Part 13: General Schedule 10: Single source defence contracts Allowable costs
Section 20 of the DRA deals with allowable costs under a QDC.  Section 20(1) provides that the SSRO must issue guidance about whether costs are allowable under a QDC.  Section 20(2) provides that in determining whether a particular cost is allowable under a QDC, the Secretary of State, or an authorised person, and the primary contractor must be satisfied that the cost is appropriate, attributable to the contract and reasonable in the circumstances.  Section 20(5) provides that the SSRO may, on the application of the Secretary of State, or an authorised person or the primary contractor, determine if a cost is allowable under QDC and may make an appropriate price adjustment as a result of such a determination (section 20(6)).
	Paragraph 12(3) amends section 20 of the DRA by inserting subsection (2A) to provide the Secretary of State with a power to make SSCRs that provide that the POCO adjustment can be made as an appropriate adjustment to allowable costs, if the profit has been incurred by a person which has a relevant connection with the primary contractor. This amendment moves the POCO adjustment from the profit setting process to the allowable costs process.
	Paragraph 12(3) also amends section 20 of the DRA by inserting subsection (2B) to provide the Secretary of State with a power to make SSCRs to define the relevant connection between a primary contractor and a person for the purposes of a POCO adjustment and what adjustment should be made to allowable costs.
	Paragraph 12(5) amends section 20 of the DRA by substituting subsection (5) and inserting subsection (5A) to require the SSRO to make a determination on the allowability of a specified cost. The amendment clarifies that a person listed in subsection (5A) may apply to the SSRO for a determination on whether a cost would be allowed without such an application necessarily being linked to a specific QDC.