The MTS group is leading the race for the Tel Aviv light rail tender, and appears to be the big winner, TheMarker has learned.

MTS and MetroRail submitted their updated bids - representing the size of the grant the state will provide to the company chosen to build the first stage of the new Tel Aviv transport system - to the tender committee last week.

The two bids were less than NIS 7.5 billion, with MTS's bid slightly lower than MetroRail's.

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The project's first stage is estimated to cost NIS 10 billion.

MTS is a consortium that includes Lev Leviev's Africa Israel, the Egged bus company, the Portuguese infrastructure company Costa da Soares, China's largest infrastructure firm CCECC, Germany's Siemens, which would be responsible for manufacturing the train cars, and Dutch transport operator HTM.

MetroRail includes Shari Arison's construction firm Housing and Construction, the Israeli firm Ashtrom, French railcar maker Alstom, French transport operator Connex, the world's largest infrastructure company Vinci, and the German infrastructure company Zublin.

The two consortia significantly lowered their bids from the ones presented six months ago.

MetroRail initially offered NIS 9.1 billion while MTS offered NIS 9.4 billion, translating into price reductions of NIS 1.6 to 2.0 billion.

The tender's next stage will be a comparison between the bids and the state's project estimate. The state's figures are unknown, but thought to be around NIS 7.5 billion. In light of the bids, the state has actually increased its price estimate.

Government officials involved in the project have said that if there is a significant gap between the state's estimate and the actual bids in practice, there would be a problem proceeding with the project.

If both bids meet the technical and financial requirements and are higher than the state estimate, then another pricing round will be held between the two competitors to lower the final price.

If the lowest bid is below the estimate, then it will be possible to name the winner, which appears to be MTS for now.

A third group, Spidan - made up of Miloumor, Dan, Sapir, Aviv, BVG, Ansaldo, Bombardier, Pantechniki and Terna - was disqualified by the tender committee in the previous round.

The committee claimed that Spidan's bid did not meet the tender's minimum conditions.

No winner yet

Sources said the group's bid of NIS 6.8 billion was significantly lower than the other two bidders. However, the bid was not even opened by the tender committee due to the disqualification of Spidan, so the actual price is not known.

It is still too early to declare MTS the winner. The committee must still study the entire proposal, and see that it meets all of the tender's requirements, since both groups have corrected and clarified their offers.

The committee also changed the process for submitting bids in this round in order to prevent information leaks.

While MetroRail bid NIS 300 million less than MTS in the initial round, it was ranked only slightly better due to financial and technical reasons, which favored MTS.

It seems that MetroRail has not reduced the five-year, 10-month period it had requested to complete the project, while MTS is offering to finish in five years. This was the major engineering-technical difference between the two bidders, and if it does not change, then MTS will have an advantage in the event that the prices are close.

The committee will also check the financial models used by both groups, which is very important given the lower bid.

Every financial change will be examined extremely carefully to see if they meet all of the financial conditions, which also could change the rankings between the two bidders.

The Tel Aviv light rail system is one of the country's largest infrastructure projects.

Not before 2013

The project will be built through the BOT (build-operate-transfer) method, whereby the winning bidder - the consortium that offers to complete the task with the lowest government subsidy - will build the rail track and operate the network for 32 years before handing it all over to the state.

In the interim period, the contractor enjoys proceeds from the passengers and ongoing operations.

The Jerusalem light rail tender was won by the Citipass group, which bid for government funding worth 72 percent of the project's cost. The Tel Aviv subsidy is expected to be closer to 80 percent of the total cost of the light rail project.

The project consists of an initial 22-kilometer rail route from Petah Tikva to Bat Yam, via Bnei Brak, Ramat Gan, downtown Tel Aviv and Jaffa.

The central 10-kilometer section will run underground, and the entire construction is expected to take six to seven years and not be ready before 2013.