Selling to the Government
Many governments finance public works projects by borrowing from Multilateral Development Banks. Please be sure to review the “Financing of Projects section below” 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 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.
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 bidding on Government tenders 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 the U.S. Commercial Service worldwide and inter-agency partners 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. Consult Advocacy for Foreign Government Contracts for additional information.
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 Inbar Marom at firstname.lastname@example.org
Sites that offer request for quotations (RFQ) that may be of interest to U.S. exporters include:
NTA – Tenders Page
Israel and the United States have a number of financing projects jointly operated, such as:
The Ex-Im Bank offers project financing and other financial services. Ex-Im Bank provides a range of financial programs ranging from medium and long-term guarantees, insurance programs, working capital guarantee to project finance. The Project Finance Division provides financing to projects that are dependent on the project cash flows for repayment.
U.S. companies will find that Israel does not suffer from any lack of capital or trade financing. There are no unusual rules or regulations concerning export financing, apart from the foreign currency regulations noted above. Loans at market interest rates are available from commercial banks to finance the manufacture of exports including the import of raw materials and components for export products. Loans vary depending upon the raw material requirements, cost of conversion and collection timeframe.
U.S. exporters may find export financing and insurance available through commercial sources; City/State-sponsored export financing and loan guarantee programs; the U.S. Small Business Administration (SBA); the Ex-Im Bank, which can provide U.S. exporters with export credit insurance, pre-export financing and working capital guarantees; and other sources. Ex-Im Bank can also provide established Israeli buyers with fixed-rate financing for their purchases from U.S. exporters. Ex-Im Bank’s Environmental Export Insurance Policy provides enhanced short-term insurance for medium and long-term loans and guarantees for environmental exports, projects, and services. Israel does not receive PL-480 or similar U.S. Department of Agriculture (USDA) program commodity grants. USDA’s GSM-102 funds and supplier credit guarantees are available but not sufficiently attractive to most parties.
Three bilateral U.S.-Israel government-funded organizations provide financing for joint R&D and research projects:
U.S.-Israel Binational Industrial Research and Development Foundation (BIRD)
Established in 1977, BIRD supports joint industrial R&D projects designed to develop, manufacture, sell and support an innovative product. A pair of companies, one from each country, must conduct the project. BIRD often plays a proactive role in providing matchmaking services between potential U.S. and Israeli strategic partners.
BIRD provides funding covering up to 50% of project development costs, up to $1M per project, with the goal of expanding cooperation between U.S. and Israeli private high-tech industries. The mission of the Foundation is “to stimulate, promote and support joint (non-defense) industrial R&D of mutual benefit to the two countries”. Projects are supported in the areas of Agriculture, Communications, Construction Technologies, Electronics, Electro-optics, Life Sciences, Software, Homeland Security, Renewable and Alternative Energy and other technology sectors.
According to the Foundation, BIRD supports approximately 20 projects annually. The cumulative sales of products developed through BIRD projects have exceeded $10 billion. Awards typically range from $700,000 to $900,000. The award size varies based on total project budget and other considerations.
U.S.-Israel Binational Science Foundation (BSF)
The U.S.-Israel Binational Science Foundation (BSF) promotes scientific relations between the U.S. and Israel by supporting collaborative research projects in a wide area of basic and applied scientific fields, for peaceful and non-profit purposes.
Founded in 1972 by an agreement between the United States and Israel, the BSF is an independent body, directed by a board of governors consisting of five American and five Israeli members. Its base of operation is in Israel.
Funding for research derives from the annual interest on an endowment contributed in equal parts by the two countries. Grants are made on a competitive, peer reviewed basis, juried by leading scientists from the U.S., Israel and around the world. Eligible projects must demonstrate outstanding scientific merit and clear collaboration between Israeli and American researchers from institutions throughout the two countries.
Since its inception, the BSF has awarded some $700 million to over 5,000 research projects of the highest quality. Many of these have led to important scientific, medical, and technological breakthroughs with wide-ranging practical applications.
U.S.-Israel Binational Agricultural Research and Development Fund (BARD)
BARD funds, generated from a $100 million endowment, finance cooperative agricultural research between scientists of the United States and Israel on topics considered to be of mutual benefit to the agriculture sectors of both countries. BARD also supports international workshops and provides post-doctoral fellowships.