n Articles and Rulings

Intellectual Public Procurement:
The Law in Israel

Written by L. Marc Zell, Adv.
(with Craig Rubin, Adv.)

A. Public Procurement and its Legal Basis

1. Constitution and Legislation

Overview of Israel and its Economy

Israel, the Middle East’s only democracy, is located on a narrow stretch of land on the eastern shore of the Mediterranean Sea. A country with a population of slightly more than 6 million, Israel achieved its independence in 1948 after fighting a war of independence against the invading armies of neighboring Arab countries.

Once a small localized economy based on light industry and agriculture, Israel today is a world leader in such areas as electronics and information technology. The Israeli economy has undergone many changes in recent years, and as the result of privatization and new legislation the government has greatly reduced its direct involvement in the economy. The citizens of Israel today enjoy a standard of living that is comparable with that of Western Europe.

Israel is a founding member of the World Trade Organization, a signatory of the GATT Uruguay round and is the only country in world that has entered into free trade agreements with the United States, the European Community and the European Free Trade Association.

Israel is a country that is still building itself and many major infrastructure projects are being carried out or are in the planning stages. Most of these projects are conducted by way of international tender and numerous foreign companies have won such tenders.

Overview of the Israeli Legal Framework

Israel is a parliamentary democracy and is one of only a handful of countries in the world without a written constitution. The 120 member Israeli parliament or “Knesset” serves both as a house of representatives and as the legislative branch of government. There are no restrictions on the legislative powers of the Knesset except for a limited number of “entrenched clauses” found in certain “basic laws” which essentially enact constitutional norms.

Primary Legislation and Implementing Regulations

Primary legislation in Israel is enacted by Israel’s Knesset. Primary legislation often authorizes the government, through government ministers or other public officials, to enact implementing regulations (secondary or subsidiary legislation) pertaining to the primary legislation. Certain areas of the law, as is the case with public procurement, are primarily governed and regulated by the implementing regulations. Most laws enacted by the Knesset expressly state which government minister is responsible for enacting the relevant implementing regulations. In certain circumstances, as is the case with public procurement, the implementing regulations enacted by the relevant ministers must be approved by a committee of the Knesset.

2. Budget Regulations

Procurement conducted by a government entity must specifically be provided for in the entity’s budget. Pursuant to the Budgetary Principles Law, 5745-1985 (the “Budgetary Law”), the amounts to be expended by the government in any fiscal year are to be included in the annual budget of the State of Israel. The budgets of other government entities such as statutory companies, government companies and local governments must be approved by either the Israeli Minister of Finance or the Minister of the Interior.

The Budgetary Law also provides that the contracts of various government organs and entities that are above certain designated amounts must state that the specific transaction is provided for in the entity’s budget and indicate the relevant section of the budget where it is included. In addition, the Budgetary Law provides that unbudgeted-for contracts valued above certain designated amounts are considered void.

3. General Overview of Laws, Implementing Regulations, International and Bilateral Agreements Applicable to Public Procurement in Israel

a. The Three Main Branches of Public Procurement in Israel

Public procurement in Israel can generally be divided into three separate legal regimes:

1. Procurement by government ministries, government companies, government subsidiaries and statutory companies;

2. Procurement by the Ministry of Defense, the Israel Defense Forces and government companies and subsidiaries for which the Minister of Defense is responsible; and

3. Procurement by municipalities and local and regional councils.

Although there are many similarities regarding the basic legal principles and procedures which apply to all three legal regimes, there are various substantial differences, as discussed herein.

b. General Principles of Public Procurement Law in Israel

General Principles

“Tender” has been defined by the Israeli Supreme Court as an “(i)nstitutionalized framework for carrying out negotiations in preparation for signing a contract, by way of competition between different proposals.” (Beit Yules Ltd. v. Raviv Moshe & Co. Ltd., Additional Hearing 22/82, 43 (i) P.D. 441, 480 (1989)).

Israeli public procurement law is grounded on two central policies or foundations: (1) to allow contracting government entities to choose from among as great a number as possible of suitable proposals in order to choose the best one; and (2) to provide all interested parties with the opportunity to compete for a contract on the basis of fair competition and equal conditions (Beit Ariza Rechovot Ltd. v. the Minister of Agriculture, High Court Petition 292/61, 16 (i) P.D. 20, 27 (1961)). In short, the basic principles of Israeli procurement law are intended to ensure the public interest in equality and integrity as well as the economic interest of the procuring entity (see e.g., Gozlan v. Beit Shemesh Local Council, High Court Petition 368/76, 31 (i) P.D. 505, 511 (1976)).

Over the years the Israeli courts, through a series of decisions related to procurement and the tender process, have established a modern body of procurement law which apply to all government entities. These decisions have articulated general principles that must be followed by the procuring government entities during all stages of a tender. These principles include equality, fair competition, reasonableness, good faith, impeccability, and the lack of favoritism, arbitrariness, discrimination and conflicts of interest on the part of the government entity. These principles are considered so important and fundamental to public procurement in Israel that it has been held that the procuring government entity must take steps to prevent even the appearance of impropriety (Herut Ltd. v. the Minister of Health, High Court Petition 794/78, 33 (ii) P.D. 716 (1979), regarding favoritism of certain offerors). In addition, as is the case in other jurisdictions, the law of contract, quasi-contract and torts all apply to public procurement law and tender procedures in Israel.

The Legal Situation before the Enactment of the Mandatory Tenders Law

Prior to the enactment of the Mandatory Tenders Law, 5752-1992 (the “Law”) there was no general statutory requirement that government entities conduct public open tenders when contracting to procure goods or services. Only local governments were required by law to conduct public tenders. Many central government entities, however, were required to procure by way of public tender pursuant to the Finance and Business Rules issued by the Israeli Accountant-General (the “Rules”). Pursuant to the Rules, much discretion was given to the procuring entities, and the Accountant-General allowed for many individual transactions to be performed without the need for a public tender.

Prior to the enactment of the Law government companies were only required to procure by way of public tender if their own specific internal guidelines required this. Since the Rules as well as the specific internal guidelines of other government entities were not legally binding directives grounded in legislation passed by the Knesset and were not made known to the general public, the ability to challenge the tenders of government entities was somewhat limited. The Rules continue to serve as internal procurement procedures for certain government entities even after the enactment of the Law and the promulgation of its implementing regulations. The Rules today, however, are only considered internal instructions of a technical nature, which must conform with the provisions of the Law and its implementing regulations.

