Legal Updates

A tender bidder may not rely on experience of affiliates unless the tender specifically so allows

June 1, 2020

A tender participant has won the tender by relying on the experience of affiliated companies and only after it was declared winner did it amend its bid to add personal experience.
The Court held that a bid relying on experience of affiliates, when the tender terms do not specifically allow this, is materially flawed and may not be amended in retrospect after the bids were opened. Israeli Companies Law states that a company is an independent and separate legal entity. An exception to this basic rule is of piercing the corporate veil, which enables attribution of company debts and rights to its shareholders, or vice versa. However, such means may only be used under extreme circumstances. Such principles also apply to a company when participating in a tender, unless the tender terms specifically enable this. Thus, when a company is part of a group and wishes to participate in a tender, it is still regarded as a separate entity, even if under the same control as the rest of the group. Regarding the possibility of amending flaws in a bid in retrospect, generally, a material flaw in the bid requires its disqualification. An exception may be allowed regarding clarifications and technical amendments. This derives from principles of equality and efficiency which underlie the tenders’ laws. The more material the flaw and the later such amendment is requested, the more likely that such will not to be allowed. Although the tender committee has discretion in this regard, this may not be used to circumvent the tenders principles and enable expanded amendments. Here, when submitting its bid, the winner relied solely on the experience of other group companies, and in light of the separate entity principle it couldn’t have done so. Regarding the amendments in the form of adding personal experience, the tender committee excessively and inappropriately expanded the right to amend, however as afterwards it conducted a serious examination of the bid, the bid will stand.