The rules governing how much money single private contractors can make from government defence projects are set to be reviewed.
The Single Source Regulations Office – the new regulator for Ministry of Defence contracts set up in January – will consult on changes to the existing system, which allows companies to make a 10.6% margin as well as contingency costs.
Speaking to the Financial Times, SSRO chairman Jeremy Newman said the "world has changed" since the existing rules were first established in 1968.
“Back in the 60s and 70s, the Ministry of Defence’s buying was much simpler," he added.
"The profit benchmark against manufacturing made a lot of sense. Today they buy a whole range of goods and services, a whole host of different sorts of contracts, some of which bear little resemblance to industry and manufacturing. The world is also a lot more global."
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The SSRO's consultation will open on September 25, and proposals for reform include an end to contingency allowances and tougher rules to stop companies making profits at different stages of an individual contract.