Traditionally, buyers impose a ’compensation clause’ in conjunction with major defence procurements from foreign defence contractors. Previously, the term offset1) was used for such compensation, but nowadays Finland uses the term ‘industrial participation’.
This is because the focus of the activity lies on cooperation between the Finnish defence industry and the foreign supplier, especially with regard to guaranteeing access to critical technologies in all conditions.
These days in Europe and, particularly, elsewhere many large defence procurements continue to include offset/industrial participation clauses. Alongside system performance and costs, offsets are an important element of the prospective suppliers’ comprehensive tenders. In the global marketplace, offsets constitute a general prerequisite for major defence acquisitions and more often than not are the rule rather than the exception. They vary greatly in terms of form, objectives and ways of implementation.
Prior to the entry into force of the Act on Public Defence and Security Contracts (1531/2011) Finland normally required industrial participation in defence procurements exceeding the value of EUR 10 million.
Starting from the time the Act entered into force the practice changed and the clause has no longer been automatically included in such acquisitions. These days the imposition of an industrial participation obligation is always considered on a case-by-case basis.
Click here for the full report (12 PDF pages) on the Finnish MoD wbsite.