Part 1: General

(1)

These Regulations may be cited as the Single Source Contract Regulations 2014 and come into force on the day after the day on which they are made. [on 18 December 2014]

(1)

In these Regulations—

[^F1“the Act” means the Defence Reform Act 2014, and references to sections are to sections of that Act;]

“business unit” means either—

1. a unit—
1. which carries on any activities for the purposes of an undertaking; and
2. for which separate financial accounting statements are produced; or
2. an undertaking, or group of two or more undertakings, for which a single set of financial accounting statements is produced which is separate from the financial accounting statements of each of those undertakings

“contract completion date” has the meaning given by regulation 4;

[^F2“contract price”, in relation to a qualifying defence contract, means—

1. the price payable under the contract to the primary contractor as determined in accordance with regulation 10, or
2. if the contract is amended in a way that affects the price payable under it, the price payable under the contract to the primary contractor as determined or, as the case may be, last determined in accordance with the Schedule;]

“cost recovery base” means the unit of measure to which a cost recovery rate is applied in order to calculate a cost under a contract;

“cost recovery rate” means a rate calculated for a business unit that is used to determine a cost payable under a contract, being a rate per unit of a cost recovery base that is multiplied by the quantum of that cost recovery base to determine the cost;

“deliverable” means any goods, works or services which—

1. are provided under a contract; and
2. can be described using an output metric;

“further group sub-contract” has the meaning given by regulation 12(6);

“group sub-contract” has the meaning given by regulation 12(5);

“output metric” means a quantifiable description of any goods, works or services (including a number, weight, dimension, time or physical capability, but not including a monetary value);

“parent undertaking” has the meaning given by section 1162 of the Companies Act 2006;

“regulated pricing method” means one of the six pricing methods described in paragraphs (4), (5), (6), (7) and (8), (9) and (10), or (11) of regulation 10

“SME” has the meaning given in Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises.

Info: Broadly, an SME is an enterprise that has fewer than 250 employees and has an annual turnover not exceeding EUR 50 million, and/or a balance sheet total not exceeding EUR 43 million. But there are a number of caveats and excemptions set out in the full definition.

“TCIF adjustment” means an adjustment made under section 16(1)(b). [Refer: Regulation 15]

“the time of agreement” means—

1. in the case of a contract which is a qualifying defence contract by virtue of section 14(3), or a qualifying sub-contract—
1. the date the contract is entered into; or
2. if the price payable under the contract is re-determined [^F3in accordance with the Schedule], the date of that re-determination;
2. in the case of a contract which is a qualifying defence contract by virtue of section 14(4) or (5) [a contract brought in to the regime on amendment]—
1. the date of the amendment mentioned in section 14(4)(c) or (5)(b); or
2. if the price payable under the contract is re-determined [^F4in accordance with the Schedule], the date of that re-determination;

SSRO guidance: The SSRO has issued detailed guidance about determining the "time of agreement". See paragraph 3.41 of the Contact Reporting guidance.

“undertaking” has the meaning given by section 1161(1) of the Companies Act 2006;

“working day” means any day excluding—

(a)

Saturday, Sunday, Christmas Day, Good Friday or a bank holiday under the Banking and Financial Dealings Act 1971; and

Info: Bank holidays

(b)

where a person gives the Secretary of State and the SSRO no less than 30 days' written notice of its intention to treat a day as a holiday, that day.

(2)

A reference to a report provided under Part 5 includes a contract pricing statement (regulation 23), a contract reporting plan (regulation 24), a contract costs statement (regulation 29), and information provided under regulation 30 (on-demand contract report). [ie. despite not being called "reports" these may still be referenced as such]

(3)

[^F5A reference to a report provided under Part 6 includes an estimated rates agreement pricing statement under regulation 38.] [ie. despite not being called a "report" it may still be referenced as such]

”Defence purposes” means the purposes of defence (whether or not of the United Kingdom), or related purposes.

(1)

The “contract completion date”, in relation to a contract, means—

1. the date described in the contract as the contract completion date; or
2. if no such date is described in the contract, the date on which the contractor completes all obligations which entitle it to final payment under the contract;
3. if the contract is terminated before the date described in sub-paragraph (1)(a) or (b) (as the case may be), the date on which the contract is terminated.