The Enactment of the Mandatory Tenders Law

Israeli procurement law underwent a “revolution” on March 3, 1992 when the Law was enacted by the Knesset. The Law went into effect on May 16, 1993. The enactment of the Law was the culmination of a process that had continued for many years and had included various informal proposals as well as formal proposed bills being submitted to the Knesset. An early version of the Law was originally submitted to the Knesset in 1984.[1]

The Law is essentially a very concise framework which specifies those areas where secondary implementing legislation may be enacted. The Law authorizes the Minister of Finance, upon the approval of the Constitution, Law and Justice Committee of the Knesset, to promulgate regulations in certain specified areas in order to implement the Law. The approval required of the Knesset committee insures the parliamentary overview of the implementing regulations. The result, therefore, is that the vast majority of the content and procedures regarding mandatory government tenders in Israel are included in the implementing regulations and not in the Law itself.

In addition, due to the special nature and role of the military establishment in Israel, and the importance and sensitivity of procurement by the Ministry of Defense and the Israel Defense Forces, the Law provides that the Minister of Defense can promulgate separate regulations implementing the Law with regard to procurement by the military establishment.

c. Scope of the Law

The Law essentially provides that all government ministries, statutory companies (companies created through specific legislation), government companies and certain other entities connected to the government may only enter into contracts to procure goods or services through a public tender which grants every person an equal right to participate. Section 2 of the Law provides that:

“The State, all government bodies corporate, religious councils and sick funds, may not enter into any contract for the performance of any transaction in respect of goods or real estate, or for the performance of work or the acquisition of services, except by way of a public tender which provides every person with an equal opportunity to participate in it.”

Section 1 of the Law defines “government bodies corporate” as including government companies, government subsidiaries, and statutory companies (“Government Bodies Corporate”).

d. Implementing Regulations of the Mandatory Tenders Law

In 1993 the Minister of Finance promulgated the Mandatory Tenders Regulations, 5753-1993 (the “Regulations”) which implement the Law and provide the basic procedural rules with respect to procurement by the government entities covered by Section 2 of the Law, other than the defense establishment.

In 1993 the Minster of Defense promulgated the Mandatory Defense Regulations (Defense Establishment Contracts), 5753-1993 (the “Defense Regulations”) which provide the basic procedural rules applicable to procurement by the Ministry of Defense, the Israeli Defense Forces and government companies and subsidiaries for which the Minister of Defense is responsible.

e. Preferences for Local Products and Offsets

The Preference Regulations

In addition to the Regulations and Defense Regulations, other implementing regulations have been promulgated pursuant to the Law. These regulations include preferences for Israeli products and services. Section 3A of the Law, which authorizes the enactment of secondary legislation related to preferences, was not included in the original Law but was only added as an amendment in 1993.[2] These preference regulations have their origin in a pre-Law government decision from February 1984 which required that government entities provide certain preferences for local products and services when conducting procurement.

The Mandatory Tenders Regulations (Preference for Israeli Products and Mandatory Commercial Cooperation), 5755-1995 (the “Preference Regulations”) apply to government ministries and Government Bodies Corporate only. The Preference Regulations therefore cover both government entities that procure pursuant to the Regulations as well as certain entities that procure pursuant to the Defense Regulations. The Preference Regulations provide for a preference with respect to the price criteria of Israeli goods that do not exceed a proposal regarding foreign goods by more than 15 percent (or 10 with respect to procurement by government companies). The Preference Regulations currently do not apply to Israeli services although the Israeli Ministry of Industry and Trade is currently proposing that the Preference Regulations be expanded to provide for a preference with respect to Israeli services as well.

The Mandatory Tenders Regulations (Preference for Products from National Priority Areas), 5755-1995 (the “1995 National Priority Regulations”) and the Mandatory Tenders Regulations (Preference for Products from National Priority Areas), 5758-1998 (the “1998 National Priority Regulations) provide for a preference of between five and fifteen percent with respect to the price criteria in a tender with regard to goods or services of offerors from certain designated national priority areas within Israel. In general, the 1995 National Priority Regulations apply only to government ministries (other than the Ministry of Defense) and the 1998 National Priority Regulations apply only to tenders of the Ministry of Defense.

The Preference Regulations, the 1995 National Priority Regulations and the 1998 National Priority Regulations are similar in purpose to national preference legislation in other countries such as the Buy American Act in the United States.

Mandatory Commercial Cooperation (“Offsets”)

The Preference Regulations also require foreign suppliers (defined as “a producer, supplier or importer of imported goods or a supplier of work not executed in Israel”) that contract with certain government entities for the acquisition of goods or the execution of works the value of which exceeds 2,100,000 New Israel Shekels (“NIS”)[3] to implement “mandatory commercial cooperation” (offsets) in an amount equivalent to 35 percent of the value of the contract. The mandatory commercial cooperation requirement, however, is only a qualification for a foreign supplier to participate in a government tender and is not a criteria for awarding a contract. As described below, such mandatory commercial cooperation is only to be performed if the foreign supplier actually contracts with the Israeli government entity. The requirement to perform mandatory commercial cooperation applies also to contracts above the said monetary value which are not done by way of tender.

f. The Government Procurement Agreement

Israel is a signatory to the 1994 Agreement on Government Procurement that was signed in Marrakech on April 15, 1994 and entered into force on January 1, 1996 (the “GPA”). The GPA, an agreement within the framework of the World Trade Organization, is intended to open up government procurement contracts and tenders of the signatory states to international competition and to remove national preferences and discrimination against foreigners. Article III (1) of the GPA requires that its signatory countries give the products, services and suppliers of other signatory countries treatment “no less favourable” than that given to domestic products, services and suppliers and that signatory countries not discriminate among goods services and suppliers of the other signatory countries when procuring.

The GPA, however, only applies to certain government tenders in Israel. The application of the GPA to a specific tender depends upon the procuring entity, the value of the contract as well as the type of product or service being procured. The GPA applies to tenders of the following Israeli government entities, for contracts valued above the listed thresholds:

Annex I of the GPA – Procurement by all government ministries (except for the Ministry of Defense and the Ministry of Internal Security):

Annex II of the GPA – The municipalities of Jerusalem, Tel Aviv and Haifa

Annex III of the GPA – Various government companies including the Israel Airports Authority, the Israel Ports and Railways Authority, the Israel Electric Corporation, and Mekoroth Water Resources Ltd.:

Pursuant to Section 44 of the Regulations, which provides that the Regulations “shall apply to the extent that they do not contradict any obligation of the State under an international treaty,” the provisions of the GPA are given precedence over the provisions of the Regulations if there is any contradiction between the two. Therefore, when an Israeli government entity is involved in the procurement of goods or services which is covered by the GPA, the Preference Regulations and the 1995 National Priority Regulations regarding preferences for local Israeli products and services shall not apply with regard to suppliers from any other GPA signatory country.

