In addition, it was determined in clause 5.3.2(f) that in the framework of its proposal, the supplier must specify ownership, business or other relationships of the sub-supplier, to the extent that they are: "may create a conflict of interest or a fear of dependence, or do not meet the conditions specified in clause 1.5.4...", and that the main supplier must specify: "the steps and conditions that ensure that the operation of the database will not be affected by the dependence or connection of the sub-supplier to the institutional bodies...". And finally, even in the context of the sub-suppliers, the Respondent retained some flexibility, by determining in clause 5.3.2(g) that: "The Ordering Party is entitled to disqualify bids that there is concern that they do not meet the conditions specified in the tender and the above clarifications".
It should be emphasized that the Petitioner did not attack the terms of the tender before submitting its proposal, and it does not attack them in its petition either.
- I will now discuss the tender proceedings that led to the filing of the petition.
Only two bids were submitted to the tender, that of the Petitioner and that of Ness. After the bids were opened, the tenders committee decided to request clarifications from the Petitioner and Ness. In the matter of Ness, the tenders committee requested information on the business relationships between the controlling shareholder of Ness - Ness A.T. In a tax appeal (hereinafter - "Ness M") - and the institutional entities, and inter alia for the software services provided by Ness Mother to the institutional entities through another subsidiary of it - Danel Financial Solutions in a Tax Appeal (hereinafter - "Danel"). Ness replied (Appendix D to the Respondent's reply) that Ness Am does indeed provide institutional entities with software for the management of financial assets, but these are "non-substantial" engagements, none of which reach 5% of Ness Am's annual turnover in terms of their financial value. Ness added that Danel is a company with a separate personality from Ness M, and that all of its engagements are independent and separate from those of Ness M. Ness argued that there is no concern of a conflict of interest between Danel's business and the service that Ness will provide according to the tender, since Ness is a company that was established for the purpose of the tender, and that according to the terms of the tender, if it wins it, it will be obligated to provide the services according to the tender to the institutional bodies in accordance with the terms and prices dictated in the tender, without Ness having discretion or flexibility in this matter. In its response, Ness also declared that it is an independent company that will be managed completely separately from Ness M and Daniel, through a board of directors: "which is also composed of board members who are not in any way connected to the parent company or Daniel, under the management of a completely independent CEO and management." Ness noted that Danel's CEO is indeed one of its directors, but it clarified that he is one of six directors, and that in order to remove any concern, its shareholders agreed among themselves that any decision concerning any of Ness's shareholders or its related entity would require the prior written consent of all shareholders.
- On March 27, 2023, the subcommittee of the tenders committee, whose role was to examine the proposals submitted in the tender and to recommend its recommendations to the tenders committee, held a discussion on the proposals, including a clarification of a miracle (Appendix E to the reply). At the end of the discussion, the subcommittee decided, in a majority and minority opinion, to recommend not to disqualify Ness's proposal at that stage. The minority opinion was of the opinion that in light of the wide scope of services provided by Ness Am to many institutional entities, through Danel and through Ness Pension systems, there is a concern that the independence required by clause 1.5.4 of the tender will be harmed. The majority opinion was of the opinion that although there is a concern of a conflict of interest and harm to Ness's independence, the disqualification of Ness's proposal will leave the committee with one valid bid in the tender, a result that is unjustified in light of Ness's clarification that Ness Am's engagements with the institutional bodies are not significant. The majority opinion added that: "The concern of a conflict of interest can be expressed in the bias in the valuation of a particular asset in which one institutional entity or a limited number of entities invest, but this is a valuation model that has a fixed methodology that has been determined in advance, and therefore the margin for maneuver that is supposed to affect the valuation of a staged asset is relatively narrow." In light of the above, the subcommittee recommended that Ness continue to participate in the tender "but subject to legal examination". In addition, the subcommittee noted that opinions within it were also divided on the question of whether it was appropriate to ban Danel's CEO from membership in the board of directors of Ness. It should be noted here that this matter has been taken off the agenda for the time being, after in the hearing that took place in the petition, Counsel for Ness declared that Danel's CEO is no longer and will no longer be a director of Ness (transcript of the hearing at p. 28, paras. 23 ff.).
- On April 24, 2023, the tenders committee discussed the subcommittee's recommendations and decided not to disqualify Ness's proposal out of hand, but to continue to examine it on its merits, and only then to decide whether there is a concern regarding Ness of a conflict of interest that justifies the rejection of its proposal (Appendix F to the Reply). In the decision, the tenders committee determined that clause 1.5.4 of the tender: "does not specify what are the business relationships that may create a conflict of interest. In addition, the authority to determine that the relationships of shareholders of bidders give rise to a concern of a conflict of interest or dependence is at the discretion of the committee." The Committee held, based on the judgment given in the appeal in Petition/Administrative Claim 4011/05 Dagesh Foreign Trade v. Ports Authority (February 11, 2008), that the prohibition regarding conflict of interest in public law is not an absolute prohibition, that dealing with issues of conflict of interest requires a balance between various considerations, including the intensity of the wrongdoing and the existence of measures that can be taken in order to weaken it. The committee also determined, based on the judgment in the High Court of Justice case 531/79 Likud faction v. Petah Tikva Municipality, IsrSC 35(2) 566), that sometimes principles of necessity will preclude the application of the rule prohibiting conflicts of interest. The committee summed up its decision as follows:
"... In light of the importance of the tender and its decisive impact on the pension savings of the general public, it is necessary to examine the various models by comparing proposals and suppliers. To this, it should be added that in accordance with the declaration of Ness Fair Value, the strength of the economic connection between it and the institutional bodies is not high. In addition, to the extent that the Ness Fair Value model does not leave discretion or flexibility to the winning supplier, the risk of a conflict of interest decreases.