The Single Source Contract (Amendment) Regulations 2019

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Single Source Contract Regulations 2014 (S.I. 2014/3337) (“the 2014 Regulations”) and the Single Source Contract (Amendment) (No. 2) Regulations 2018 (S.I. 2018/1350) (“the 2018 Regulations”). The 2014 and 2018 Regulations were made under Part 2 of the Defence Reform Act 2014 (“the Act”). The Act creates a regulatory framework for single source contracts (that is, contracts which are not competed) in the defence area, and the 2014 Regulations implement the detail of the regulatory regime. The regulatory framework applies to qualifying defence contracts (contracts to which the Secretary of State is party, and which meet the criteria in section 14(2) of the Act), and also qualifying sub-contracts (sub-contracts to qualifying defence contracts, which meet the criteria in section 28(3) or (4) of the Act).

Part 2 of these Regulations makes a number of changes to the 2014 Regulations. Regulation 3 amends regulation 2 (interpretation) of the 2014 Regulations to correct an inconsistency between the treatment of Parts 5 and 6 of the 2014 Regulations in relation to what types document are considered to be a report under those Parts. Regulation 4 simplifies regulation 5 (calculating the value of a contract) of the 2014 Regulations, including by removing one of the ways of calculating the aggregate value of a contract.

Regulations 5 and 18 make changes to the nomenclature used in regulation 9 (competitive process for contracts made under a framework agreement) and regulation 60 (competitive process for sub-contracts made under a framework agreement) respectively of the 2014 Regulations in order to remove ambiguities caused by the original wording.

Regulation 6 inserts a new paragraph into regulation 16 (procedure for determining final price adjustment) of the 2014 Regulations to ensure that only defined contract threshold elements are taken into account when determining the final price adjustment. Regulation 7 amends regulation 17 (calculation of final price adjustment) of the 2014 Regulations to specify that where only a defined component or components of a contract has or have been determined by certain pricing methods, the calculation of the final price adjustment should be applied to that component or components.

Regulations 8 to 12 amend regulations 24 (contract reporting plan), 25 (contract notification report), 26 (quarterly contract report), 27 (interim contract report) and 28 (contract completion report) of the 2014 Regulations to create new reporting obligations for primary contractors and thereby enable greater transparency of the supply chain.

Regulations 13 and 15 make minor changes to regulations 35 (QBU actual costs analysis report) and 37 (QBU estimated costs analysis report) respectively of the 2014 Regulations to ensure the burden of costs analysis reporting is appropriate. Regulation 14 makes a change to the reporting requirements under regulation 36 (estimated rates claim report) of the 2014 Regulations to ensure that the Secretary of State can better understand the driver of future contractor rates. Regulation 16 increases the threshold at which reporting obligations are engaged under regulation 42 (strategic industry capacity report: activities, people and infrastructure) of the 2014 Regulations.

Regulation 17 amends the wording of regulation 50 (maximum penalties) of the 2014 Regulations in order to remove an ambiguity in the language.

Regulation 19 inserts a new paragraph into regulation 61 (assessing whether a contract would be a qualifying sub-contract) of the 2014 Regulations to create new record-keeping obligations for contractors and thereby enable the supply chain to be more transparent. Regulation 20 inserts a new paragraph into regulation 64 (modifications of Part 2 of the Act) of the 2014 Regulations which modifies section 21 of the Act to permit adjustments to be made to the total price by contracting authorities where a qualifying sub-contract is involved. Regulation 21 makes changes to regulation 65 (modifications of the 2014 Regulations) of the 2014 Regulations which means that records only have to be kept by a contractor for two years after the date a contract ceases to be a qualifying sub-contract. Regulation 22 inserts a new regulation, regulation 66 (price adjustments for qualifying sub-contracts), into the 2014 Regulations. This new regulation requires that where a final price adjustment is made to the contract price of a qualifying sub-contract, any amounts payable as a consequence are dealt with directly between the Secretary of State and the sub-contractor.

The 2018 Regulations amended the 2014 Regulations to change the method by which the contract price of a qualifying defence contract is to be redetermined if the contract is amended in a way that affects that price. The provisions were set out in a new Schedule to the 2014 Regulations. Regulation 23 of these Regulations amends that Schedule to the 2014 Regulations to remove a superfluous definition.

The 2018 Regulations also made various transitional provision in connection with the changes to the contract pricing methodology. In Part 3 of these Regulations, regulation 24 amends those transitional provisions to ensure that the relevant “statutory guidance” is taken into account for the purposes of regulations 18 and 19 of the 2014 Regulations.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sectors is foreseen.