European Defence Agency

NORWAY

Brussels - 23 April 2014

OFFSET POLICY

Legal basis or government regulations and guidelines

The Regulations on Industrial Co-operation Related to Defence Acquisition from Abroad (RIC) are pursuant to the Norwegian Acquisition Regulations for the Defence Sector1 (ARF), section 1.10, and are an attachment to the ARF.

Objectives of offset policy

Industrial Co-operation related to defence acquisition shall contribute to the development of a competitive industry in Norway within areas of importance to the further development of the Norwegian Armed Forces, provided that this is considered to meet the Norwegian Armed Forces’ demands.

Industrial Co-operation is an important tool in the implementation of the strategy of industrial policy related to the Norwegian Armed Forces’ acquisitions.

Threshold value in EURO

5,618 MEUR (50 MNOK)

The role of offset in the procurement procedure (selection/award criteria) along with short explanation

Although cost and performance, as well as time of delivery, are the essential criteria in the evaluation of offers, MoD will put considerable emphasis on the supplier’s proposed industrial co-operation plan in the overall evaluation.

MoD’s evaluation will also include an assessment of a potential supplier's past performance under both completed and ongoing Industrial Co-operation Agreements. This assessment also includes other entities or departments within the same corporation/industrial group, even when these are located in other countries than the potential supplier.

Offset agreement (along with short explanation on how offset agreements are concluded)

RIC apply to acquisitions of goods, services and materiel from foreign suppliers. RIC further apply to transactions where the supplier is registered in Norway, whereas significant parts of the delivery are produced abroad.

As a rule, an exemption to RIC will be given in multinational co-operation projects where the value of the contribution from the Norwegian industry is equal to the Norwegian financial investments.
 

Responsible government authorities and their respective areas of responsibility

MoD has the overall responsibility for the establishment and supervision of Industrial Co-operation related to acquisitions from abroad. MoD may delegate its authority to subordinate entities.

MoD may establish reference groups comprising representatives from the Norwegian Armed Forces, the industry and other relevant stakeholders, either to discuss general aspects of industrial co-operation, or particular aspects related to specific acquisitions.

OFFSET REQUIREMENTS

Offset requirement criteria (percentage, threshold, SMEs, etc)

The supplier must undertake to carry out industrial co-operation equal to a minimum of 100 % of the value of the basis of calculation.
For all acquisitions, a substantial part of the Commitment must be covered by binding contracts with the Norwegian industry prior to the Armed Forces entering into an agreement with the supplier.

Industrial projects must be within one of the three following categories:

  • Category I: Strategic projects (projects that are considered to be of strategic importance to both the Armed Forces/the national security and the Norwegian industry
  • Category II: Non-strategic, defence related projects
  • Category III: Security related projects and dual use projects

At least 50 % of the Commitment must be fulfilled within Category I and a maximum of 25 % of the Commitment may be fulfilled by use of Category III.

The Norwegian partner in industrial projects must be from industry or research and development communities located in Norway. In cases where it is important to maintain or create systems or maintain competences within the Norwegian Armed Forces, entities within the Norwegian Defence Sector may be approved as a Norwegian partner.

As a main rule, there is no general requirement of direct industrial co-operation, i.e. projects that include sub-contracts to the acquisition in question. However in particular cases, direct industrial co-operation may be required if considered to be of great importance to the Armed Forces.

Only the part of valued added in Norway by an industrial co-operation project is credited. When the project valuation is based on production, and the Norwegian share of the added value exceeds 80 %, the project will receive 100 % credit. The Norwegian part of the added value will not be credited if this constitute less that 20 % of the total project value.

If the Norwegian partner is classified as a medium sized or small business (SME), a higher multiplier will be applied.

Transactions qualifying as offset (accepted offset activities)

The projects should employ an equal or higher technological level than the products procured by the Norwegian Armed Forces. Acquisition of Norwegian raw materials or low-tech products will not be approved.

Based on the demands of the Norwegian Armed Forces, and in consultation with the Norwegian industry, MoD has identified eight areas of technological competence that shall give guidance to the industrial co-operation. These are:
1. Information and communication technology
2. System integration and architecture
3. Missile technology and autonomous weapon and sensor systems
4. Underwater technology and sensors
5. Simulation technology
6. Weapon and missile propulsion technology, ammunition and military explosives
7. Material technology
8. Maritime technology
A significant part of the projects should be within the currently applicable technology competence areas.
Projects that contribute to the maintenance, development or creation of system competences of importance to the Norwegian Armed Forces, are given priority.

