Around half of MoD spend is single source © Thomas McDonald/Crown Copyright
Around half of MoD spend is single source © Thomas McDonald/Crown Copyright

Single sourcing shake-up for MoD

Will Green is news editor of Supply Management
31 January 2017

The UK government regulator charged with overseeing single sourcing in the Ministry of Defence (MoD) is seeking enhanced powers.

The Single Source Regulations Office (SSRO) wants to alter legal definitions and thresholds to ensure more contracts come under its remit and increase its powers to demand information from suppliers.

The SSRO, established to monitor compliance with the regulatory framework created by the Defence Reform Act 2014 and the Single Source Contract Regulations 2014, has said around half of MoD spending is single sourced. This could equal £100bn between 2015 and 2025.

The SSRO, which has the power to set contract prices based on a formula involving a supplier’s costs and profit margin, said single source contracts worth £11.1bn were notified to it in 2015-16 and it achieved savings of £11.9m.

Under the regulations the MoD and suppliers must notify the SSRO of single source contracts above a threshold. Among the costs declared by suppliers that the SSRO has investigated are hospitality and entertaining costs and Christmas parties.

Under the proposed changes the threshold at which contracts between prime contractors and subcontractors come under the remit of the SSRO will be lowered from £25m to £10m. The threshold between the MoD and prime contractors remains at £5m.

Where contracts were originally valued below £5m but subsequent changes increase the value to above the threshold, they will be treated as new contracts and come under the remit of the SSRO. This is not currently the case.

The SSRO also wants to be able to demand information from suppliers. “The SSRO has experienced circumstances in which the reports have not provided it with sufficient information to enable it to carry out its statutory functions. There have been occasions on which the SSRO has requested information that has either not been provided or something incomplete has been provided,” it said.

The body wants to take over responsibility for issuing compliance and penalty notices from the MoD in respect of contract reporting and suppliers’ assessments of whether their contracts with subcontractors come under the remit of the SSRO or not.

A public consultation runs on the proposals until 24 March before the SSRO’s final recommendations are submitted to the secretary of state for defence, who is obliged to carry out periodic reviews of the regulatory framework.

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