The regulator for single source UK defence contracts has published its first annual Compliance Report.
In 2015 the Single Source Regulations Office (SSRO) found almost £100,000 of agreed savings and identified over £20m of potential savings. A further £5.7m of possible savings are also currently under investigation on the first six QDCs. In addition, the existence of the regime itself has created unquantified savings by providing more opportunities for the MOD to act as an intelligent customer and seek efficiencies.
Whilst contractors have in some cases provided insufficient information that certain costs should be included in the contract, they have been willing to remove non-Allowable Costs identified by the SSRO once this information has been provided. Examples include charging to rectify faulty workmanship, contingency funding not actually used and marketing costs.
There is evidence of differing levels of knowledge and understanding of the Act and Regulations in the MOD and challenges in meeting the reporting and verification requirements. The SSRO expects, with the establishment of the MOD’s Single Source Advisory Team, the MOD’s compliance should increase significantly over 2016.
Jeremy Newman, Chair of the SSRO, said:
“2015 was the first year for the SSRO and the new arrangements for single source contracts so, not surprisingly, we have seen differing levels of understanding of, and compliance with, the Regulations and the SSRO’s guidance both by the MOD and contractors.
“Wherever possible, we will continue to help contractors and the MOD meet their obligations, rather than simply monitor compliance and report on it afterwards. We will therefore continue to devote resources to help build understanding of what is required.
“It is already clear that the new regime has the potential to achieve substantial savings which can then be reinvested elsewhere in defence.”