Defence Reform Act 2014

20 Allowable costs U.K.

(1) The SSRO must issue guidance about determining whether costs are allowable costs under qualifying defence contracts.

(2) In determining whether a particular cost is an allowable cost under a qualifying defence contract [F1 , or, where the contract is divided into components, a component of that contract], the Secretary of State or an authorised person, and the primary contractor, must be satisfied that the cost is—

(a) appropriate,

(b) attributable to the contract [F2 or component], and

(c) reasonable in the circumstances.

[F3 (2A) Single source contract regulations may provide that the requirements set out in subsection (2)(a) to (c) are not met in relation to a cost where the cost arises from profits made by a person connected with the primary contractor.

(2B) The regulations may specify the circumstances in which a person is connected with the primary contractor.]

(3) In determining whether the requirements set out in subsection (2)(a) to (c) are met in relation to a particular cost, the Secretary of State or an authorised person, and the primary contractor, must have regard to guidance issued under subsection (1).

(4) The Secretary of State or an authorised person may at any time require a primary contractor to show (whether by reference to guidance issued under subsection (1) or otherwise) that the requirements set out in subsection (2)(a) to (c) are met in relation to a particular cost claimed by the primary contractor as an allowable cost under a qualifying defence contract [F4 , or where the contract is divided into components, a component of that contract.]

[F5 (5) Where a person within subsection (5A) applies to the SSRO for such a determination, the SSRO must determine—

(a) the extent to which a cost is or would be an allowable cost under a qualifying defence contract or a component of such a contract, or

(b) the extent to which a method which is used or may be used to determine a cost under a qualifying defence contract or a component of such a contract would result in that cost being an allowable cost under such a contract or component.

(5A) The following persons are within this subsection—

(a) the Secretary of State;

(b) an authorised person;

(c) a primary contractor under a qualifying defence contract;

(d) a potential primary contractor.]

(6) The SSRO may determine that the price payable under [F6 a qualifying defence contract] is to be adjusted by an amount specified by the SSRO in consequence of a determination under subsection (5), having regard to the extent to which the cost in question was treated as an allowable cost when the price payable under the contract was determined (or last determined) in accordance with section 15.

Textual Amendments

F1 Words in s. 20(2) inserted (19.1.2024) by Procurement Act 2023 (c. 54), s. 127(2), Sch. 10 para. 12(2)(a); S.I. 2024/61, reg. 2(1)(b)(v) (with reg. 3)

F2 Words in s. 20(2)(b) inserted (19.1.2024) by Procurement Act 2023 (c. 54), s. 127(2), Sch. 10 para. 12(2)(b); S.I. 2024/61, reg. 2(1)(b)(v) (with reg. 3)

F3 S. 20(2A)(2B) inserted (19.1.2024) by Procurement Act 2023 (c. 54), s. 127(2), Sch. 10 para. 12(3); S.I. 2024/61, reg. 2(1)(b)(v) (with reg. 3)

F4 Words in s. 20(4) inserted (19.1.2024) by Procurement Act 2023 (c. 54), s. 127(2), Sch. 10 para. 12(4); S.I. 2024/61, reg. 2(1)(b)(v) (with reg. 3)

F5 S. 20(5)(5A) substituted for s. 20(5) (19.1.2024) by Procurement Act 2023 (c. 54), s. 127(2), Sch. 10 para. 12(5); S.I. 2024/61, reg. 2(1)(b)(v) (with reg. 3)

F6 Words in s. 20(6) substituted (19.1.2024) by Procurement Act 2023 (c. 54), s. 127(2), Sch. 10 para. 12(6); S.I. 2024/61, reg. 2(1)(b)(v) (with reg. 3)

Commencement Information

I1 S. 20 in force at 14.7.2014 for specified purposes by S.I. 2014/1751, art. 4(f)

I2 S. 20 in force at 5.12.2014 in so far as not already in force by S.I. 2014/3162, art. 3(c)