Redesigning offsets for the 21st century

Executive summary

Traditional offsets have sometimes been controversial, but the nature of offsets has evolved significantly over the past decade into more sophisticated commercial partnership agreements that produce clear, long-term economic benefits for both buyers and sellers. For sellers, offsets can help establish global development capabilities and access to emerging markets. For buyers, especially in emerging countries, offsets are a way to accelerate their own aerospace and defense development. At the Global Aerospace Summit 2014 in A bu Dhabi, offsets were addressed in a dedicated strategy session. International contractors, original equipment manufacturers (OEMs), and governments offered their opinions on what make offsets successful. Some of these include: buyer and seller alignment on the business and strategy; a long-term approach to the relationship; good communication and transparency; and having a single government agency responsible for the offset to avoid confusion and conf licting demands. However, Strategy& has found that before any offset agreement is struck, governments must first develop a national industrial strategy and policy that sets and articulates national goals and establishes a coherent approach to pursuing those goals. These national goals can include the capabilities (military and industrial) to be built locally, job creation, and economic development. A good example of such a clear capability strategy is Australia’s 2012 “Defence Capability Plan”.