Info: The contract completion date drives some time limits, for example some statutory grounds for referral. Contracting parties should be cautious if they describing the contract completion date in the contract in a manner that is not linked to the actual end of work under the contract.

(2)

For the purposes of paragraph (1)(b), final payment under a contract does not include—

1. any payment relating to the effect of specified indices or rates (regulation 10(5) [fixed pricing method] or (10) [volume-driven pricing method];
2. any TCIF adjustment [Refer: section 16(1)(b)] ;
3. any payment under regulation 16 (final price adjustment); or
4. any amount which is determined by the SSRO to be payable.
SSRO guidance: Referrals procedures for determinations

Info: References to the value of a contract include its value as estimated in accordance with this regulation (see section 43(2)(a)).

(1)

The value of a contract is to be determined—

1. by the contracting authority; and
2. in accordance with this regulation.

(2)

For the purposes of the Act and these Regulations, the value of a contract means the consideration (net of value added tax) which the contracting authority expects will be payable under the contract.

(3)

The contracting authority must determine the value of a contract—

1. in the case of a proposed contract under regulation [^F5...]61 (assessing whether a contract would be a qualifying sub-contract), either—
1. at the date of the assessment under regulation [^F661], or
2. at any later date on which it is proposed to enter into the contract,

whichever is the higher;

2. in the case of a contract which is a qualifying defence contract by virtue of section 14(4) or (5) [a contract brought in to the regime on amendment], at the date of the amendment mentioned in section 14(4)(c) or (5)(b);
3. in all other cases, the date the contract is entered into.

(4)

In making that determination, a contracting authority must—

1. where appropriate, take account of—
1. any option contained in the contract and the likelihood that it will be exercised;
2. any effect which changes in the value of money are likely to have on the allowable costs it expects to be included in the contract price;
2. exclude the value of any land, buildings, equipment, information, personnel or other resource that is provided by [^F7the contracting authority];
3. convert any amounts payable under the contract in a foreign currency to sterling, using a rate consistent with the contracting authority's [^F8...] policies [^F9or where no such policies exist, a rate of exchange derived on a just and reasonable basis].

(5)

Subject to [^F10paragraph (6)], where—

1. the purpose of the contract is to fulfil a requirement for goods, works or services, and
2. the contracting authority has also entered into, or proposes to enter into, one or more other contracts [^F11which are not the result of a competitive process] [refer: regulation 8 and 9 for QDCs; regulation 59 and 60 for QSCs, group sub-contracts and further group sub-contracts] with the same person (or persons associated with that person) for the purpose of fulfilling that requirement,

the value of the contract is the aggregate of the consideration which the contracting authority has paid or expects to be payable under the contract and all of those other contracts or proposed contracts.

(6)

For the purposes of paragraph (5)(b)—

1. the contracting authority may disregard a contract if conditions A and B [see below] are met in relation to it;
2. the contracting authority may disregard a proposed contract if, were it entered into on the terms proposed, conditions A and B would be met in relation to it;
3. [^F12the contracting authority must disregard a contract, or a proposed contract, which has a value of £250,000 or less where it is reasonably satisfied that the procurement has not been subdivided in order to avoid the requirements of the Act and these Regulations.]

(7)

Condition A is that the contract has a value of [^F13more than £250,000 but] less than £1,000,000.

(8)

Condition B is that the aggregate value of—

1. that contract, and
2. any other such contract within paragraph (5)(b), each of which has a value of [more than £250,000 but] less than £1,000,000,

is less than 20% of the aggregate of the consideration which the contracting authority has paid or expects to be payable under all contracts entered into, or to be entered into, for the purpose of fulfilling the requirement mentioned in paragraph (5)(a).

(8A)

[^F14A contract which has a value of £1,000,000 or less shall not be treated as a qualifying defence contract by virtue of this regulation unless the contracting authority is reasonably satisfied that the procurement has been subdivided in order to avoid the requirements of the Act and these Regulations.]

(9)

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(10)

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(11)

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(12)

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(13)

In this regulation, “the contracting authority” means the party to the contract which is, or would be, liable to pay the contract price.