Israel is a signatory to the WTO government procurement code. Under the 1993 Public Procurement Law, all Government of Israel (GOI) entities and government-owned companies are required to procure goods or services by issuing a tender. In 1995, the Knesset approved the Preference for Israeli Products regulations and the Mandatory Commercial Cooperation regulations.
The "Preference for Israeli Products" regulations stipulate that a 15% preference may be given to Israeli manufacturers for certain items exempted by the WTO and for products with at least 35% Israeli content and with a value not exceeding US$500,000. Israeli manufacturers in "National Priority Zones" receive an additional 5-15% advantage.
"Mandatory Commercial Cooperation" requirements are an integral part of each international tender document valued at $500,000 or more. The regulations require foreign companies to enter into offset agreements at a negotiable 28% of the value of the contract. While the foreign firm is required to make every effort to fulfill its offset obligations, there is no penalty connected with a failure to do so. However, due to the importance the GOI attaches to commercial cooperation, failure to fulfill one's obligations will almost certainly result in a lack of success in future tenders.
The Industrial Cooperation Authority (ICA), a division of the Ministry of Industry, Trade & Labor, is responsible for negotiating and monitoring the implementation of offset agreements. The agreements may be for local subcontracting, investment in Israel, technology transfer, R&D contracts, or procurement of Israeli products. The first four options are preferred because of their potential long-term impact on the Israeli economy.
By court ruling, the use of industrial cooperation as a factor in the award process is not allowed. However, in the competitive Israeli market, the industrial cooperation arrangements made by foreign companies play a decisive role in the competition. U.S. companies interested in selling to the GOI are strongly advised to appoint a wellconnected local agent to assist in dealing with the Israeli bureaucracy. In public tenders for large projects, in which the public entity is looking for involvement of foreign companies, the tendering party has several tender options:
• Open International Tender, requiring the foreign bidder to partner with a local firm, or use local subcontractors.
• Closed International Tender, following an open or closed pre-qualification process.
• Open or Closed National Tender, requiring Israeli bidders to team up with foreign companies.
As a result of this bidding process, foreign companies will not always be aware of major tenders. U.S. companies are advised to contact the U.S. Commercial Service in Tel Aviv to obtain information on upcoming projects and how best to position themselves.