Why are offsets important?
Offsets are used as a key differentiator by procurement agencies of 120 countries around the world, when assessing bids for high value projects. They are seen as an integral part of the sales process for multi-national companies and, due to their high value and stringent terms imposed at the outset, can be a significant burden for suppliers who do not have the capability to deal with them efficiently.
If a company wants to bid for a high value project, it has to be prepared to undertake offset obligations as part of the contract.
There are many benefits for each party:
For the buyer country:
- Political benefits – the Government can define its socio-economic objectives and use offsets to deliver part of it
- Economic development – allows the country to re align its economic and industrial base
- Creates or sustains local employment opportunities - transfer of key skills and access to new internationals markets and transfer of work to sustain local jobs
For the supplier:
- It is a means to differentiate themselves from the competition and win new business
- They are a means to access a new market
- Can also be a way of diversifying into new business areas and new geographic markets
- Create greater efficiencies through new global supply chains.