Regulation 19G Aggregation of componentsF1
The aggregation of components method of determining the price of a qualifying defence contract may be used where—
a contract contains two or more components; and
the parties agree to make an adjustment in accordance with paragraphs (3) to (7).
The method of determining the price of such a contract is to add—
the price of each of the components (“the total component price”); and
the value of the adjustment agreed in accordance with paragraphs (3) to (7).
Paragraph (4) applies where—
the contract requires the primary contractor to integrate outputs from different components of the contract; and
the parties are satisfied that the cost risk adjustments (see step 2 of regulation 11) made in respect of the components of the contract are insufficient to reflect the financial risks to the primary contractor of entering into the contract, taking account of the requirement to integrate outputs from different components of the contract.
Where this paragraph applies, adjust the total component price by an amount (“the total cost risk adjustment”), so as to reflect the financial risks to the primary contractor under the contract, taking into account the particular types of activities to be carried out by the primary contractor under the contract, including the integration of outputs from different components of the contract.
The total cost risk adjustment must, when added to the cost risk adjustments agreed in respect of all components of the contract, not exceed the sum of all costs risk adjustments under the contract had the parties agreed an adjustment of plus 25% of the baseline profit rate when pricing each component of the contract.
Where the Secretary of State determines that the primary contractor should be given a particular financial incentive as regards the performance of provisions of the contract specified by the Secretary of State, the contract price may be increased by an amount (“the total incentive adjustment”) specified by the Secretary of State.
The maximum amount of the total incentive adjustment is—
the total of any incentive adjustments (see step 3 of regulation 11) that might be made in respect of the individual components of the contract that have been priced in accordance with the default pricing method, less
the amount of all of the incentive adjustments that have been determined in accordance with regulation 11(6) in respect of that contract.
Annotations
Textual amendments
- F1
Pt. 3 Ch. 3 inserted (1.4.2024) by The Single Source Contract (Amendment) Regulations 2024 (S.I. 2024/420), regs. 1(2), 24