Offset Arrangements

[Author of box 8.2 is Todor Tagarev]

Building integrity and reducing corruption risk in defence acquisition covers many specialist areas: from the way that technical specifications are developed, to the evaluation process, through to the way Defence Ministry procurement functions are organised. In most of these subject areas, there is increasingly a reasonable body of knowledge on what constitutes good integrity practice. Yet in one area—offsets—there is remarkably little scrutiny and very little discussion or development of good practice, despite the large and rapidly growing part that offset packages play in modern defence acquisition.

Transparency International’s (TI) assessment is that offsets are a major corruption risk, even in the most developed nations. In TI’s experience, defence officials from many countries also share this view, while governments are not properly managing this risk today. There is an urgent need for a concerted effort by industry and governments internationally to set and enforce a much stronger regime of transparency and integrity standards related to offsets.

This chapter starts with a brief discussion on current offsets usage. It then outlines specific corruption risks and the experience to date in examining offsets contracts. The final section presents what are currently considered minimum standards of good practice.

... For the full text of this chapter see the accompanying file below.