The mandatory commercial cooperation requirements, however, apply to foreign suppliers in Israel even if the GPA applies to the specific government tender. This is due to the fact that Israel, which is considered a “developing country” for purposes of the GPA, negotiated conditions for the use of offsets at the time of its accession to the GPA. These conditions permit Israel to require offsets in the amount of 35 percent of the contract value through the year 2000 and 30 percent for the four years thereafter.[4]

g. Bi-lateral and other Agreements that Effect Procurement by Israeli Government Entities

Israel has also entered into a number of international agreements that apply to government procurement with regard to suppliers from certain foreign states. Article 15(3) of the United States – Israel Free Trade Agreement of 1985 requires that Israel waive all “Buy National” (local preference) restrictions with respect to government agency purchases of at least $50,000 with regard to U.S. suppliers. The government agencies covered by this Article are 13 Israeli government entities which came under the framework of the WTO government procurement agreement that preceded the GPA. A number of important procuring government entities such as the Israel Airports Authority and the Israel Ports and Railways Authority are included among the 13 entities. The Preference Regulations and the 1995 National Priority Regulations will not apply to suppliers from the U.S. with regard to contracts of the 13 covered entities which are above the noted threshold.

In 1987 Israel and the United States also signed the Memorandum of Understanding Between the Government of Israel and the Government of the United States of America Concerning the Principles Governing Mutual Cooperation in Research and Development, Scientist and Engineer Exchange, Procurement and Logistic Support of Defense Equipment (the “MOU”) which relates in part to procurement by the Israeli Ministry of Defense. Within the framework of the MOU the Israeli Ministry of Defense invites U.S. suppliers to submit proposals in certain tenders for the acquisition of defense supplies. The local preferences provided for in the Preference Regulations will not apply with regard to American suppliers which participate in tenders of the Ministry of Defense pursuant to the MOU. Preferences for Israeli suppliers from certain national priority areas which are provided for in the 1998 National Priority Regulations will, however, apply to such tenders.

In 1997 Israel also signed two procurement agreements with the European Community which open up each side’s public procurement markets beyond the provisions of the GPA:

The Agreement between the European Community and the State of Israel on Government Procurement broadens the scope of the GPA with regard to European Community suppliers to cover additional entities and services including Israeli municipalities not covered by the GPA, urban transport entities, maintenance and repair services and medical equipment.

The Agreement between the European Community and the State of Israel on Procurement by Telecommunications Operators opens up the procurement of Bezek (Israel’s sole provider of telephone line service) and Israel’s various mobile telecommunication operators to European Community suppliers. This agreement requires that such Israeli entities not apply any of the relevant local preference rules with regard to European Community suppliers in procurement contracts of greater than $186,000 for supplies and services and $12,189,000 for construction services.

B. Procedure for Award of Public Procurement Contracts

1. Application of Relevant Legislation and Regulations

As discussed above, the government entities included in Section 2 of the Law, other than those that are a part of the defense establishment, are required to procure goods and services by conducting public tenders pursuant to the procedures and rules included in the Regulations.

The following government entities are required to procure pursuant to the Regulations:

1. All government ministries (excluding the Ministry of Defense);

2. Reference units of such ministries;

3. Government companies and subsidiaries;

4. Statutory companies;

5. The Israel Lands Administration;

6. The office of the President, the Knesset, the State Comptroller’s Office and the Knesset Central Elections Committee;

7. Religious councils; and

8. The Sick Funds (the four major providers of medical care in Israel).

Many of the largest government procuring entities are required to procure pursuant to the Regulations, including the Israel Ports and Railways Authority, the Israel Airports Authority, the Israel Electric Corporation and Bezek.

Although the Regulations apply to a wide range of government entities there are some differences regarding the applicability of the Regulations to government ministries, government companies and statutory companies. These differences can be summarized by stating that government companies, due to their commercial nature, are given more latitude in a number of areas including the exemption of certain contracts from the general open tender requirement.

In addition to the Regulations all government entities have detailed internal procedures pertaining to procurement. Such internal rules, however, may not contradict the provisions of the Law or its implementing regulations, including the Regulations. As stated above, the internal procurement procedures set out in the Rules apply to most government ministries.

Tender Committees

Pursuant to Section 8 of the Regulations, each government entity is required to appoint one or more tender committees which are responsible for conducting the tenders of the entity. Most entities have a number of tender committees, each responsible for a different area of procurement. The tender committees of government ministries and statutory companies are required to have no more than five members, who must include the director-general of the entity, the accountant and legal adviser (or their representatives). Government companies are required to have a tender committee of at least three members. Decisions of tender committees are adopted by a majority vote.

Government entities other than government companies and subsidiaries also have special exemption committees which must approve certain decisions of the tender committee regarding exemptions from mandatory open tenders and the holding of closed tenders. One exemptions committee, appointed by the director-general of the Ministry of Finance, acts for all government ministries. Certain other decisions of the tender committees regarding exemptions require the approval of the Accountant-General of Israel or the Director-General of the entity.

Estimates

Before entering into the tender process, most government entities undertake to estimate the value of the proposed transaction. Although not required in the Regulations, as is the case in the Defense Regulations and the regulations which apply to local governments, estimates are carried out for three essential purposes:

1. In order to calculate what type of tender procedure is required (open tender, closed tender, GPA tender, exempt from tender);

2. To ensure the transaction is covered by the budget of the procuring government entity; and

3. To gauge whether the prices submitted by the various offerors are reasonable, overpriced or “dumping” prices.

The estimate is often undertaken by obtaining unofficial proposals from a number of potential suppliers or by having an expert calculation prepared.

2. Types of Procedure

Exemptions from Open Invitation Mandatory Tendering

The Regulations include a long list of transactions which are exempt from the general mandatory tender requirement included in Section 2 of the Law. In addition, the Regulations include a list of transactions that require that a “closed tender” be held.

Section 3 of the Regulations, entitled “Exemption from Mandatory Tender”, includes 30 different categories of contracts regarding transactions in goods, real estate, performance of work or the acquisition of services which do not require the holding of an open public tender and are exempt from the provisions of Section 2 of the Law.

