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Defence Reform Act 2014

Section 20: Allowable costs

71.This section makes provision for the allowable cost element of the formula for pricing QDCs (section 15(4)(b)). There are three requirements which the Secretary of State and contractor must be satisfied are met for a cost to be allowable. These requirements are specified at subsection (2).

72.In determining whether a cost is an allowable cost, subsection (3) provides that the Secretary of State and contractor must have regard to guidance which may be issued by the SSRO under subsection (1).

73.Subsection (4) provides the Secretary of State with power to require a contractor to show that a cost claimed as an allowable cost meets those requirements specified at subsection (2).

74.Either party may refer a cost to the SSRO for a determination as to whether it is an allowable cost under a contract (subsection (5)). Where the SSRO determines that a cost, or part of a cost, is (or is not) an allowable cost, the SSRO may further determine a price adjustment to the extent that that cost was (or was not) included in the price of the contract (subsection (6)). Enforcement of this price adjustment is provided for by section 22.

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