Part 13: General Schedule 10: Single source defence contracts Pricing of qualifying defence contracts
Section 15(1) of the DRA requires that SSCRs must make provision about the price payable to the contractor under a QDC ("the price"). Section 15(2) and (4) require that the SSCRs must provide for the price to be determined in accordance with the formula:
	(CPR x AC) + AC ("the pricing formula")
	In the pricing formula, "CPR" is the contract profit rate for the QDC and "AC" is the contractor’s allowable costs under the QDC. The DRA and SSCRs make provision for establishing the contract profit rate and the contractor’s allowable costs.
	Paragraph 3(3) amends section 15 of the DRA by substituting subsection (2) and inserting subsections (2A) and (2B) to provide the Secretary of State with a power to make SSCRs to permit QDCs to be priced other than in accordance with the pricing formula set out in subsection 15(4) in certain specified circumstances.
	The types of circumstances where it is envisaged that pricing might be different include:
items that are priced by reference to market prices;
prices that are regulated by other means (e.g. utilities);
where a requirement has been recently competed and the Secretary of State wants to enter into a new contract to procure additional goods, works or services from the same contractor, using pricing which is in line with the competitively obtained priced previously secured;
where a contract has been converted from a non-QDC to a QDC and it may be impracticable to re-price the existing scope in accordance with section 15(3)(a) because of the duration of the contract, or there may be little value in reopening parts of the contract where the work has already been done and the agreed price paid;
where a QDC is novated to another contractor to perform the remainder of the contractual requirement.  Such novations often arise through the restructuring of a corporate group, with the result being that contracts are novated from one company to a different company in the same corporate group;
where one or more elements of the price are obtained through competition (such as an hourly rate) but at least one element is not obtained through competition (such as the estimated volume of hours to which the competitive rate is applied);
where a contract is split into components, and it is necessary to specify means of determining an overall price for the contract; and
where the parties wish to make changes to the contract profit rate without changing the work to be performed under the contract, for instance where the Secretary of State decides not to use the incentive adjustment when the contract profit rate was agreed but subsequently decides that it would be appropriate to use the incentive adjustment to help to achieve the commercial objectives.
	Paragraph 3 also amends section 15 of the DRA to permit the parties to agree that different parts of a contract may be treated distinctly (i.e. split into components).  Paragraph 3(8) amends section 15 of the DRA by inserting new subsections (6), (7) and (8) to provide the Secretary of State with a power to make SSCRs to specify circumstances in which certain parts of a QDC may or may not be treated differently from each other, for example, in relation to pricing.
	Amendments in paragraph 3(2) to section 15(1) make clear that SSCRs may be made to determine the price payable for each component (where the contract is divided into components) and for the contract as a whole.
	Paragraph 4(3) amends section 16 of the DRA by inserting subsections (4) and (5) to provide the Secretary of State with a power to make SSCRs giving the SSRO powers in relation to an alternative pricing method for a QDC or a component to:
determine whether the method used was appropriate; and
in consequence of such a determination, determine that the price payable under the contract is to be adjusted by an amount which the SSRO specifies.