The major exceptions to the general mandatory tender rule which are included in Section 3 of the Regulations are as follows:

1. The value of the contract is not greater than NIS 42,000 (so long as contracts not done by way of tender between the government entity and the specific supplier do not exceed a total of NIS 84,000 during the relevant budgetary year);

2. The contract is required on an urgent basis in order to prevent significant harm;

3. Conducting a public open tender may cause harm to the national security of the state;

4. The contract is a continuation of an earlier contract, made within three years thereof, and the aggregate value is not greater than 50 percent of the earlier contract; or

5. Where special and unusual circumstances justify not holding an open invitation tender.

The value of a contract is defined in the Regulations as being the total amount of payments made pursuant to a contract (including taxes), exclusive of any options.

Section 5 of the Regulations provides for exemptions from public tenders for transactions with certain expert professionals for the performance of work or the acquisition of services.

Section 14 of the Regulations provides for exemptions for foreign transactions if the said transaction is to be with a resident of a foreign country and is to be carried out abroad if:

1. It is a transaction for the acquisition of goods which cannot be acquired in Israel; or

2. The contract is entered into by a foreign branch or representative office of the government entity for its own use.

The Regulations also include provisions which provide for additional exemptions from mandatory tenders for certain contracts of specific government entities. Section 34 provides that a contract of a government company or subsidiary for the performance of a transaction in goods or real estate, the performance of work, or the acquisition of services, shall be exempt from tender if:

1. The contract may harm the company’s profitability, its ability to compete, its business opportunities, its ability to carry out a role with which it was charged by law or its ability to supply an essential service or commodity to the public;

2. The value of the contract is not more than NIS 168,000 (NIS 504,000 for government companies with an annual contract volume of more than NIS 840,000); or

3. The contract is for the sale of goods or the acquisition of services with a resident of a foreign state.

Section 39 of the Regulations provides that a statutory company shall be exempt from the public tender requirement if holding such a tender may harm its ability to carry out a role with which it is charged to fulfill under the law by which it was created or harms its ability to supply essential services or goods to the public.

In addition, Section 23(b) of the Regulations provides that if an open public tender is held and no proposals are submitted or if the tender committee does not recommend any of the submitted proposals, the government entity may enter into a contract without holding a new public tender if it is concluded that there would be no benefit to the procuring government entity in holding another open public tender.

Closed (Restricted Invitation) Tenders

Section 1 of the Regulations defines a closed tender as a “tender in which invitations for proposals are submitted to only certain offerors.” Before the Law and its implementing regulations were in effect it was very common for government entities to hold closed (restricted invitation) tenders when contracting with regard to goods and services.

The Regulations provide that in certain instances government entities are to hold closed or restricted tenders instead of a public tender. Such instances are listed in Section 4 of the Regulations and include the following:

1. The value of the contract is not greater than NIS 336,000;

2. A contract for goods with special characteristics and uncommon properties; or

3. A contract regarding R&D.

Pursuant to Section 16 of the Regulations, when a government entity wishes to enter into a contract that requires a closed tender, the tender committee shall approach several suppliers included in its list of potential offerors which each government entity is required to maintain.

A supplier who wants to be included in the relevant potential supplier list of a government entity is required to submit an application to the entity’s tender committee together with all information and documents required by the committee. The supplier shall be added to the list if the tender committee decides that the supplier is “fit” to be included on the list.

If there are less than ten suppliers listed, the tender committee is required to approach all of them with regard to a closed tender. If there are more than ten potential suppliers the tender committee must approach at least five suppliers who are to be chosen, in so far as possible, on a rotating basis.

Limited Tendering under the GPA

Limited tendering (closed tenders) is permitted under the GPA so long as it is “not used with a view to avoiding maximum possible competition or in a manner which would constitute a means of discrimination among suppliers of other parties or protection to domestic producers or suppliers.” Limited tendering is permitted under Article XV of the GPA in the following circumstances:

1. There is no response to an open tender or those submitting proposals do not comply with the conditions of the open tender;

2. The products/services can only be supplied by a particular supplier and no reasonable alternative exists;

3. The existence of extreme urgency; or

4. Procurement made under exceptionally advantageous conditions which only arise in the very short term.

Article VIII of the GPA provides that suppliers from GPA signatory countries are to be allowed to request inclusion in any qualified supplier lists at any time.

Classification of Tenders

Pursuant to Section 9 of the Regulations, when a government entity intends to enter into a contract its tender committee shall classify the contract as to whether it requires an open tender, a closed tender, a GPA tender or comes under one of the many exemptions to the general open tender rule included in Section 2 of the Law. In certain circumstances, such a decision requires the approval of the relevant exemptions committee, the Accountant-General or the Director-General of the entity. Section 42 of the Regulations requires, however, that procuring government entities give preference to holding open public tenders in so far as this is “justified and reasonable under the given circumstances” and do everything possible to prevent a matter from becoming “urgent.”

3. Notices

When a government entity intends to enter into a contract which requires an open tender, Section 15 of the Regulations requires that notice of the same be published in one Hebrew language daily newspaper in Israel, one Arabic language newspaper in Israel as well as on an internet website. Most government entity tender notices appear on the Israeli Government Advertising Office’s tenders website (http://michrazim.lapam.gov.il). Many government entities have also recently begun putting notice of proposed procurement on their own individual websites. The tender committee may, at its discretion, also publish notice of the tender in the foreign press and/or send notice to at least two foreign potential offerors.

Section 15 requires that the notice of proposed procurement include the following:

1. Description of the proposed contract;

2. The contract period, including any options;

3. Required preconditions for submitting a proposal;

4. Where the tender documents and additional information may be received; and

5. The place and last date for submission of proposals.

Where applicable the Preference Regulations as well as the 1995 National Priority Regulations require that the tender notice state that certain preferences will be given to Israeli products with respect to the price criteria. In addition, Section 5(b) of the Preference Regulations requires that if the contract is valued at more than NIS 2,100,000 the tender notice must state that a foreign supplier is required to include with its proposal an undertaking to carry out mandatory commercial cooperation in Israel if its proposal is chosen.

Entities which are required to waive preference regulations for American suppliers pursuant to the United States – Israel Free Trade Agreement also send notices of proposed procurement to the commercial department of the United States Embassy in Tel Aviv. Many other government entities also send notices of proposed procurement to the U.S. Embassy in Tel Aviv.

