Legal Updates

A clause in a tender that prohibits coordination of bids prohibits the very disclosure regardless of whether it resulted in damage to the competition

August 18, 2022

A number of affiliated companies under the same ownership submitted bids in a tender for the construction of 5 residential and commercial complexes and each won the tender for a complex. As the terms of the tender stated that each bidder in the tender can win a single complex and is forbidden from coordinating offers, another bidder in the tender demanded that the win be voided.

The Court held that the submission of bids by affiliated companies for several complexes in order to increase the chances of winning constitutes prohibited bid coordination and therefore the winning must be disqualified. One of the pillar principles of tender law is the strict observance of clear and uniform rules for the purpose of promoting equality and fairness of the tender, increasing public trust and preventing corruption, and promoting fair competition between bidders. As such, the clause prohibiting the coordination of bids is intended to promote competition between the bidders in the tender, while preventing an unfair advantage and maintaining equality between the bidders precisely at the stage prior to the submitting the bids, since at this stage the bidders have an interest in preventing competition between them in order to increase their chances of winning. Here, the language of the tender clause prohibiting the coordination of bids forbids any action that would reveal the details of the bid of one bidder to another bidder, regardless of whether the disclosure resulted in actual damage to the competition between the bidders. Thus, even though the bidders did not compete for the same complex, the submission to different complexes is actually a division of the market, which gives them an unfair advantage and harms the equality between the bidders, and therefore their bids and winnings must be disqualified.