The following types of industrial projects may be approved:
1. Technology co-operation (projects where the Norwegian and foreign partner participate on an equal basis and contribute fairly equal towards producing the next generation of products, preferably on a system level)
2. Assistance related to market development and market access
3. Co-operation related to research and development
4. Acquisition of defence materiel, defence and security related products or dual use products from Norwegian industry. Acquisition of defence materiel developed and produced in Norway, by the authorities of the supplier’s home country or other countries will normally be accepted as industrial co-operation if the acquisition contributes to market access for the Norwegian industry
5. Transfer of technology and know-how to a Norwegian partner
6. Investments that contribute to strengthening of the competitiveness of the Norwegian industry
Technology co-operation denotes

Sectors (defence, other)

Defence related, Security related and Dual-use

MODALITIES / IMPLEMENTATION

Fulfilment period

10 years

Confidentiality clauses

As a rule, the Industrial Co-operation Agreements are exempted form public disclosure in accordance with Offentlighetslovens (the Public Information Act) section 5.1, cf. Forvaltnings-lovens (the Public Administration Act) section 13.2. However, the value of the agreement, the remaining obligations, and supplier’s name are normally regarded as information subject to public disclosure.

Multipliers

The value of an industrial co-operation project may be adjusted through use of multiplication factors.
The following factor scale may be applied for the various types of industrial projects:

Technology co-operation 1,0 – 5,0
Assistance related to market development and market access 0,1 – 2,0
Co-operation related to research and development 1,0 – 5,0
Acquisition of products 1,0
Transfer of technology and know-how to a Norwegian partner 1,0 – 2,5
Investments 1,0 – 5,0

If the Norwegian partner is classified as a medium sized or small business (SME), a multiplier of 1.3 or 1.5 is applied in addition to the foregoing.
In cases where a Norwegian SME is subcontractor to deliveries from larger Norwegian companies, where the deliveries have been accepted as an industrial co-operation project, the additional multipliers apply to the value of the SME part of the delivery.

In determining multipliers, the project content will be evaluated against the objective of RIC, in addition to its categorization.

Monitoring

By 31 March each calendar year, the supplier must submit a report comprising a request for activities carried out the previous calendar year to be approved and credited. The supplier may not request approval and credit for activities carried out more that two years before. 

MoD will provide feedback to the supplier within 30 September the same year.

Abatements / Swaps

May be approved on case-by-case basis

Penalties

If the supplier fails to fulfil the Commitment by the end of the Fulfilment Period, including strategic content requirements, the supplier is obliged to pay final compensation. The amount of the final compensation must be stated in the Industrial Co-operation Agreement (ICA), but shall not be less than 10 % of the outstanding value.

Suppliers that fail to meet the milestones, are obliged to pay milestone compensation as stated in the ICA. This shall not be less than 10 % of the outstanding value, as according to the milestone schedule. If stated in the ICA, the milestone compensation may be postponed, provided that a bank guarantee of an equivalent amount is issued. This bank guarantee will be cancelled upon fulfilment of the milestone requirement. If at the expiration of the ICA, the supplier still has not fulfilled the requirement in question, the milestone compensation may be deducted from the bank guarantee.

Payment of milestone or final compensation does not exempt the supplier from the commitment, and the ICA will remain in force until the commitment is fulfilled.

Guaranties

See "Penalties"

Selection of the offset receivers

Every project must be pre-approved in accordance to RIC, not the company.

The Norwegian partner in industrial projects must be from industry or research and development communities located in Norway. In cases where it is important to maintain or create systems or maintain competences within the Norwegian Armed Forces, entities within the Norwegian Defence Sector may be approved as a Norwegian partner.

In the event that a Norwegian partner is not acting in accordance with, or previously has not acted in accordance with, the Norwegian Defence Acquisition Regulations (ARF), section 1.8.7 with attachments, and/or ARF, section 2.10, MoD may reject to approve proposed industry projects where such a Norwegian partner is involved.
 

ADDITIONAL INFO

Contact info

Norwegian Defence Procurement Division (NDPD)
P.O. Box 43
NO-1306 Bærum Postterminal
Norway

Points-of-Contract:

Senior Adviser Knuth Herrefoss
E-mail: kherrefoss@mil.no

Senior Adviser Britt Laila Steinkjer
E-mail: bsteinkjer@mil.no

 

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