Legal Updates

When the tender committee discovers, in retrospect, new information that ought to have disqualified a bid, it is required to reconsider the declaration of the winner

January 13, 2020

The Israel Land Authority published a tender for the sale of land for construction which stated that if a winning bid is canceled due to non-compliance with the winning conditions, the second bid will be declared the winner on the condition that it is raised to match at least 90% of the first winning bid. The winning bid was at ILS 60 million but after a month the bidder requested the Israel Land Authority to withdraw from the bid, because it was based on a mistake. The Israel Lands Authority demanded the second bidder, whose offer was at ILS 30 million to raise the bid to 90% of the first winning bid.
The Supreme Court held that because the winning bid was not canceled due to breach of agreement but because it was a defective bid, there is no need to require the second winner to raise the bid as a condition of winning. The Court will not interfere with a tender committee mistake if it was done in good faith and without violating equality or the principle of fairness. The law allows the tenders committee to disqualify a bid if it has a defect by being a lacking bid; a bid based on a mistake; a bid based on false assumptions; A bid based on a misunderstanding of the subject of the tender; or a bid that may cause jeopardizing of rights of employees. When it comes to a technical flaw, it may be corrected, as opposed to a material defect that impedes fair competition between the tender participants, which usually results in the disqualification of the bid and may not be rectified except in exceptional cases. Here, the winning bid was a non-executable losing offer and although there is sometimes logic behind a losing offer, there is no such here and therefore it should be disqualified. Although the discretion exercised by the tender committee upon its original decision, based on the information at the time, was correct, this does not preclude the tender committee from the right, and in appropriate cases, the obligation, to reject the winning bid when new information is discovered and such information would have disqualified the bid in the first place. Here, the winner approached the committee after a month and pointed the material flaw in the bid and therefore the winning bid had to be disqualified. Therefore, this is not a breach of the agreement but a disqualification of the original winnings and therefore the second bidder is not required to raise its bid.