Determining the amount of penalty

3.1

When issuing a penalty notice, the Secretary of State should consider all the circumstances in order to determine a fair and proportionate penalty. The central objective of imposing a penalty should be deterrence. The amount of any penalty must be sufficient to ensure that it will act as an effective incentive to compliance, having regard to the seriousness of the contravention.

3.2

The Secretary of State must have regard to the following factors when determining the amount of penalty:

1. the impact of the contravention:
1. what harm has the contravention caused the Secretary of State;
2. what benefit has the person gained with the contravention;
3. duration of the contravention; and
2. the nature of the contravention:
1. was the contravention deliberate (was the person aware that their action or inaction would or could result in a contravention);
2. was the contravention reckless;
3. on occasions when a report was not fully completed, was the report materially incomplete; and
3. any previous penalty notices and general compliance history of the person:
1. is it the first contravention;
2. how frequently have previous contraventions occurred (repeated contraventions may lead to significantly increased penalties);
3. is the current contravention the same or similar to prior contravention(s); and
4. the size and turnover of the contractor; and

(v)

the value of the actual qualifying defence contract or qualifying sub-contract. [Refer: regulation 5]

4.1

After considering the factors stated above, the Secretary of State must also have regard to the following factors which may tend to decrease the level of a penalty amount:

1. has the person taken steps to mitigate and prevent the contravention and future contraventions; and
2. the extent and timeliness of any steps taken to end the contravention in question, and any steps taken to mitigate the consequences of the contravention; and
3. has the person co-operated with the Secretary of State; and
4. does the person have a reasonable excuse for the contravention.

5.1

As specified in Regulation 50(3), in a case where:

1. the Secretary of State gives a person a penalty notice in respect of a contravention within section 31(3)(a)(ii),(failure to comply with reporting requirements), and
2. within the 12 months immediately preceding the date on which the Secretary of State gives the person that penalty notice, at least five other penalty notices for contraventions within section 31(3)(a)(ii) have been given to the person (or any person or persons associated with that person),

5.2

Any penalty notice which has been cancelled by the SSRO as a result of a determination [Refer: section 10] shall be disregarded when determining a persistent contravention.

6.1

Having had regard to any representations the person may wish to make and having considered the factors listed above (to the extent that they are relevant) and any other circumstances relevant to that particular case, the Secretary of State should determine a fair and proportionate penalty. In doing so he will ensure that the amount does not exceed the maximum penalty [Refer: Annex A: Maximum penalty amounts] for the particular type of contravention.

6.2

The final amount of the penalty must be stated in the penalty notice.

7.1

For failures to comply with the duty to keep accounting and other records, in contravention of section 31(3)(a)(i), the penalty amount may be reduced if the person satisfactorily addresses the contravention within the time specified in Table 1.

8.1

8.2

9.1

The SSRO will publish a compliance report each year that will specify persons who have been issued with penalty notices.

Info: The SSRO publishes compliance reports about qualifying contracts.

9.2

A person’s name will not be published in the compliance report if the SSRO has notified the contractor that their qualifying defence contract may benefit from the transitional period or [no longer in effect] if a determination is outstanding.

10.1

Matters in respect of which the contractor may apply to the SSRO for a determination are:

1. whether the person has contravened section 31 of the Act or failed to take the steps specified in a compliance notice (or both);
2. whether the person had a reasonable excuse for contravening section 31 of the Act or failing to take the steps specified in a compliance notice (or both); and
3. the amount of the penalty.

10.2

When a person applies to the SSRO for a determination of a matter mentioned in the penalty notice is not payable until a determination has been made.

10.3

In determining the matter, the SSRO may:

1. substitute its own decision for any decision of the Secretary of State;
2. vary the amount of the penalty;
3. cancel the penalty notice; and
4. state the date by which the penalty must be paid (unless the penalty notice is cancelled).

10.4

The SSRO’s determination is final.

10.5

For further information, please refer to “Guidance on Referral Procedures to the SSRO under the Defence Reform Act 2014 and the Single Source Contract Regulations 2014”