Many government entities also set up special meetings or “contractor visits” before the deadline for proposals are to be submitted in which potential offerors may meet with representatives of the procuring entity, visit relevant locations and receive additional information regarding the particular tender. These special meetings are often required in order to be able to submit a proposal.

Invitation to Participate Regarding Intended Procurement – Article IX of the GPA

Government entities conducting tenders covered by the GPA are required to publish an “invitation to participate regarding intended procurement” in either the Jerusalem Post or the International Herald Tribune – Ha’aretz (Israel edition), Israel’s two English language daily newspapers.

Each “invitation” to participate in a GPA tender is required to include the following information:

1. Whether the procedure is open, selective or will involve negotiations;

2. The date for starting delivery or completion of the delivery of goods/services;

3. The place where tender documents may be received and the price thereof;

4. Where additional information may be obtained;

5. Economic and technical requirements; and

6. Financial guarantees required.

The notice must also state that the tender is covered by the GPA.

The Tender Documents

As stated above, the notice of tender provides information as to where the tender documents may be obtained. Pursuant to Section 17 of the Regulations payment may be required by the procuring government entity for the tender documents. Israeli government entities almost always charge potential offerors for the tender documents and in general the greater the value of the contract the greater the charge for the tender documents. For large tenders the tender documents may cost thousands of dollars and such fees are not refundable. Many entities will permit potential offerors to review the tender documents before they decide whether they are interested in purchasing them.

The tender documents are considered an integral part of the tender and are often incorporated into the contract that is to be signed by the offerors.

Section 17 of the Regulations also states that the following are to be included in the tender documents:

1. The conditions of the tender and the required conditions to participate therein;

2. An offeror proposal form;

3. The text of the contract, terms of payment and the plans and specifications related to the implication of the contract;

4. The conditions, amount and period of the required guarantee, if any;

5. Some or all of the criteria by which the winning proposal will be chosen; and

6. Any other necessary information or documents.

Tender Documentation – Article XII of the GPA

Article XII of the GPA requires that the tender documents in a GPA tender include all information that was in the notice of intended procurement as well as:

1. The language the proposals are to be submitted in;

2. Economic and technical requirements and financial guarantees;

3. All necessary information and documents; and

4. The criteria to be used for awarding the contract, including factors other than price.

4. Time Limits

The Regulations do not provide for any time limit with regard to submission of proposals. Section 18 simply requires that the tender proposals be submitted at the time and in the place designated in the conditions of the tender. In practice the time limits for submission of proposals vary among the government entities and the type of contract.

Time Limits for Tendering and Delivery - Article XI of the GPA

Article XI of the GPA requires that any prescribed time limit be adequate to allow suppliers of other contracting parties as well as domestic suppliers to prepare and submit proposals before the deadline. The general rule prescribed in this Article of the GPA is that there should be no less than 40 days between the date of publication of the notice and the date for submitting proposals.

5. Qualification of Tenders (Preconditions for Participation in the Tender)

Section 6 of the Regulations provides that participation in a tender shall be conditional upon the following:

1. Possession of necessary licenses or registration required under law in the area which is the subject of the contract;

2. Compliance with any relevant Israeli standards; and

3. Submission of documents required under the Transactions of Public Bodies (Enforcement of Bookkeeping and Payment of Taxes) Law, 5736-1976 (for Israeli entities).

If an offeror does not fulfill all of the preconditions for participation in a tender the tender committee is required to disqualify the proposal.

The government entity may add other relevant conditions as well as condition participation in a tender on relevant experience, extent of activity, annual turnover, personnel requirements and the recommendations of third parties regarding the offeror.

Procuring government entities usually require that foreign offerors have the applicable industrial ratings or similar approval and provide basic incorporation and or other documents related to the company.

Many government entity tender notices simply state that participation in the tender process is subject to the offeror satisfying all of the preliminary requirements in Section 6 of the Regulations.

Section 7 of the Preference Regulations requires that a foreign supplier attach to its proposal a “Foreign Supplier’s Undertaking Form for Commercial Cooperation” in which the foreign supplier undertakes to the State of Israel that in the event it wins the tender it will carry out commercial cooperation at a level of at least 35 percent of the value of the contract or transaction. This undertaking is a standard form, the current version of which was published in Reshumot (the official government gazette) in 1998.[5] Submission of this undertaking, when required, is not a criteria for awarding a contract but is rather a pre-condition for a foreign supplier to participate in the tender.

Qualification of Suppliers – Article VIII of the GPA

Article VIII of the GPA provides that contracting government entities “shall not discriminate among suppliers of other Parties or between domestic suppliers and suppliers of other Parties.” Qualification procedures must be consistent with the following:

1. Conditions for participation in the tendering procedures must be published in adequate time to permit interested parties to complete the qualification procedures, to the extent this is compatible with the efficient operation of the procurement process; and

2. Conditions for participation in tendering procedures must be limited to those which are essential to ensure the offeror’s capability to fulfill the contract in question.

6. Specifications

Where relevant, the tender documents include detailed technical specifications required of the goods or services to be supplied. In this regard, government entities often require documentation showing compliance with relevant standards, laboratory reports and other types of authorizations. Technical specifications often include information regarding technical and design characteristics, methods of operation, methods of installation, quality and dimensions.

If a proposal does not fulfill the technical requirements of a tender (other than minor or insignificant differences) it will be disqualified by the tender committee.

Technical Specifications – Article VI of the GPA

Article VI of the GPA requires that technical specifications related to the characteristics of the products or services to be procured “such as quality, performance, safety and dimensions, symbols, terminology, packaging, marking and labeling, or the processes and methods for their production and requirements relating to conformity assessment procedures prescribed by procuring entities” may not be required in a GPA tender if the purpose of such specification is to create “unnecessary obstacles to international trade.” Technical specifications are to be in terms of performance rather than design or descriptive characteristics and based on international standards, if any.

7. Terms and Conditions Required by Contracting Authority

The Israeli Supreme Court has emphasized the importance of detailing the conditions of the tender in the tender documents and has held that the decision regarding the winning proposal may not be based on details, special characteristics or conditions which were not included in the tender documents (see e.g., Interdko, Commercial Company for Industry Ltd. v. the Kiriat Shemona Municipality, High Court Petition 63/85, 39 (iii) P.D. 324, 328 (1985)).

The conditions of a tender must be clear, unequivocal and reasonable and must be such that they enable the comparison of the various proposals. Every offeror in a tender must be able to understand what factors are to be taken into consideration by the procuring entity when it chooses the winning proposal. The tender committee will disqualify a proposal that does not fulfill all of the required conditions listed in the tender documents.

