Suspension of a recognized contractor's license for government work by the Accountant General following safety orders and work accidents
Nov 21, 2021
By: Omri Nisani
Many contractors invest significant effort to obtain the status of a “Recognized Contractor,” also known as a “Star Contractor,” as it serves as the only key to submitting bids for government tenders.
Sometimes, this recognition is an integral part of the contractor company’s business model, with most of its operations focused on the institutional and public sectors. As a result, the revocation or suspension of a “Recognized Contractor” license can cause substantial damage and even pose a tangible risk of economic collapse.
In the brief article below, we will examine the connection between sanctions imposed on “Recognized Contractors” due to construction safety violations.
A reputable contractor, who is he?
The Inter-Ministerial Committee for Determining the Delivery of Works to Recognized Contractors operates under the Ministry of Finance (Properties, Procurement and Logistics Division). As part of its duties, it is authorized to maintain a registry of "recognized contractors." That is, a registry that allows contractors who meet the conditions defined to compete in tenders announced by government ministries.
This is no small matter, as the state owns more than 3 million square meters of public buildings and assets at any given moment. This is alongside countless security facilities and future projects that are in the planning or execution stages.
Among the bodies that employ recognized contractors on behalf of the state are, for example, the Civil Service Commission, the Israel Police, the Israel Land Authority, Netivei Israel, the police, and of course all government ministries (including the Ministry of Housing and Construction).
Many contracting companies seek to be included on the list of recognized contractors, and it is known that the aforementioned approval is used not only for the benefit of submitting bids for tenders, but also as a kind of "quality mark" with the private sector. When a recognized contractor loses its registration due to failure to meet the criteria, the damage is double. The contractor is not only unable to access government tenders, but is also forced to deal with damage to its reputation with the private market.
Recognized Contractor — What Does It Mean?
The Interministerial Committee for Determining the Assignment of Works to Recognized Contractors operates under the Ministry of Finance (Assets, Procurement, and Logistics Division). As part of its duties, it is vested with the authority to maintain a registry of “recognized contractors,” i.e., a registration that enables contractors who meet the defined criteria to compete in tenders published by government ministries.
This is no trivial matter, as the State holds at any given time more than 3 million square meters of public buildings and assets, alongside countless security facilities and future projects that are in the planning or execution stages.
Among the bodies that employ recognized contractors on behalf of the State are, for example, Ma’atz, the Israel Police, the Israel Land Authority, Netivei Israel, the police, and of course all government ministries (including the Ministry of Construction and Housing).
Many contracting companies seek to be included on the list of recognized contractors, and it is well known that this approval serves not only for submitting bids for tenders but also as a kind of “quality seal” in the private sector. When a recognized contractor loses its registration due to failure to meet the criteria, the damage is twofold: the contractor is no longer able to participate in government tenders and must also contend with harm to its reputation in the private market.
The connection between "recognized contractor" and safety violations at construction sites
Safety is one of the reasons for suspending contractors from the status of "recognized contractor" and these include cases such as multiple safety orders, including violations in the construction field, dangerous defects, multiple or serious accidents at the contractor's construction sites, and the like.
In a sidebar, we note that the suspension of a "star contractor" can also be for many reasons related to violation of workers' rights, submitting bids with calculated errors that were mistaken or suspected of being made out of "craft", submitting knowingly false/misleading documents to the inter-ministerial committee, submitting bids that exceeded the range of reasonableness, "collusion" between contracting companies to bring about a predetermined win in the tender, and more.
The sanction of removing contractors from the "List of Recognized Contractors."
The Accountant General of the Treasury takes safety violations very seriously, and there is a dramatic procedure regarding the connection between construction violations and the right to be listed in the register of recognized contractors.
Recently, when several of the largest and most well-known construction companies in Israel found themselves in a situation where their "recognized contractor" licenses were suspended, the Accountant General commented on the matter by saying that suspending a contractor's license for safety violations is " an additional layer of deterrence for contractors who have accumulated significant safety violations ." It was further emphasized that " the Accountant General considers safety to be of paramount importance and supports companies that take significant steps to increase safety on construction sites in Israel ."
Starting in February 2019, it was determined that a recognized contractor must be suspended for a period of one year (almost immediately and without discretion) when workers were seriously injured or killed on a construction site as a result of failure to comply with safety instructions and/or at least two serious safety deficiencies were discovered on his sites that caused their closure.
Not only that, the Accountant General determined in the same document that contractors who were given at least 2 orders to stop work in the year prior to submitting the application to be recognized as a "star contractor" will not be able to be included in the government contractor database for a fixed period.
Many in the construction industry believed that the procedure published by the Accountant General was not without criticism and that its criteria could immediately exclude many companies. The Accountant General addressed this when he slightly softened the sanctions in July 2020 with the publication of a procedure that stipulated a suspension of only six months.
Ensuring safety in construction
The fight against accidents in the construction industry is one of the most central and important issues in Israel today. The numbers are not ambiguous. Every year, more than 30 workers are killed on construction sites across the country (an average of about 3 workers per month) and more than 6,000 are injured. Most fatal accidents are caused, naturally, by falls from a height.
The state, as part of its fight against this worrying phenomenon, is also using the tool of "suspending a recognized contractor's license" to convey a message of zero tolerance for safety violations. As an insurance agency representing contracting companies throughout the country, we are also witnessing this.
Time and again, we emphasize to our policyholders that the best insurance they can purchase is to exercise caution – both minor and major. Leave the insurance policy in the drawer and protect the lives of workers and those entering the gates of the construction site and its surroundings.
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