- They must be undertaken in accordance with our Code of Conduct
- They must have clear line management ownership and executive oversight
- They must be consistent with the customer’s offset policies and proportionate to the value of related contracts
- Financial and non-financial risks must be clearly assessed and mitigated.
How our business works
Offset arrangements are agreements made with export customers designed to generate work, or to create capability or economic value, in that customer’s country. Currently around 80 countries operate offset regulations and these are often an important element of the evaluation process for defence contracts.
We have offset commitments in a number of countries and through these programmes we seek to support customers’ economic and development goals, and deliver long-term sustainable benefits. All offset arrangements are governed by our Operational Framework (including our Offset Policy) and Code of Conduct.
Types of offset
There are typically two types of offset:
- Related offset that relates to our products and services.
- Unrelated offset that may be unrelated to defence. This can include investments, economic or social projects, schools or infrastructure.
Offset can also be referred to as industrial participation, international partnerships or industrial collaboration.
Our Offset Policy sets out the principles we apply to all our offset activities. The underlying principles applicable to all of our offset activities are that:
- they are undertaken in accordance with our Code of Conduct;
- they have clear line management ownership and executive oversight;
- they are consistent with the customer’s offset policies and proportionate to the value of related contracts; and
- financial and non-financial risks are clearly assessed and mitigated.
Our businesses have adequate resources who plan, negotiate and deliver offset. They are supported by a central Group Business Development team with related expertise in areas such as: investment planning, government liaison and education programmes. The Group Business Development team is also responsible for developing and embedding our offset policy, process and training materials, as well as overseeing risk management.
Training on both the commercial and the compliance considerations related to offset activity is provided to all relevant employees.
All proposals for offset put forward by our businesses are subject to a rigorous review and approvals process which includes risk-based anti-bribery and corruption due diligence. Offset proposals that are related to BAE Systems product / services must be approved by an internal panel consisting of the Group CEO, General Counsel and the Chief Counsel of the Compliance and Regulation team. All other (unrelated) offset activity must be approved by an external panel. This is a mandated process which is overseen by the Compliance and regulation team in collaboration with the Group Business Development team.
Compliance with the Offset Policy is monitored via our Operational Assurance Statement process and performance against our offset commitments is reported via our Quarterly Business Review process.
Our internal audit function may also audit offset agreements and confirm compliance with internal policy.