Ayalon CEO Urges Tossing Out Excessively Low Tender Bids

Arye Bar, CEO of the state-owned Netivei Ayalon Highway company, has proposed automatically disqualifying any bid on a company tender that is lower than the company's own estimate of the cost of the work and more than 7 percent lower than the next lowest bid - even if the bid otherwise meets all the tender requirements.

The company said that this proposal is meant to eliminate the increasingly common phenomenon of contractors submitting impossibly low bids, sometimes even below cost, and winning the tender on the strength of these bids, then afterward demanding an improvement in the tender terms, knowing that the company will usually prefer to give in to these demands rather than having to start the tender process from scratch, which would delay the project for many months.

Bar explained that such after-the-fact demands - usually for an increase in the scope of the project - result in enormous and unplanned outlays for the company, and "we are trying to fight this phenomenon."

In addition, he said, an unreasonably low bid often means that the contractor intends to save money by using cheap materials and producing a shoddy product.

But government sources said that Bar's decision violates the Tenders Law, which obligates government agencies to prefer the lowest bid as long as it meets all the tender requirements. They said that it would be better to deal with the problems Bar mentioned (of after-the-fact demands and shoddy workmanship), by including more detailed specifications in the tender.

Should Bar's decision result in the company paying higher prices for work, the sources added, the Finance Ministry will probably intervene to reverse the new policy.