The government is considering introducing a formal defence offsetting policy as part of its forthcoming Defence Industrial Strategy, with consultations now under way.
During Defence questions in the House of Commons, Conservative MP Dr Andrew Murrison argued that the UK is out of step with many allies and competitors, who use offsetting arrangements to support domestic defence industries, employment and economic activity. He noted that the UK has traditionally operated a “global by default” approach and asked when details would emerge on whether the government intends to adopt offsetting to match competitors.
Responding, Defence Secretary John Healey acknowledged the issue but pointed to the record of previous governments. He said he was “interested to hear that observation from the right hon. Gentleman, who of course was a Defence Minister for several of the 14 years during which his Government never moved to introduce any sort of offsetting policy.”
Healey confirmed that the issue is now under active consideration. “We are consulting on that now,” he told MPs, adding that the government believes “offsetting has an important role to play in Britain’s future and the future of British industry.”
He said the consultation process is due to conclude early next year, with decisions to follow. “The consultation closes in the new year, and we aim to make announcements soon thereafter,” Healey said.
It is needed, I believe the present US offset is 50%… is is what has given the US MIC such a strong base.. but the flip side is it has allowed them to run with massive inefficiencies.
Can anyone enlighten us as to how this might work.
Essentially it’s built in the procurement process.. as part of the value for money element as an example the for the US with DFARS, a foreign contractor has essentially almost zero chance due to price Preference Factors with DFARS, when evaluating offers from foreign sources for supply contracts, a price preference or “evaluation factor” is applied to the foreign offer’s price. This factor has historically been 50% for Department of Defense (DoD) procurements. During the evaluation Process if a domestic product is available but at a higher price than a foreign product, the contracting officer must determine if the domestic price is “unreasonable”. The domestic price is considered reasonable if it does not exceed the evaluated price of the low foreign offer after the addition of the 50% evaluation factor. This is wavered with some foreign nations that have offset agreements.. ( IE we buys yours of you buy ours).
Thx Jonathan that explains a lot when it comes to the American approach I hadn’t realised it was so formally built in and stacked against others to that degree. Trump reckons the World rips the USA off, this rather suggests the opposite. Seems like time indeed that we considered our own approach to such matters as it additionally shows why the likes of Bae are so keen to invest and grow in the US rather than here or indeed elsewhere when it seems the only way to grow in the World’s biggest defence market is to work from within.