Legal Updates

Negotiating with a bidder as a pre-condition to its winning is illegal and violates the principle of equality between the bidders

August 9, 2021

A tenders committee recommended to negotiate with one of the bidders, before being officially selected as the winner of the tender, as a pre-condition of its selection as a winner of the tender. By this it sought to add a waiver of debts of the authority to the bidder as a pre-condition for the win.

The Court accepted the petition and invalidated the decision in light of serious defects in the conduct of the tenders committee. The Israeli law prohibits negotiating with a bidder prior to determining the winner of the tender. Negotiating with a bidder before declaring the winner violates the principle of equality, which is one of the fundamental principles of tenders law. Equality also means transparency, as without transparency the other bidders, including potential bidders, cannot know that the principle of equality has indeed been maintained. The tender included a term authorizing the authority to negotiate once the decision regarding the wining bidder has been made. However, the tender also included another term, which its legality is questionable, stipulates that insofar as negotiations are conducted and there is no agreement, the authority reserves the right to cancel the tender altogether. The tenders committee recommended the winning of a bidder, subject to the results of negotiations which was naturally conducted prior to the formal announcement of the win. The other bidders in the tender did not know about the existence of the negotiations and did not know that its purpose was to reach a debt settlement between the authority and the bidder, who also provided services to the authority at the time. The authority concealed from the other bidders that it had an interest in the winning of that bidder and did not conduct itself with the required transparency. The tenders committee acted unlawfully and therefore its decision was invalidated and the case was reverted to the tenders committee to re-discuss the identity of the winner.