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Be wary of submitting a tricky offer!

One of my clients is a group of companies engaged in representing large international companies in various markets, including in Israel. As such, it regularly participates in tenders for the supply of equipment and services.

Recently, during a discussion of a tender team in which a very interested customer wanted, I was asked whether the bid technique that the CEO had asked to use in responding to the tender was a "tricky offer" that could invalidate the customer's offer.

In view of the number of eyebrows raised by the company's executives at the question, I was impressed that this important issue should be presented and a brief discussion should be held.

Statements made in 700/89 The Electricity Company v. Malibu Israel Ltd., PD [1] (667) defines, in general, what is a ploy and reflects the difficulties associated with finding a tricky offer:

"Indeed, anyone trying to outwit the tender owner improperly - whether by calculated deception or by means of trickiness - is worthy of his proposal to reject outright ... ... And while the concept of deception is clear to all, it seems more difficult to deploy the field of" ploy "to all the wisdom of life and the wisdom of the judge is to distinguish between legitimate tricks, and in the absence of good faith as required by those who bid in the tender. And tactics that are not legitimate."

In a tricky proposal there is a special disqualification and the proposer who uses it as an act of deceit. However, the line between misappropriation (which is considered an act of dishonesty) and a legitimate trick (which may lead to winning the tender) is sometimes very thin.

The following is an example of the case law relating to the issue that is relevant to the issue of price quotations in a way that leads to prudence.

Prudence in pricing the "price loading" proposal and the deficit proposals

What is the ruling on a proposal that offers particularly high prices for works that are supposed to be carried out in the early stages and unreasonably cheap prices for works that are supposed to be carried out in later stages? Where does the seam line pass between permissible and illegal tactics? Is an offer priced at a "zero" price or a minuscule price for certain items in the tender an invalid offer or a legitimate offer? Will a tricky offer be immune from disqualifying a place where the proposer proves that there is no concern that he will not meet his offer?

In 6926/10 Gili and Yoel Azaria Ltd. v. Israel Ports Company, the publisher of the tender originally intended to disqualify the cheapest offer due to suspicion of improper tactics. At the end of the day, the tenderer decided not to do so, because it was convinced that the financial stability of the bidder would enable it to meet its cheap offer.

The Supreme Court overturned the decision of the tender's author to choose the cheapest offer and determined that financial strength and the ability of a bidder to meet his offer cannot prepare a tricky offer, but rather a deficit proposal. In order to understand these things, one must examine the difference between the two types of proposals.

A “abnormally low tender bid" – is a bid that falls unreasonably from the estimate of the bidder or to a price deemed reasonable. This proposal is so low that it is feared that the bidder will not be able to meet its offer or alternatively will perform poorly. It should be emphasized that a deficit proposal is not a tricky proposition and that this proposal serves the other interests of the bidder - beyond the profit from the performance of the work.

A tricky proposal - is a proposal that is characterized by a deliberate combination of high prices for some of the components and low prices for others, artificially, all according to the bidder's profit plans and not according to the real cost of the work or to the interests of the bidder. This pricing is also known as "shift" or "loading" may come from offering a sophisticated observer or knowing that the relative weight of the "expensive" components compared to the "discounted" components that he offered and which he will be required to provide to the actual auction editor, is different from the relative weight given to them in the price calculation formula (Due to a mistake by the tender's editor or a mistaken assessment of the required performance or for any other reasons), all in accordance with the bidder's profit plans, with possible damage to the interests of the tender's editor.

The main concern raised by a deficit proposal is that the bidder will not be able to meet its offer. Therefore, financial strength - which can attest to the bidder's ability to execute his bid even at a loss - can somewhat mitigate this concern. The court adds that not every deficit proposal requires its disqualification. If the bidder proves that he is able to execute the offer at a loss, and if he proves that the offer has other benefits in his opinion, despite its deficits, such as penetration into a new market, a desire to "hold on to life" of a business.

On the other hand, the main concern raised by a tricky proposal is completely different. At the basis of the tricky proposal is the bet or expectation of the bidders' proposer that the bidder has made a mistake in preparing the tender documents or the execution instructions. The tricky proposition is to exploit these mistakes. If the bidder's expectations or the gamble of the bidders 'bidder materialize, the bidders' bidder and the public - as a mirror image - will lose. Another concern is that if the bidder's bet fails, he will be motivated to act in a manner that minimizes his losses, at the expense of the quality of the performance.

It was also held in the judgment that proof of financial stability does not solve the difficulties that a tricky offer reveal. Similarly, the declarations, which are heard frequently in tender committees, according to which the bidder is aware of the risks to which he is exposed in his bid and undertakes to implement them even if he bears the loss, do not solve this problem.

The court adds a principled ruling according to which there is an error in the bidder's attempt to understand the mistakes of the tender's editor in order to make easy profits at the expense of the tender's editor and the public.