#2026/510Single Source Contract Amendment Regulations 2026
AI-generated summary for informational purposes only. Not legal advice. See the original source for the authoritative text.
This law changes how profit incentives can be added to certain UK defence contracts awarded without competition. It raises the maximum incentive adjustment from 2 percentage points to 10 percentage points when the Secretary of State sets the contract profit rate. The higher incentive must be tied to a clearly defined, objectively checkable performance outcome. If judgement is involved, an independent qualified person must be able to decide it. The Ministry of Defence and defence contractors will need to define incentive targets carefully and show that any extra profit is reasonable in light of the expected public benefit.
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Key Changes
- Raises the maximum incentive adjustment for qualifying defence contract profit rates from 2 percentage points to 10 percentage points.
- Requires incentive payments to be linked to objectively verifiable performance outcomes.
- Allows the SSRO to give opinions on step 3 issues in the contract profit rate process.
Obligations
What this law requires
When specifying contract provisions eligible for an incentive adjustment in the contract profit rate, the Secretary of State must also specify the performance outcome that must be achieved before the incentive adjustment is payable.
Any outcome specified for an incentive adjustment must be capable of objective verification and must relate to performance of the relevant contract provisions.
If assessment of the incentive outcome or relevant performance involves judgement by a contracting party or a person associated with the primary contractor, that judgement element must be capable of determination by a suitably qualified independent person.
Before determining the amount of an incentive adjustment, the Secretary of State must be satisfied that the amount is reasonable in the circumstances, having regard to the potential public benefit from using the adjustment.
The Secretary of State must not set an incentive adjustment exceeding ten percentage points when determining the contract profit rate under regulation 11(6).