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The first Ansett 737-200 on the Boeing assembly line. Boeing has placed substantial offset orders with Australian companies. Most recently signed agreement from Boeing was with Hawker de Havilland who will manufacture 737-300 composite ailerons in a specially constructed autoclave facility at their Bankstown plant. The introduction of this form of technology will allow local companies much more scope in maintaining and repairing future composite airframe aircraft. To date, local companies have signed contracts valued at more than $500 m in value through the offset requirement.
Offsets Benefiting Australian Industry
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Growing Offset Workload of Benefit to Australia
Australian money spent overseas has, in the past, been of no value to Australian industry, but with the establishment of a Government program advocating Australian Industry Participation in large contracts, this situation has changed. The Commonwealth Government’s Australian Offsets Program was founded in 1970 and as a result of the introduction of the Program, Australian firms have won offset orders amounting to approximately $500 m. Aiming to obtain new technology, provide design and development work, and assist under-utilised sections of industry, the Program contributes also to the creation of new job opportunities.
Offsets are work directed to Australia by an overseas supplier as a result of receiving a major order for equipment or services in which the Commonwealth Government is involved. Under the offsets policy, overseas suppliers are required to provide economically viable offset proposals. The Program provides the supplier with an Industry Capability Directory, which details the capabilities of Australian firms, and those local firms can then solicit offset work from the supplier overseas. Offset credits can also be accrued, to be later applied to meet the offset requirements against another specific contract. The proposals are refined in consultation with the Department of Defence Support and/or Defence before the agreement is incorporated in the final tender response.
Offset work is normally sought in areas of technology similar to that of the purchase, and various types of proposals are acceptable. ‘Part production’ agreements, for assembly or sub-assembly manufacture of the equipment being purchased is one type of offset. The most common form, however, is a ‘co-production’ agreement, where components of the equipment being purchased are manufactured for sale by the overseas supplier to other customers, as well as for local use in the actual purchase. ‘Collaborative proposals’, where the prime contractor arranges for Australian participation in conceptual, design, development and production phases of the project, and arrangement by the supplier for purchase of Australian products (of similar technology), are also suitable. Funding of research projects and transfer of technology can also be presented as offset proposals.
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Offset work must be additional to that which would have occurred through normal commercial arrangements, and most work must be completed within a certain timespan – usually five years. The Australian Government does not provide financial assistance specifically for support of offset activities but will provide some financial assistance for research and development to encourage further export of Australian products.
The aircraft industry is a major beneficiary of this scheme, and the offset arrangements in relation to the aerospace industry have been compiled below. Since the inception of the Program in 1970, the following major aircraft contracts involving the Australian Government have been signed.
Purchase of: Airbus Industrie A300, Boeing 727, 737, 747, 767, Fokker F28, Lockheed P-3 Orion, Lockheed C-130H Hercules, McDonnell Douglas F-18A fighters, Westland Sea King helicopters, and engines for these aircraft from General Electric, Rolls Royce, Pratt and Whitney, and Detroit Diesel Allison. (Excluded from the list above are the 56 Bell 206B-1 helicopters manufactured under licence by Commonwealth Aircraft Corporation for the Australian Army and Navy. )
A spin-off of the Offsets Program has been an Airbus Industrie proposal that Australia join the A320 family program as an associate partner. A Memorandum of Agreement between Airbus Industrie and Hawker de Havilland, Commonwealth Aircraft Corporation and Government Aircraft Factories was signed in late 1981. This Memorandum commits all parties to explore further areas where Australian manufacturers may become involved with the A320 program, and could reap more than $200 m for Australian industry by the end of the century.
The table below compares overseas purchases with major offset orders. With fluctuating exchange rates and varying rates of inflation, it is impossible to compare figures, but in most cases, 30% of the value of the order has been placed with the Australian industry. Offset orders against engine purchases include General Electric, who provide engines for the F-18A, A300 and 767
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