Single Source Contract Regulations - The Regulated Pricing Methods

Pricing Formula for UK MoD Single Source Contracts

A single source Qualifying Defence Contract (QDC) or Qualifying Sub-Contract (QSC) must be priced using one of six regulated pricing methods allowed by the Defence Reform Act. All of the six regulated pricing methods use a "bottoms up" pricing method of allowable cost + profit = selling price and hence there is no ability under the Defence Reform Act to price any elements of a Qualifying Defence Contract or Qualifying Sub-Contract using commercial list prices such that the UK MoD is paying the normal market price of an item. 

The pricing formula is: (CPR x AC) + AC where -

(a) “CPR” is the contract profit rate for the contract,
and
(b) “AC” means the contractor’s allowable costs under the
contract.

The Six UK MoD Single Source Contract Pricing Methods

(a) Firm Pricing Method

(b) Fixed Pricing Method

(c) Cost-Plus Pricing Method

(d) Estimate-Based Fee Pricing Method

(e) Volume Driven Pricing Method

(f) Target Pricing Method