Substitution of regulation 23 (contract pricing statement)
27. For regulation 23 substitute—
“Contract pricing statement
23.—(1) The primary contractor must provide—
(a)a contract pricing statement for the qualifying defence contract within one month of the initial reporting date; and
(b)if the contract is amended so as to create a new component under the contract or if the contract or a component of the contract is repriced in accordance with regulation 19F, a revised contract pricing statement—
(i)where the amendment has a value of £10,000,000 or more, within one month of the amendment;
(ii)where the amendment has a value of less than £10,000,000, at the same time as the next report is provided in relation to the contract under regulation 26 (quarterly contract report), regulation 27 (interim contract report) or regulation 28 (contract completion report).
(2) For every qualifying defence contract or component of such a contract, a contract pricing statement must—
(a)set out the date and version of any statutory guidance made under section 18(1), 20(1) or 35A in force at the time of agreement;
(b)describe any known deviation from that statutory guidance made in determining the contract price; and
(c)describe any other information which was material to the pricing of the contract.
(3) If the contract price for the contract or component is determined in accordance with regulation 10 (default pricing of contracts) a contract pricing statement must—
(a)set out any allowable costs and the contract profit rate used to determine the contract price;
(b)describe the calculation that was made under regulation 11 to determine the contract profit rate, including all factors that were determined under each of the steps of that regulation; and
(c)describe—
(i)the contractor's facts, assumptions and calculations relevant to each element of the allowable costs (including those relevant to any risk or contingency included in the allowable costs); and
(ii)any facts or assumptions provided by the Secretary of State and used by the contractor in those calculations.
(4) If the contract price for the contract or component is determined in accordance with regulation 19A (commercial pricing) a contract pricing statement must—
(a)explain—
(i)the circumstances that allow the application of the commercial pricing method; and
(ii)how the commercial price used was demonstrated to be reasonable; and
(b)describe the facts, assumptions and calculations relevant to the pricing of the item including—
(i)the basis on which each market price was determined; and
(ii)any adjustment made under regulation 19A(6)(b).
(5) If the contract price for the contract or component is determined in accordance with regulation 19B (prices determined in accordance with law) a contract pricing statement must—
(a)state a citation for the relevant legal provision and explain how that provision affects the price;
(b)state which of regulation 19B(3) or 19B(4) applies; and
(c)where regulation 19B(4) applies, explain the approach used to secure that the price is as close as possible to the price which would have been agreed between the parties in compliance with the Act and these Regulations but for the application of the relevant law.
(6) If the contract price for the contract or component is determined in accordance with regulation 19B (prices determined in accordance with law) and regulation 19B(4) applies, the contract pricing statement must—
(a)explain the justification for using the price determined in accordance with law method;
(b)explain how the price used was demonstrated to be reasonable; and
(c)describe the facts, assumptions and calculations relevant to the pricing of the item including—
(i)the basis on which the price was determined; and
(ii)the facts, assumptions and calculations on which any variation was made.
(7) If the contract price for the contract or component is determined in accordance with regulation 19C (previously agreed price) the contract pricing statement must describe any element that enables a variance in price and any mechanism put in place to prevent excessive profit or loss.
(8) If the contract price for the contract or component is determined in accordance with regulation 19D (novated contracts), a contract pricing statement for contract B must contain the same information as was required in respect of contract A.
(9) If the contract price for the contract or component is determined in accordance with regulation 19E (competed rates applied to uncompeted volumes) a contract pricing statement must—
(a)describe—
(i)the contractor's facts, assumptions and calculations relevant to each element of the allowable costs (including those relevant to any risk or contingency included in the allowable costs); and
(ii)any facts or assumptions provided by the Secretary of State and used by the contractor in those calculations; and
(b)the facts referred to in paragraph (b)(i) must set out the volumes that are applied to the competed rates to arrive at the contract price.
(10) If the contract price for the contract or component is determined in accordance with more than one contract pricing method, the contract pricing statement must comply with all of the requirements in this regulation that apply to the contract pricing methods that have been used.
(11) Where the contract contains components, the contract pricing statement must—
(a)set out any cost risk adjustment determined under step 2 of regulation 11 or incentive adjustment determined under step 3 of regulation 11 in relation to the contract and each component;
(b)include an explanation of how—
(i)the total of all cost risk adjustments in relation to the contract and each component remain within the limit for the cost risk adjustment for the contract; and
(ii)the total of all incentive adjustments in relation to the contract and each component remain within the limit for the incentive risk adjustment for the contract; and
(c)where a component uses a contract pricing method under which costs are indistinguishable from profits, treat the costs under that component as the price of the component.”.