Single Source Regulatory Framework: Consultation on further amendments to support the delivery of the Defence and Security Industrial Strategy

Background

The regulatory framework for single source defence contracts

The regulatory framework for non-competitively procured defence contracts was brought into effect by Part 2 (Single source contracts) of the Defence Reform Act 2014 and the Single Source Contract Regulations 2014 (SSCRs). The single source defence contract framework has three principal components: the SSCRs, the statutory guidance, and an executive non-departmental public body to manage and monitor the framework, known as the Single Source Regulations Office.

The SSCRs were introduced by the Ministry of Defence (MOD) to address long-standing issues with the large sums of money spent each year on non-competitive defence procurement - they are designed to provide value for money while ensuring fair prices are paid to industry.

Command Paper

On 4 April 2022, the MOD published a Command Paper entitled ‘Defence and Security Industrial Strategy: reform of the Single Source Contract Regulations’ setting out a series of proposed reforms to the SSCRs to support the delivery of the Defence and Security Industrial Strategy. The Command Paper included 30 proposals for reforming the single source procurement regime relating to, for example, the improvement of choice and flexibility in the contracting approach by ensuring the SSCRs can be used in a wider range of sectors and contract types, enabling the regime to be used to speed up and simplify the acquisition process, and the adaptation of SSCRs to ensure they support innovation and exploitation of technology.

Consultation of 1 November 2023

On 1 November 2023, the MOD published an open consultation under the heading ‘Defence and Security Industrial Strategy: Consultation on amendments to the Single Source Contract Regulations’ - this relates to the reforms referred to above.

The consultation of 1 November states that “Implementation of these proposals will require a combination of primary and secondary legislation as well as changes to the statutory guidance published by the Single Source Regulations Office and internal MOD commercial guidance and practice”. As explained in the consultation document, the reference here to “primary legislation” is to amendments to the Defence Reform Act 2014 effected through Schedule 10 (Single source defence contracts) of the Procurement Act 2023. We will address these in further detail in a separate webinar/materials in the coming weeks and months.

As for the secondary legislation, two tranches are planned by the MOD to make the amendments to the SSCRs. The first tranche of this secondary legislation will deliver the most urgent reforms required in support of the delivery of the Defence and Security Industrial Strategy, including providing more flexibility in the ways contracts can be priced (the MOD is planning to pass these changes through the Parliamentary process in time for them to come into force in April 2024). The second tranche of the secondary legislation will deliver the reporting and more technical changes proposed in the Command Paper.

It is the first tranche of the secondary legislation which is the subject of the consultation of 1 November, which closes at noon on 1 December 2023. In terms of content, the consultation builds on the proposals in the Command Paper, but also sets out the detailed changes that will need to be made to the SSCRs in order to implement such proposals, including in relation to alternative pricing mechanisms, componentisation, the definition of Qualifying Defence Contract, Profit on Cost Once, and the implementation of such changes.

Responses should be submitted here.

A second consultation exercise will be held in relation to the second tranche of secondary legislation.

For further information or to discuss single source regulatory framework or defence procurement more generally, please contact the authors.