Offset agreements - general background
In connection with the procurement of equipment from foreign suppliers, the Ministry of Defence (MOD) enters into offset agreements with the suppliers. This applies mainly to procurements where the cost exceeds NOK 50 million.
An offset agreement is an agreement between the foreign supplier and MOD committing the foreign supplier to industrial collaboration with Norwegian industry. This collaboration can either take the form of direct subcontracts placed with Norwegian companies for parts of the overall system to be supplied or it may take the form of more indirect industrial collaboration. Such offset agreements, or industrial collaboration agreements, ensure that the placing of defence contracts with foreign suppliers will also be of benefit to the Norwegian defence industry. Overall figures for offset agreements in 1997 you will find here.
Norway's Armed Forces need a national defence industry. The MOD has in recent years placed considerable emphasis on the importance of maintaining an active industrial policy. The aim is to achieve a match between the substantial materiel procurement needs of the Armed Forces and the desire - and requirement - to maintain a competitive and technologically advanced Norwegian defence industry. In the long term this will provide a beneficial spin-off for the civil industrial sector as well. The primary aim must, however, be to meet the requirements of the Armed Forces for the right equipment at the right time, both from a defence capability point of view and from an operational perspective.
The MOD has placed particular importance on strengthening existing expertise in areas where Norwegian industry already has a competitive edge or in fields which are of special interest in the defence context. These areas are also kept in focus by the Ministry in the process of negotiating offset agreements. Areas of particular interest are: hardware and software for communication, command, control and information (C_I) systems, radio, satellite and line communications, electro-optical (optronic) systems, fire control systems, missile technology, ammunition and military explosives, submarine technology and sonar systems, high-speed vessel technology and space technology.
Summary of offset agreements negotiated in 1997
During 1997 the Ministry of Defence negotiated a total of 6 offset agreements in connection with the purchase of defence equipment from foreign suppliers. The value of the offset in each case is set by the Norwegian authorities on the basis of criteria, and associated multiplying factors, relating to the type or content of the offset transactions proposed. In total, the value of the offset agreements negotiated in 1997 amounted to over NOK 1.8 billion. The following offset agreements with foreign suppliers were negotiated during 1997:1. DCN International (DCNI)
In July 1997 an offset agreement was concluded between DCNI and MOD in connection with the Royal Norwegian Navy's purchase of command and weapon control systems for the HAUK Class MTBs. The value of the contract is approximately NOK 840 million. DCNI is committed to 100 percent offset. The agreement covers strategic collaboration between DCNI and Kongsberg Defence and Aerospace, an arrangement offering considerable opportunity for Kongsberg as well as possibilities for the supply of goods to DCNI by the Norwegian companies Ericsson Radar AS, Racal Norge AS, Kværner Ship Equipment AS, Kværner Mandal and Aanderaa Instruments AS.2. Giat Industries
An offset agreement was concluded In December 1997 between Giat and MOD in connection with the purchase by the Norwegian Army of the ARGES autonomous off-route anti-armour rocket system. The contract value is approximately NOK 260 million and again the supplier is committed to 100 percent offset. Giat Industries, with whom the agreement has been concluded, are responsible for implementing the offset purchases. Giat's subcontractors, Hunting (UK), Dynamit Nobel and Honeywell (both Germany) will also contribute to the fulfilment of the offset commitment. Offset purchases in connection with this contract include:
- purchase of a whole range of components / modules for the autonomous anti-armour rocket system from a variety of Norwegian suppliers,
- production of the rocket motor, or large parts of it, by Raufoss,
- production of electronic circuit cards for the autonomous anti-armour rocket by Kongsberg Defence,
- produksjon av elektroniske kretskort til det autonome panservernvåpnet hos Kongsberg Defence
- production of explosives for the anti-armour rocket warhead by Dyno,
- the purchase of various types of (specifically identified) explosives from Dyno,
- purchase of the IS 2000 laser sight from Simrad Optronics for integration with the German-produced Panzerfaust 3 short-range anti-tank weapon system,
- purchase and marketing of various types of 12.7 mm ammunition produced by Raufoss.
3. Rheinmetall W & M GmbH
In December 1997 an offset agreement was concluded between Rheinmetall and MOD in connection with the Norwegian Army's purchase of 155 mm modular propelling charges. The value of this procurement contract is of the order of NOK 300 million and Rheinmetall is committed to 100 percent offset. By way of offset relating to this contract, we have negotiated an agreement which includes the purchase of hexogen explosives from Dyno for the charges being procured for the Norwegian Army as well as the purchase by Rheinmetall of future supplies from Raufoss and Dyno, mostly for the German market, over the period to 2005. These future deliveries could include:
- hexogen explosives from Dyno for 155 mm ammunition and 155 mm modular propelling charges (over and above the Norwegian requirement)
- Production of various types of shellcase by Raufoss,
- participation in the development and production of 120 mm tank gun ammunition (Raufoss).
4. SAAB Training Systems AB
In connection with the Army's purchase of 105 mm practice ammunition from the Italian firm Simmel Difesa to a total value approaching NOK 50 million, MOD has concluded an offset agreement with that company. The agreement covers mainly indirect offset purchases linked to collaboration between Simmel Difesa and the Norwegian companies Dyno and Raufoss.
5. Simmel Difesa SpA
In connection with the Army's purchase of electronic firing range equipment to the total value of approximately NOK 60 million, an offset agreement was concluded in May 1997 with the supplier, Saab Training Systems. The offset agreement covers the purchase of circuit cards from Kitron ASA and cables from Production Partner A/S, both Norwegian companies.6. Daimler Benz AG
An offset agreement in connection with the Army's framework contracts for the purchase of vehicles from Mercedes-Benz was concluded in December 1997. The agreement is linked with purchases covering the period 1993 onwards. As at 31 December the agreement involved a commitment to offset purchases totalling NOK 307 million. The agreement provides the Norwegian vehicle component industry strengthened opportunities for working with and supplying Mercedes-Benz AG.
Overall figures for offset agreements in 1997 you will find here.
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