Discusses the legal requirements for selling to the host government, including whether the government has agreed to abide by the WTO Government Procurement Agreement or is a party to a government procurement chapter in a U.S. FTA. Specifies areas where there are opportunities.
Last Published: 12/10/2019

Many governments finance public works projects through borrowing from the Multilateral Development Banks. Please be sure to review the “Project Financing” section in “Trade and Project Financing” for additional information. 

Israel is a signatory to the WTO Agreement on Government Procurement (GPA). Additionally, under Israel’s 1993 Public Procurement Law, all Government of Israel 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” regulation and the “Mandatory Industrial Cooperation” regulation, both of which are described in further detail below.

The "Preference for Israeli Products" regulation stipulates that a 15% preference be awarded to Israeli manufacturers for certain items exempted by the WTO GPA and for products with at 35% Israeli content and with a value not exceeding $500,000. Israeli manufacturers in "National Priority Zones" receive an additional 5-15% advantage.

"Mandatory Industrial Cooperation" requirements are an integral part of each international tender document valued at $5,000,000 or more. The regulation requires foreign companies to enter into offset agreements. These agreements are administered, negotiated and monitored by the Industrial Cooperation Authority (ICA), a division of the Israel Ministry of Economy and Industry. Foreign Suppliers that have won government or public tenders are required to engage in an offset procurement in Israel to the extent of 35% (or 20% for WTO GPA signatory countries), or at least 50% of the contract value, in the civil or security fields, respectively. Industrial cooperation can be managed in various ways: local subcontracting, procurement of Israeli goods and services, cooperation in R&D, investment or assistance for an Israeli industrialist or exporter abroad. ​ Subcontracting, investment, technology transfer, and R&D contracts 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, industrial cooperation arrangements made by foreign companies can play a decisive role in the decision-making process.

According to ICA regulations, the final offset decision must be to the commercial benefit of the foreign company. A short explanation of the policy is available at the ICA website:

http://economy.gov.il/English/InternationalAffairs/IndustrialCooperationAuthority/Pages/default.aspx
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 if the effort is made in good faith. However, due to the importance the government of Israel attaches to commercial cooperation, failure to fulfill one's obligations may result in a lack of success in future tenders. U.S. companies interested in selling to the Government of Israel are strongly advised to appoint a well-connected local agent to assist in dealing with the Israeli bureaucracy.    

For those pursing Foreign Military Financing (FMF) funded defense contracts, please note that these contracts are exempt from sanctions and 50% offset demands. Instead, U.S. defense firms are encouraged to negotiate industrial participation contracts at 35% of the contract value.
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, including:

  • 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 prime bidders to team up with foreign companies.
As a result of the extensive use of closed tendering processes, foreign companies will not always be aware of major tenders. There is no single centralized Israeli government website where public procurements are advertised. U.S. companies interested in additional information on specific tender opportunities or on Israel’s public tender process in general are advised to contact Commercial Specialist Yael Torres at: Yael.Torres@trade.gov.
Sites that offer request for quotations (RFQ) that may be of interest to U.S. exporters include:

Advocacy

U.S. companies bidding on a Mexican Government tender may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center, coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of domestic U.S. Commercial Service Export Assistance Centers and with the U.S. Commercial Service in Mexico to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Useful information about the Advocacy Center’s work in support of U.S. companies—as well as the instructions and application form to apply for advocacy—can be found at their website: http://export.gov/advocacy.

Multilateral Development Banks and Financing Government Sales

Price, payment terms, and financing can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks. Please refer to the Project Financing topic in the Trade and Project Financing section for more information.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.