted to the MOD and the SSRO. Contractors with qualifying contracts submit a set of reports for those contracts. Certain contractors who have contracts above a financial threshold of £50 million are also required to submit supplier reports about their costs.
Find out more about reporting.
Reviewing report submissions
Once a report is submitted, it will be reviewed by the MOD and the SSRO. The SSRO’s compliance methodology explains our approach to reviewing reports. Any issues identified by either party will be raised in DefCARS and will identify the relevant area of the report. The contractor can provide comments in response to the identified issue or submit a correction of the original report.
We have built in validation checks to DefCARS to assist contractors in ensuring that any potential issues with the quality of their reports are flagged before they submit their report. We provide support to contractors to help them understand why issues have been raised on reports. Contractors should contact the SSRO helpdesk if they are unclear on why issues have been raised.
We publish regular compliance information to help contractors understand how compliance with reporting requirements and how the timeliness and the quality of data provided in the reports can be improved.
The SSRO publishes guidance to assist the MOD in determining the amount of any financial penalty it issues for non-compliance.