By Dr Luke Butler, Lecturer in Law (University of Bristol Law School).
In an earlier blog, I introduced the Defence Reform Act 2014 (DRA), the Single Source Contract Regulations (SSCR) and the Single Source Regulations Office. Collectively, these regulate the pricing of defence contracts awarded by the Ministry of Defence to a single source contractor. It is recalled that contractors can recover certain “Allowable Costs” incurred under a Qualifying Defence Contract (QDC) if they are appropriate, attributable to the contract, and reasonable in the circumstances (the so-called “AAR test”).
But what if, ahead of the agreement of the contract, work relating to the contract is undertaken at risk pursuant to an “intention to proceed” (ITP) arrangement? Unless the ITP fulfills the requirements for a legally binding contract, it cannot itself constitute a QDC. This leaves the question whether this kind of pre-contractual work can constitute an Allowable Cost recoverable under the QDC once the QDC is in place. (more…)