The contract included among the tender documents is usually a very detailed document which includes all of the conditions and terms of the tender. Many government entities use standard contracts for different types of procurement contracts. Procurement contracts are discussed in greater detail in Section E herein.

Procuring entities often require certain information regarding the offeror. Such information may include the following:

1. Details on the various entities that make up the offeror;

2. A list of the offeror’s other customers who use the specific product or service;

3. Details of the offeror’s activities and business;

4. The manpower and personnel of the offeror; or

5. The value/quantity of other projects being carried out by the offeror at the same time.

Guarantees

Although not specifically required in the Regulations, procuring entities almost always require that all offerors submit as part of their proposal one or more bank guarantees ensuring performance of the contract by the offeror. Offerors are often required to submit a bank guarantee in an amount equivalent to a certain percentage of their proposals (usually five or ten percent) that is to be in force until the beginning of execution of the contract. Such a guarantee is intended to ensure that the offeror begins carrying out its obligations if its proposal is selected. In addition, offerors are often required to issue a performance guarantee in order to ensure that the offeror completes all of its obligations under the contract if its proposal is selected. The submission of such guarantees is considered a fundamental and essential requirement and the Israeli Supreme Court has held that a proposal that does not comply with the guarantee requirements of a tender cannot be chosen as its winner (see e.g., Y.S.Y. Sheddy Construction, Digging and Development Company Ltd. v. Simcha Urieli and Sons Engineering and Contracting Ltd. et. al, Civil Appeal 1828/93, TAKDIN-ELYON 95 (2) 1266 (1995)). The tender documents are to include information regarding the type, conditions, amount and time frame of any required guarantees.

Price Offered by Offeror - Terms and Conditions

The Regulations do not relate to the price offered by an offeror in a tender and this information is usually included in the tender documents and the contract attached thereto. The tender documents and the contract usually detail the price and payment requirements.

Such requirements usually include information regarding:

1. What is to be included in the price component of the proposal (price for the goods, V.A.T. and other taxes, importation and shipping costs);

2. Payment schedules; and

3. Currency of payment.

9. Tender

The notice of proposed tender described above as well as the tender documents state where and by when the proposals are to be submitted. The proposals are to include all documents and information required in the tender documents, as described above. Pursuant to Sections 18 and 19 of the Regulations a participant in a tender is to submit its proposal to the relevant tender committee in a sealed tender envelope to be deposited into the tender box at the designated location. The various proposals remain in the locked tender box until it is open in order to review the proposals which were submitted by the deadline.

10. Processing of Tender

The tender committee reviews all of the proposals that were deposited into the tender box before the deadline for submission of proposals had expired. The tender committee may not consider a proposal submitted later than the deadline for submission.

Pursuant to Section 20 of the Regulations, as part of its review of the proposals, the tender committee may contact an offeror and request that it clarify details included in its proposal. The tender committee may also correct clerical or arithmetic errors included in a proposal.

Disqualification of Proposals

The tender committee initially reviews the various proposals and disqualifies all proposals which do not conform to the basic conditions and requirements of the tender. Section 20(d) of the Regulations requires that the tender committee disqualify all proposals that are incomplete, mistaken or are based on incorrect assumptions or misunderstandings of the tender, unless the tender committee decides otherwise. The Supreme Court has emphasized the importance of the requirement that a proposal must conform to the conditions of the tender as well as the rule that those proposals which include substantial changes from the conditions of the tender are to be disqualified (see e.g., Hosem Ma’arachot Hagana Aminot v. the Israeli Police, High Court Petition 691/82, 37 (i) P.D. 473, 475 (1983)).

Experts

Although not mentioned in the Regulations, as is the case with the Defense Regulations and the regulations which apply to local governments, the tender committees of entities that procure pursuant to the Regulations may make use of outside experts when examining proposals. This is often done for very technical matters. The tender committee, however, makes all final decisions regarding proposals and such authority may not be placed in the hands of the experts who are only to serve in an advisory role and to make recommendations to the tender committee.

Negotiations with offerors in a tender

In certain limited circumstances, if mentioned in the tender documents and notice of tender, a procuring government entity is entitled to conduct negotiations with those offerors in a tender whose proposals were found to be the most suitable.

Pursuant to the provisions of Section 7 of the Regulations, after such negotiations are carried out the tender committee shall make its final decision or may allow those offerors with whom it negotiated to submit final proposals by a certain date.

The Israeli courts have held that negotiations may also be carried out with the winning offeror after it has been selected by the tender committee with regard to minor changes to the contract, conditions, etc. so long as such changes do not effect the essential conditions and terms of the tender (see e.g., Invest Impect Ltd. v. the Director-General of the Ministry of Health, High Court Petition 118/83, 38 (i) P.D. 729 (1984)).

Negotiations - Article XIV of the GPA

Article XIV of the GPA permits negotiations with offerors if notice that negotiations would be permitted appeared in the tender notice or if no one proposal is obviously the most advantageous in terms of the specified evaluation criteria set forth in the notices or tender documentation.

11. Evaluation of Tenders and Award of Contract

Pursuant to Section 21(a) of the Regulations the tender committee is authorized to choose the most suitable proposal or can elect not to chose any proposal at all, in order to ensure the greatest benefit to the procuring entity.

Section 21(b) of the Regulations includes the general rule for the selection of the winning proposal. This section states that the tender committee shall choose the lowest priced proposal unless the tender committee decides otherwise due to “special circumstances” after it has given the offeror who submitted the lowest priced proposal the opportunity to state its case before it.

Criteria

Section 21(b) also provides that if the tender documents included various criteria by which the winning proposal is to be chosen, as is almost always the case, the tender committee shall select the proposal which provides the most benefits pursuant to such criteria.

Section 22 of the Regulations provides that the criteria included in the tender documents according to which the tender committee will choose the winning proposal shall include all or some of the following:

1. The price;

2. The special properties or quality of the goods or services and their suitability to the purposes of the tender;

3. The experience, expertise and qualifications of the offeror;

4. The degree of satisfaction with the offeror’s performance on previous contracts and recommendations provided by the third parties; or

5. Any other special requirements.

Many government tenders state what criteria break down is to be used to determine the winning proposal (for example: Price 50%, Technical Characteristics 40%, Past experience 10%). The methods of computing such scores is usually, however, not revealed by the procuring entity. Some government entities will only list the criteria to be taken into consideration without providing the relevant percentages.

