Background
In a tender inviting the public to submit proposals for the purpose of entering into a contract, both the contracting authority (“the procuring entity”) and the bidders take part. At the conclusion of the process, based on the predetermined criteria and the weighting assigned to the various components of the proposal, the winning bidder is selected, with whom the procuring entity enters into an agreement.
Tender law requires strict adherence, inter alia, to the principles of equality between bidders and good faith between the bidders and the contracting authority. Where equality among bidders or good faith has been compromised—whether due to the conduct of the contracting authority or that of one of the bidders—grounds may arise to annul the contract between the winning bidder and the contracting authority, either at the initiative of the contracting authority or at the request of a losing bidder.
Various actions undertaken by participants or bidders in the course of submitting their proposals may be deemed misleading to the contracting authority, granting an unfair advantage, and thereby undermining the equality between bidders. The violation of equality among bidders may also result from acts or omissions of the contracting authority. Each of these acts may constitute grounds for the disqualification of the winning bid, and, in some cases, the annulment of the entire tender process.
Deceptive (Tactical) Bid
In essence, a deceptive or tactical bid is a proposal submitted in bad faith or through fraudulent means, the purpose of which is to conceal the bid’s true economic nature by employing illegitimate tactics designed to create the impression that the bid is legitimate. By doing so, the bidder gains an unfair and unlawful advantage, thereby violating the principle of equality among bidders and undermining the efficiency, fairness, and integrity that the tender procedure seeks to achieve.
A common example of a deceptive bid is the practice of price loading (shifting) in a tender that requires separate pricing of different components. In such a case, the bidder exploits information gaps and prices certain items artificially—disconnected from their actual market cost—in order to distort the evaluation outcome.
This situation is, of course, distinct from that of a loss-making (abnormally low) bid. In a loss-making bid, the offered price is significantly below the estimated cost, raising concerns that the bidder may not fulfill the contractual obligations or may compromise the quality of the goods or services provided. In such a case, the tender committee must examine the bidder’s justification for the low price and give the bidder an opportunity to demonstrate a sound economic rationale (such as expansion of business activity, entry into a new market, etc.). If the bidder successfully justifies the price, the bid may be deemed valid.[1]
The Legal Status of a Deceptive Bid
As noted, when dealing with a deceptive bid, the primary legal response is disqualification of the bid. The justification for such disqualification lies in the fundamental importance of mutual trust between the contracting authority and the bidders, as well as the need to preserve integrity and good faith throughout the tender process—particularly where the deception or bad faith is apparent on its face.[2]
Nevertheless, even when there is a suspicion of a deceptive or tactical bid, the tender committee must conduct a thorough examination of the bid’s details to understand the bidder’s pricing method and assess their good faith. This includes analyzing the scope of components priced unrealistically, their relative weight within the total bid, and how they compare to the other bids submitted.[3]
The M.G.A.R. Case[4]
This case concerned a tender published by the Local Council of Elikhin for the provision of auxiliary collection services for a total period of 60 months. The tender included two threshold requirements:
- A confirmation that no “going concern” note appears in the bidder’s financial statements; and
- Specific professional experience required of the candidate proposed to serve as the collection manager on behalf of the bidder.
The petitioner, who lost the tender, argued that the winning bidder failed to meet both threshold conditions and further claimed that the proposed collection manager was a “straw candidate.”
It emerged that the proposed manager’s salary at her previous place of employment was higher than the salary offered in the winning bid, and that the winning bidder intended to replace her shortly after the commencement of the contract with another candidate—the same person originally proposed by the petitioner, who resigned from her position once the petitioner lost the tender.
The petitioner asserted that the inclusion of the original candidate in the winning bid was intended solely to obtain higher quality scores in the evaluation process, while the bidder knew in advance that there was no genuine intention to employ her for the duration of the contract.
The council and the winning bidder sought dismissal of the petition, arguing that the replacement of the collection manager occurred after several months and was performed in accordance with the contractual provisions.
The court held that the position of collection manager in the tender was of substantial importance, both in terms of quality scoring and the declarations made by the bidder and the proposed manager regarding the intention to serve in the position for the duration of the contract.
The court found that the manager included in the winning bid was indeed a “straw candidate,” whose inclusion was intended to mislead the council into believing it was selecting the most optimal bid. The tender committee was therefore deceived, and the submission of the bid in this manner violated the principles of equality and fair competition among the bidders (in this case, the petitioner alone).
As a result, the contract between the council and the winning bidder was annulled at the request of the losing bidder. The grounds for the court’s decision were that the winning bidder had submitted a deceptive (tactical) bid.
Conclusion
The conduct of the contracting authority and the bidders in a tender process is subject to judicial review. Beyond the review exercised over the selection process—whether concerning the contracting authority or the winning bidder—the courts possess the authority to examine retrospectively the components of the winning bid and the good faith of the bidders.
In appropriate cases, the court may determine that certain components of a bid constitute a false representation, a violation of equality among bidders, or a compromise of the efficiency and integrity sought by the tender process. In such circumstances, the bid will be deemed invalid, and the court may consequently order the annulment of the contract with the winning bidder.
For further information please contact:
Chen Weinstein, Adv. Aviad bergrin, Adv.
Office: 03-691-6600 Office: 03-691-6600
Email: chen@ekw.co.il E-mail: aviad@ekw.co.il
[1] Mor Marketing of Building Products (1992) Ltd v. A.P. Formica Center (1998) Ltd, AdminA 5399/14 (Isr. Sup. Ct., Jan. 24, 2016).
[2] Rahmani D.A. Earthworks Ltd v. Israel Airports Authority, AdminA 7201/11 (Isr. Sup. Ct., Jan. 7, 2014; .P.A. Fedida Transportation & Tours Ltd v. Kiryat Ata Municipality, AdminA 65163-01-25 (Haifa Admin. Ct., June 30, 2025).
[3] Misaei Aryeh Shasha Ltd v. Ministry of Finance – Accountant General, AdminA 7231/13 (Isr. Sup. Ct., Apr. 23, 2014).
[4] M.G.A.R. Ltd v. Eliakim Local Council et al., AdminC 61601-02-25 (Haifa Admin. Ct., Aug. 3, 2025).