Industrial cooperation (offsets) requirements under Danish defence equipment tenders and acquisitions
Industrial cooperation plays a vital role in many major public tenders from DALO regarding the purchase of defence equipment from foreign suppliers.
In short, industrial cooperation refers to the requirement for foreign suppliers to commit - as a precondition for being awarded a public defence tender - to collaborative projects with Danish companies, such as using Danish subcontractors or investing in Danish businesses and technology development projects.
The primary objective of industrial cooperation is to ensure that foreign suppliers awarded major defence contracts in Denmark contribute to the Danish economy and defence industry and to facilitate knowledge transfer and strengthen the Danish defence industry in the international market.
Current guidelines
In 2021, new guidelines were introduced by the Danish government to ensure alignment with EU legislation while keeping industrial cooperation requirements in tenders regarding the purchase of defence equipment. These guidelines apply to tenders regarding defence equipment where the contract value exceeds DKK 50 million.
Necessity and proportionality
For each defence tender, a comprehensive assessment must be made to ensure industrial cooperation is both necessary and proportionate to national interests. This involves evaluating whether industrial cooperation is essential to protecting Denmark's security interests and maintaining relevant competencies, and whether it represents the least invasive yet effective measure to achieve these objectives. Additionally, the assessment should consider whether industrial cooperation may negatively affect competition within the EU internal market.
Implementation and execution
The requirement for industrial cooperation must be clearly outlined in both the procurement materials and the contract with the foreign supplier. If cooperation is mandated, the signing of an independent "Industrial Cooperation Agreement" will be a precondition to finalizing the procurement contract.
Execution of industrial cooperation can take many forms, including the procurement of defence equipment and services from Danish companies or collaboration on development projects. The execution timeframe depends on factors such as the required defence industrial competencies, project lifecycle, delivery timelines, product lifespan, and supply security. Certain activities that are assessed to have a significant impact on the Danish defence industry are assigned a "multiplier", meaning that the activity will count for more towards the required industrial cooperation amount than the actual investment (up to a factor 7), why foreign suppliers may be interested in such activities to reduce the costs associated with industrial cooperation. These activities will typically include e.g. transfers of technology, financing for development, counselling or making facilities available to Danish companies.
Foreign suppliers bidding on Danish tenders regarding the purchase of defence equipment should closely consider any requirements on industrial cooperation and factor such requirements into the overall business case.
Want to know more?
If you have any questions or need advice on Danish defence tenders and defence equipment acquisitions, please contact Plesner's Defence and National Security team.