Home >
Offset > Implementation 
Offset Implementation
Offset programs can also be viewed as contracts that require the seller to transfer additional economic benefits to the buyer as a condition for the purchase of the goods and services.
The offset arrangement has become an increasingly popular tool in government procurement, especially arising from large defence products and major commercial aircraft purchases. They are common in exchanges involving aerospace goods and services and thus offsets permeate the market for defense systems and armaments. These arrangements also arise when governments purchase telecommunications equipment, computers and a myriad of other goods that need not embody high technology products.
The arrangement is marked by specific conditions where the purchasing government obliges a foreign seller to include extra benefits with the sale of the base goods and services. The foreign firm may then enter into individual offset contracts with local firms in the purchasing government's economy where governments prefer to realize these benefits in the form of in-kind transfer instead of bargaining for price discounts.
Typical arrangements include transfers of technology, agreements by the seller to purchase from local suppliers with some connection to the buyer, agreements to invest in production or other facilities in geographical proximity to the buyers, or agreements by the seller to meet certain performance targets (e.g., export requirements) or undertake other related activities (e.g., counter-trade) on behalf of the buyer.
Offsets vary considerably in form. Offset transactions may take — but are not limited to — any of the following forms:
| |
• |
Subcontracting; |
| |
• |
Technology transfer; |
| |
• |
Counter purchase; |
| |
• |
Foreign investment; |
| |
• |
Marketing assistance; |
| |
• |
Training; |
| |
• |
Co-production; and |
| |
• |
Licensed production. |
Offset Management Framework as illustrated below is used as a reference for Offset Programme implementation in Malaysia.
The processes were enhanced and adapted to fit the requirements of the Government of Malaysia. As a result of the integration, an Offset Management Framework (OMF) was derived based on the proposed Technology Acquisition Process Flow with the phases being as follows:
| |
• |
Establishment of Offset Committee (OC)
OC is formed upon initiation of an offset programme consisting of Secretary General of the procuring Ministry, representatives from Ministry of Finance, TDA and Under Secretary of Procuring Division. OC in general is to provide strategic guidance and approve the offset projects, monitor and review the offset projects implementation and evaluate the activities for the purpose of banking credit |
| |
| |
• |
Offset Requirement Document (ORD) Development
The ORD states the intent of offset programme implementation and list of proposed projects to be considered by bidders |
| |
| |
• |
Bidders Offset Proposal Submission
During this process, bidders will response to the propose list of projects by OC and provide alternative projects if require |
| |
| |
• |
Offset Proposal Evaluation
The evaluation method is used to measure and provide the most strategic proposed projects by taking into consideration from Recipient Audit and others |
| |
| |
• |
Offset Programme Agreement
Offset Agreement is to signed by both suppliers and representative from the procuring ministry Government of Malaysia |
| |
| |
• |
Offset Programme Implementation
During this process, OC meeting headed by Ketua Setiausaha (KSU) of the procuring ministry will be held periodically for monitoring purposes. Surveillance Audit will be conducted as and when require. |
| |
| |
• |
Offset Programme Assessment
Offset Programme Assessment is to measure the projects achievement as agreed earlier. Post Implementation Audit will be conducted for verification purpose. |
| |
| |
• |
Offset Obligation Relief
Upon completion of offset projects, the certification will be awarded to obligors. |