Change of Terms after Execution of Agreement with Tender Winner

Change of Terms after Execution of Agreement with Tender Winner

February 9, 2018

In the context of a tender for marine fueling, the port requires the bidders to present a refueling barge that meets certain criteria. The winner of the tender waits until the agreement is signed with it and then informs the port that it is about to hire third party services on time charter terms to carry out the refueling services, while dealing only with the sale of the services. Is it possible for a person who lost the tender to follow the manner of consummation of the tender contract and approach the Court if the winner does not act in accordance with the conditions of the tender?

When an authority enters into tender proceedings, it is required to publish the terms and the bidders in the tender are not permitted to deviate from such, or the bid submitted will be disqualified. After the winner is chosen, the authority executes a contract with it (and the wording of the contract is usually attached to the tender as part of its terms) and at that moment the tender ends and an ordinary agreement is deemed executed between the authority and the winner. At this stage, the other bidders exit the picture and this creates fertile ground for the authority and winner to amend the agreement between them in a way that in effect retroactively changes the tender terms.

In a case discussed in the Tel Aviv Court, after a winner was declared in the tender, new circumstances were discovered that necessitated changes in the terms of the agreement. A company that did not deal at all with the tender claimed that it was a material change, and if it knew of the possibility of such a change, it would approach the tender. The Court held that if the PA's flexibility to change the terms of the agreement in accordance with new circumstances that could not be expected in advance would be undermined, this would lead to instability and complete chaos, as tenders would be canceled.

However, in the case discussed by the same judge about six months later, a winner of the tender was required to provide a warning system against earthquakes within 4 months from the date of its winning. The winner did not comply with this requirement, and after negotiations with the tender's editor it was decided to make a new agreement under new conditions, this time the Court held that this is not a matter of adapting the terms of the contract to new circumstances due to a change that was inevitable and could not have been foreseen, That did not meet the conditions of the tender but the tender editor decided to update the documents retroactively to correct it.

What is a material change and what is the non-compliance with the terms of the tender? This question depends on circumstances and changes from tender to tender. For example, in one case that was discussed in the Tel Aviv Administrative Court, it became clear only in the framework of the legal proceedings that one of the bidders signed an agreement with a subcontractor to perform part of the tender. The Court held that because this fact was not mentioned in the documents that were submitted in the tender or in any other manner, this is a conduct in the lack of good faith of the bidder, and therefore his proposal must be rejected retroactively. The court also dealt with candidates in the tender who actually served as a "front" for another contestant who himself could not approach the tender, making it clear that a tender could not be held as a "masquerade ball" in which the contestants hide behind straw men.
In conclusion, not every case of a change in the contract after winning the tender will open the door to the court to open the tender, but when the change is such that in effect retroactively changes the terms of the tender can be asked to intervene.

* For the full disclosure, it should be noted that at the time of writing this article, our firm represents a company that deals with marine fueling by means of refueling ships and attacks the tenders committee in circumstances similar to those described in this article.