Industrial Participation (IP) is a UK MOD policy that aims to stimulate work and business opportunities for UK companies and secure access to overseas markets by generating long-term partnerships with offshore companies. Companies bidding for contracts to supply equipment or services to the UK armed forces undertake to place defence-related work in the UK.

IP is a flexible response to the barriers to overseas defence markets often faced by UK exporters. UKTI DSO’s Industrial Participation Unit works closely with the MOD on acquisition programmes, negotiates the IP commitments with the offshore suppliers and maintains a relationship with them to ensure the work flows to UK companies over the life of the commitment.

In addition to developing supply-chain opportunities, IP credit can also be considered for:

• Technology transfer
• R&D
• Marketing assistance

Why does the UK MoD have an Industrial Participation Policy?

While the UK MoD would prefer to operate without the need for IP, it recognises that UK companies attempting to export directly from the UK frequently face barriers to trade in the form of protectionist measures or stringent offset regimes. IP is a flexible response to these barriers.

It encourages offshore companies to use the UK’s defence industry without some of the negative effects sometimes found in more restrictive offset policies.

Who implements IP policy?

Within the Defence & Security Organisation, the Industrial Participation Unit (IPU) is responsible for implementing the UK MoD’s IP policy. In practice this includes:

• Working with IPTs of Defence Equipment and Support to identify when IP is applicable.
• Obtaining and assessing IP proposals from offshore companies looking to secure contracts on MoD programmes.
• Negotiating IP agreements with offshore companies.
• Providing input to Business Cases in accordance with Defence Industrial Strategy.
• Monitoring agreements to a successful conclusion.

What are the essential elements of Industrial Participation?

In compiling an IP proposal, offshore companies will indicate the work to be generated in the UK in terms of:

1. Direct IP – that is work carried out by UK based companies on the MoD programme to which the IP proposal relates.
2. Indirect IP – other defence work won by UK based companies from the offshore company as a result of the IP commitment.

Work must be defence or defence related to be credited against an offshore company’s IP commitment.  Commercial equipment provided as part of a defence system may be admissible for IP purposes.

The work must be carried out in the UK. It is recognised, however, that a UK company may then sub-contract part of this work offshore for its own commercial reasons and providing this is not excessive and has not been directed by other parties, IP credit may be awarded.

All claims for work containing offshore content will be individually assessed. Work should be placed as a result of the IP agreement and comprise either:

1. Products/services purchased from a new UK supplier.
2. New products/services from an existing UK supplier.
3. Purchase orders/contracts for existing products/services from a UK supplier that has been the subject of re-competition or re-evaluation.

What else can be considered for IP?

There are other means by which offshore companies can generate IP credit. These can include:

Technology Transfer – There are two approaches to technology transfer. Where technology transfer takes place as part of the Direct IP element, only the value of the work resulting from the technology transfer will be considered for IP credit. No additional IP credit will be awarded for the value of the technology itself.

Subsequent exports generated, however, by the UK company receiving the technology can generate IP credit against the Indirect element of an IP commitment. Technology transferred to a UK company solely for Indirect IP will be accepted providing the UK company receiving the technology enjoys free user and intellectual property rights.

All technology transfers must be free of charge to the UK company if it is to be considered for IP credit. The work generated by the technology transfer must be defence or defence-related as described above.

Research and Development - consideration for IP credit will depend on the extent to which the UK defence contractor is able to use the intellectual property rights derived from the research for its own purposes. IP credit will be generated by the subsequent defence sales resulting from the research.

Marketing Assistance - IP credit may be considered for marketing assistance provided free of charge to UK companies which results in them winning orders to third parties. The offshore company must be able to demonstrate that it was instrumental in the UK company winning a contract.

Companies should discuss with the IPU any plans concerning the activities listed above at an early stage (prior to any implementation) to establish eligibility for IP credit. You should note that multipliers are not given for IP credit.

IP/Offset Abatements

To assist UK based companies in their efforts to export, the IPU will pursue opportunities to carry out exchanges of IP and offset with the other offset authorities on a bi-lateral basis.

Further Information

Further guidance for UK companies on IP and a list of offshore companies with IP commitments is available on the IP page Partners site. Follow this link to register as a Partner.

If you are a company (UK or offshore) bidding on a UK MoD programme and may need to address IP the linked document will be of use.

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How can we help?

The UKTI Defence & Security Organisation provides all defence and security related advice within UK Trade & Investment. Contact the team for more information and advice:

UKTI Defence & Security Organisation, Kingsgate House, 66-74 Victoria Street, London, SW1E 6SW.

For information about what we offer potential and established UK exporters in the Defence & Security sector, see Our Services.

 

 

UKTI Defence & Security Organisation Contact: enquiries@ukti.gsi.gov.uk
Publication date: 23/03/09