Defense Industry Is Amassing $500B Offset Obligation
Defense-driven offset programs will total nearly $500 billion in cumulative obligations between 2005 and 2016, according to a new study from Washington-based Avascent. The company says its study, based on “comprehensive bottom-up research,” is the first analysis on the subject to be made public.
Avascent notes that major U.S. and European defense companies are seeking to boost their international business, as domestic budgets decline. But “the complex, changing and frequently opaque offset requirements for each country” are a puzzle. According to Avascent, “these offset policies are increasingly sophisticated and their enforcement is becoming more rigorous. Companies with offset strategies conceived after contract signature or lacking in analytical rigor are likely to see reduced profitability, increased exposure to risk and a potentially negative impact on the corporate brand abroad.”
The consulting company says it arrived at the $500 billion figure after doing a country-by-country analysis.