It should be emphasized, however, that the lowest price submitted in a public tender is given special importance in Israeli tender law and greater scrutiny of the decisions of tender committees will be carried out by the Israeli courts in cases where the lowest submitted proposal is not selected.

When reviewing proposals, the estimate, if there is one, serves as a test of the reasonableness of a particular proposal and is also used to compare different proposals to each other. If all of the proposals seriously deviate from the estimate the tender committee may decide not to accept any proposal and this decision will be usually be upheld by the courts.

Submission, receipt and opening of tenders and awarding of contracts – Article XIII of the GPA

Section 4(b) of Article XIII of the GPA states that “Unless in the public interest an entity decides not to issue the contract, the entity shall make the award to the tenderer who has been determined to be fully capable of undertaking the contract and whose tender, whether for domestic products or services, or products or services of other Parties, is either the lowest tender or the tender which in terms of the specific evaluation criteria set forth in the notices or tender documentation is determined to be the most advantageous.”

Section 4(c) of this Article also provides that “Awards shall be made in accordance with the criteria and essential requirements specified in the tender documentation.”

Preferences with regard to the price criteria

As discussed above, when determining the winning proposal pursuant to the relative criteria the tender committees of certain government entities are required to give preferences to Israeli suppliers with regard to the criteria of price. In general, such preferences will not apply in the following circumstances:

1. GPA tenders with regard to offerors from GPA signatory countries;

2. Tenders of government entities covered by Article 15(3) of the United States – Israel Free Trade Agreement with regard to offerors from the United States; or

3. Tenders which are covered by the Agreement between the European Community and the State of Israel on Government Procurement or the Agreement between the European Community and the State of Israel on Procurement by Telecommunications Operators with regard to offerors from EU countries.

The Preference Regulations

Pursuant to Section 3 of the Preference Regulations, which apply in general to government ministries and Government Bodies Corporate, if a foreign offeror would have won a tender for the supply of goods in accordance with the specific criteria of a tender, the tender committee shall recalculate the criteria of price for Israeli suppliers who have submitted proposals such that the proposed price of each Israeli proposal is reduced by 15 percent (10 percent with regard to government companies and government reference units).

If after such a recalculation is made a foreign supplier still receives the highest weighted score pursuant to the criteria of the tender, the foreign supplier will be designated as having won the tender. If, however, after the required recalculation has been made, an Israeli offeror of goods receives a weighted score that is greater than that of the foreign offeror, the government entity is to propose to the Israeli offeror that it lower its proposed price to the price at which its proposal would have a weighted score equal to that of the foreign offeror. Essentially, a “right of first refusal” is given to the Israeli offeror. If the Israeli offeror agrees, it is to be chosen as the winner of the tender at that price. If the Israeli offeror refuses to lower his price offer, the government entity is to make the same offer to lower the proposed price to the next two highest ranking Israeli offerors in turn, if any, on the condition that each of their weighted scores is not lower than that of the foreign offeror. If no such Israeli offerors agree to lower their proposed price, the proposal of the foreign offeror is to be declared the winner.

1995 National Priority Regulations

The 1995 National Priority Regulations, which apply in general to government ministries other than the Ministry of Defense, provide in Section 5 that if a supplier who is neither a foreign supplier nor a supplier from an “A” national priority area (as defined pursuant to the Encouragement of Capital Investments Law, 5719-1959) would have won a tender in accordance with the specific criteria of the tender, the tender committee shall recalculate the price criteria for those Israeli suppliers from national priority areas such that the proposed price of all such suppliers is reduced by 5 or 10 percent (depending on what type of national priority area they are located in). If a supplier from a national priority area receives the highest score after such a recalculation the procuring government entity is to propose to the supplier (up to four suppliers from national priority area in turn) that it lower its proposed price as described above in the Preference Regulations sub-section (a right of first refusal).

Division of Contracts

If notice of the same was included in the tender documents, Section 21(c) of the Regulations allows the tender committee to select only part of a specific proposal or to choose two or more suitable proposals and divide the contract among them.

In certain circumstances, Section 4 of the Preference Regulations permits the division of very large tenders for the acquisition of goods such that 50 percent of the volume of the tender is awarded to a foreign supplier and 50 percent to a local supplier. Notice of the same must appear in the tender documents.

Sole Proposal

Section 23 of the Regulations provides that the tender committee may select a proposal in a public tender even if it is the only proposal submitted, so long as the reasons for this are recorded by the tender committee. This may not be done in a closed tender unless the exemptions committee gives its approval that the holding of an additional open tender would not provide any benefit to the procuring entity.

12. Post-Award Notifications

Pursuant to Section 21(d) of the Regulations every offeror in a tender is to be notified of the final decision of the tender committee. All offerors in a tender are entitled to review and study the final decision of the tender committee, including the grounds for such decision as well as the terms of the winning proposal. The tender committee may, however, determine that disclosure of certain parts of its decision or terms of the winning proposal are professional or commercial secrets, or will harm Israel’s public or national security, foreign relations or economy, and forbid offerors from reviewing such materials.

13. Cancellation of the Procedure

Pursuant to various decisions of the Israeli courts, government entities may cancel a tender in a number of circumstances, including when all of the proposals are for amounts which are much greater or much lower than the estimate, when there are no proposals that fulfill the required pre-conditions for participation or other essential conditions of the tender, or where there are serious flaws in the tender.

The Israeli courts have, however, emphasized the importance of not canceling a tender, in so far as this is possible. The Israeli Supreme Court has ruled that canceling a tender after the tender box has been opened and then publishing a new tender is not desirable and all steps should be taken to prevent such actions because this opens the doorway for contracting with an offeror who was not entitled to win the original tender. This in turn damages the principle of equal competition (see e.g., “Menorah” Izi Aharon Ltd. v. The State of Israel – Ministry of Housing, Civil Appeal 6283/94, 51 (i) P.D. 21 (1995)).

C. Procedure for Award of Ministry of Defense Contracts

1. Application of Relevant Legislation and Regulations

As stated above, the Law applies to the Israeli “defense establishment” which is defined in the Law as including the Ministry of Defense, the Israel Defense Forces and its dependent units, and the government companies and subsidiaries for which the Minister of Defense is responsible. The government companies and subsidiaries for which the Minister of Defense is responsible (“Defense Companies”) include such important entities as Israel Aircraft Industries and Israel Military Industries. There are also certain differences between the application of the Defense Regulations to the Ministry of Defense (which is defined for purposes of the Defense Regulations as including the Israel Defense Forces) and Defense Companies.

