The UK government is introducing procurement reforms that would allow defense suppliers to earn higher profits for delivering on time.
The UK government is introducing procurement reforms that would allow defense suppliers to earn higher profits for delivering on time, while reducing returns for underperforming contractors.
Proposed changes to the Single Source Contract Regulations (SSCR), which oversee sole-source procurement for the UK Ministry of Defence, would reshape how contractor profits are calculated.
One of the main measures would raise the maximum incentive payment from 2 to 10 percent of contract costs for companies that deliver equipment on schedule, improve productivity, or assume greater delivery risk.
At the same time, profit floors on lower-risk contracts would be reduced, lowering suppliers' guaranteed returns unless they improve performance.
London is also introducing measures to expand access for smaller defense firms and technology newcomers.
The reforms will be rolled out in phases, starting with higher incentive payments, followed by additional measures on profit floors, innovation incentives, and contract thresholds.
Access for Smaller Defense Firms
The proposed reforms also include measures to make the defense procurement system more accessible to smaller firms and new market entrants.
A new “Innovation Uplift” would incentivize companies that self-fund the development of new defense technologies without a guaranteed government contract.
At the same time, the threshold for contracts subject to SSCR compliance would increase from 5 million to 25 million pounds ($6.6 million to $33.3 million).
According to the government, the shift would exempt most small- and medium-sized enterprises (SMEs) from mandatory reporting requirements while preserving oversight of 97 percent of the total value of single-source defense contracts.
This builds on broader UK efforts to expand the role of smaller defense suppliers in procurement.
In February, the UK Ministry of Defence held its first investor-pitching event for defense and dual-use technologies, giving 10 SMEs direct access to private investors to help address funding and procurement barriers.
