Terma director: Offset only attractive if it builds something that lasts

Large defence contracts in the Nordics often come with offset obligations to the national industries. But what value they actually bring depends largely on how they are used. 

For Denmark's largest defence company, the only relevant question is whether offset funds lead to something that remains after the given contract ends.

- We see it as a strategic way of growing the company.

The words belong to Jes Ballin, offset and industrial participation director at Terma. He emphasises that offsets are not something the company chases unless long lasting business opportunities are present.

- There has to be something left afterwards. It can’t just be that you hire 20 people for three years and then shut it down, he adds.

I’m not a fan of companies chasing the money in that way. It kills innovation

Peter Sperling, CIO at NFC

In practice, that shifts the focus away from the contract itself and onto what it enables.

Opening doors

For Terma, the real value of offset often lies in access. Projects bring the company into collaboration with large international contractors that would otherwise be difficult to engage with.

- In many cases, you gain access to large international companies with capabilities that are otherwise difficult to reach, Ballin says.

In an industry where partnerships are long-term and tightly held, that access can be decisive. It allows companies to enter new areas faster than they would on their own.

That also changes what kind of work is prioritised. Production on its own is not enough. The projects that matter are those that involve technology, development or cooperation that can be built on over time.

The Danish system is designed to support that. Incentives such as multipliers reward projects that go beyond simple workshare and involve joint development or technology transfer.

- This motivate companies not just to place production, but to engage in joint development and technology transfer, Ballin says.

Killing innovation

That logic is not uncontested.

In a recent article from Defence Nordic, concerns have been raised that the system can also push companies in the opposite direction, away from their core capabilities and towards projects driven primarily by the availability of offset funds.

Peter Sperling, Chief Innovation Officer at the National Defence Technology Center Denmark, argued then that companies risk adapting their activities to fit the system rather than focusing on what they do best.

We see it as a strategic way of growing the company

Jes Ballin, offset and industrial participation director at Terma

- I’m not a fan of companies chasing the money in that way. It kills innovation, he said.

The critique points to a structural tension. Offset is intended to build industrial capacity, but if the incentives are misaligned, it can just as easily lead to activity that is difficult to sustain.

For companies like Terma, that risk underlines the need for a more selective approach, and for focusing on projects that strengthen existing capabilities rather than diverting them.