Reciprocal Procurement

Reciprocal procurement is a duty that is applied to a person or body that submits a bid in a government tender, a tender of a municipal authority or a tender of an HMO, to cooperate industrially and / or to purchase in exchange for winning certain products or services made in Israel, at specific rates based on their bid.This obligation, which many are not aware of, has implications for the pricing of the proposal, the exposure of the bidder to sanctions in the event of violations and even its future disqualification from submitting proposals for certain government and / or municipal tenders.

The conditions of reciprocity are regulated by law as well as by a number of specific regulations, all alongside international treaties and agreements, which provide exceptions and relief in relation to law.


The Industrial Cooperation and Investment Promotion Authority
The Industrial Cooperation and Investment Promotion Authority, better known as the ICA, is the body of the Ministry of Economy, which, among other things, trusts the management of all reciprocal procurement made in the State of Israel.

The ICA oversees the implementation of the reciprocal purchase obligation in Israel and even assists in its implementation in light of inquiries made to it.

Due to the authority and professionalism of the ICA, there is a real advantage in the ongoing conduct vis-à-vis the ICA through a professional law firm expert in the field of reciprocal procurement and the ability to promote operations and dialogue with the ICA


Reciprocal procurement rates
The reciprocal purchase obligation is derived from the tender offer amount and its scope varies according to the type of tender published, the identity of the bidder and the place of residence. Occasionally, a total exemption can also be obtained from a reciprocal purchase obligation, or facilitation from its implementation.

In general, Prior discussion of mitigation by virtue of international treaties, it can be said that industrial cooperation not related to the procurement of security equipment will amount to at least 35% of the value of the transaction or contract, whereas in the case of such security equipment, it will be at least 50%out of the purchase total.


What would be considered reciprocal:
• Goods manufactured in Israel, with legal restrictions.
• Some services
• Research and development
• sharing knowledge
• Inclusive section that allows the ICA to discretion.

What would not be considered reciprocal:
Acquisition of shares of corporations to which the Securities Act, 1968 applies, at a rate at which the acquirer has not become a stakeholder as defined in the Securities Law above.
Expenses, including agents’ fees, spent on promotion of a foreign supplier in Israel.
Although the legislature tried to regulate the field of industrial cooperation and reciprocity in a clear and clear way, in practice there are many buyers and uncertainties as to the applicability of the law, and the nature of the services and goods that are considered reciprocal.

Since the bidder must attach a clear plan of the reciprocal and industrial cooperation that he intends to carry out at the time of the proposal, when a violation of these may result in sanctions, it is important to receive personal and professional advice before submitting the offer.


Relevant legislation, guidelines and agreements:
• Tender Obligation Act, 1992.
• Tender Obligations Regulations (Duty of Industrial Cooperation), 2007.
• Municipal regulations (duty of industrial cooperation), 2010.
• Tender Obligations Regulations (preference made in Israel), 1995
Chapter 7.12.5 – Industrial Cooperation.
• Governmental Procurement Agreement GPA.

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