As stated, the basic procedural rules pertaining to the defense establishment are included in the Defense Regulations which are promulgated by the Minister of Defense after consulting with the Minister of Finance and receiving the approval of the Constitution, Law and Justice Committee of the Knesset. The Ministry of Defense also procures pursuant to the “Ministry of Defense Rules”, which implement the directives included in the Defense Regulations. Most of the other entities that procure pursuant to the Defense Regulations also have internal directives and procedures regarding procurement and tendering.

In addition to the Priority Regulations which apply to the defense establishment, the 1998 National Priority Regulations apply to certain Ministry of Defense contracts published after July 15, 1998.

Foreign Military Financing

Section 14 of the Priority Regulations provides that the Priority Regulations shall not apply to defense establishment imports which are financed by the support funds of a foreign country. Such funds refer to procurement by the defense establishment which is paid for with the military aid or “foreign military financing” (hereinafter “FMF”) given to the government of Israel by the United States of America. In recent years the United States has provided Israel with approximately $1.8 billion in FMF annually.

International Agreements

The GPA does not apply to procurement by the defense establishment. In addition, Section 19 of the Defense Regulations provides that the Defense Regulations shall apply so long as they do not conflict with an obligation of Israel pursuant to an international treaty or a reciprocity agreement concluded before the Law went into effect. The MOU is covered by the parameters of this section.

Tender Committees

The various tender committees of the Ministry of Defense make decisions with regard to ordinary tenders. Ministry of Defense tender committees are required to include among its members a “public representative.” These public representatives are appointed to sit on the Ministry of Defense tender committees by the Director-General of the ministry. In general, the public representatives do not participate in meetings of the various tender committees regarding transactions which are classified as secret.

The Ministry of Defense also has special tender committees for extraordinary tenders, discussed below (which do not include public representatives), and special exemption committees responsible for exempting or recommending exemptions from certain mandatory tendering requirements.

Defense Companies also have their own tender and exemption committees.

Estimates

The Defense Regulations require the Ministry of Defense, although not Defense Companies, to calculate an estimate of the value of the transaction before the date for submission of proposals has passed. Such estimates are almost always carried out by Defense Companies as well.

Section 13 of the Defense Regulations require that the estimate be calculated by one of the following methods:

1. The price in Israel based on the updated value of previous contracts entered into by the Ministry;

2. The price in a foreign country (including costs for insurance and transportation to Israel);

3. The market price in Israel;

4. The maximum price set by a relevant price control law;

5. The valuation of an assessor; or

6. A cost calculation.

2. Types of Procedure

Exemptions from Open Invitation Mandatory Tendering

Unlike the Regulations, the Defense Regulations do not state that preference is to be given by the tender committees to holding open tenders. In addition, unlike the entities that procure pursuant to the Regulations and the regulations which apply to local governments, most of the procurement conducted by the defense establishment is done by way of closed tender (or is exempt from mandatory tendering).

As is the case with Section 3 of the Regulations, Section 3 of the Defense Regulations includes a comprehensive list of transactions for which the Ministry of Defense is exempted from holding a mandatory open tender. Most of these exceptions also apply to Defense Companies.

Transactions which are exempt from mandatory tender include the following:

1. The value of the transaction is not greater than NIS 16,800 (or not greater than NIS 42,000 if during the budget year no transaction was performed without a tender with the supplier on an identical subject);

2. A transaction with the only supplier of the goods or services in Israel or with the only entity which has the scientific capability, technology or infrastructure to supply the goods or services;

3. A transaction regarding the testing or initial development of an innovative idea;

4. A transaction which is the continuation of an earlier transaction (within three years thereof), on terms no less favorable than the original transaction and so long as the aggregate of the new transaction is not greater than the original;

5. A transaction which is urgently required;

6. A transaction for the acquisition of vital services or goods (does not apply to Defense Companies;

7. A transaction for the performance of auditing, architectural work, legal work or economic consulting, or the performance of other professional work that requires special qualifications, expertise, know-how, or special trust with the provider of such services; or

8. A transaction, the disclosure of which may cause substantial harm to Israel’s national security, economy or foreign relations.

Section 3(37) also includes a very expansive “basket” exemption which provides that a transaction will be exempt from an open tender when there are special and unusual circumstances which justify this. Such an exemption requires the approval of the Minister of Defense.

Section 4 of the Defense Regulations includes very important exemptions from the mandatory tender requirements for certain transactions with a resident of a foreign country or transactions that are to be performed in a foreign country. Such exempted foreign transactions include the following:

1. Certain transactions which are carried out with foreign country support funds, are carried out in a foreign country or when the assisting country requires that the transaction be carried out with certain specific suppliers (this refers to FMF). In certain circumstances covered by this exception it is necessary, however, to request written proposals from at least three suppliers; or

2. Transactions for the acquisition of goods or services when there is no producer of such goods or no provider of such services in Israel. In certain circumstances covered by this exception it is necessary, however, to request written proposals from at least three suppliers.

Section 24(b) provides for similar “foreign transaction” exemptions for Defense Companies. Section 24(b) does not, however, include an exception for transactions which are carried out with foreign country support funds.

Section 24(a) of the Defense Regulations also includes a number of other transactions for which Defense Companies are exempted from holding public tenders. These include transactions where holding a public tender would have a negative effect on the company’s business opportunities, competitiveness, profitability, ability to carry out a task which it is required to perform under law or its ability to supply the public with a vital service or commodity.

Pursuant to Section 24(a)(2) of the Defense Regulations, Defense Companies are exempt from open mandatory tenders in transactions valued at not more than NIS 168,000 (NIS 504,000 for companies with an annual contract volume of more than NIS 840,000).

Section 17(k) of the Defense Regulations provides that in an open tender where no proposals are submitted or where the tender committee has decided not to accept any of the submitted proposals, the procuring entity may contract without holding a new open tender.

Closed (Restricted) Tenders

Section 5 lists various transactions for which the Ministry of Defense shall hold closed tenders. Pursuant to Section 25 of the Defense Regulations most of these transactions also apply to Defense Companies. Such transactions include the following:

1. A transaction the value of which is not greater than NIS 168,000;

2. A transaction which has been given a security classification of “restricted” or higher;

3. A transaction regarding scientific work or R&D;

4. A transaction for the performance of professional work which