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What Freeze? Netanyahu Clears the Way for 450 New Units (at least) in Pisgat Ze'ev

Pisgat Ze'ev Tenders Map 320x265.jpgIs something new happening in the East Jerusalem settlement of Pisgat Ze'ev?

Yes. According to a report in yesterday's Hebrew-language business daily "The Marker", the Israel Lands Authority has decided to accept "appeals" by contractors relating to the failed Pisgat Ze'ev tenders, and award contracts for the construction of at least 450 new units.  An image of the article from the print version of The Marker (Hebrew-only) can be viewed/downloaded here.

Wasn't it reported recently that Prime Mininster Netanyahu had frozen some tenders for construction in Pisgat Ze'ev?

Yes.  At the end of July it was reported that Prime Minister Binyamin Netanyahu had "frozen" tenders for 900 new units in the East Jerusalem settlement of Pisgat Zeev.  The back-story here was that these tenders, which had been issued by the Government of Israel in July and August 2008, had essentially failed - that is, the bids offered by real estate developers were so low that the government elected to not award the contracts.

Optimists were cautiously welcoming of this news.  Skeptics were, well, skeptical.  Sadly, it appears the skeptics were right. 

Are these the same tenders and if so, how is it that they have been "unfrozen"?

Yes, these are part of the tenders for 900 units that were issued previously but not awarded.

What does it mean to say that the tenders "failed"?

Tenders are an invitation for bids to purchase construction rights.   The issuance of tenders does not obligate the government to award contracts; it is more like an auction, and if the bids submitted are below the valuations made by the governmental assessor, the government reserves the right not to award the contract to any bidder - even the highest. That was precisely what happened with the 2008 Pisgat Ze'ev tenders, and contracts were awarded for the construction of only 56 of the 763 units on the auction block. When, three weeks ago, the Israel Land Authority moved to reissued the tenders, Netanyahu instructed them not to.

How can failed tenders now be back in play?

According to The Marker, the ILA has decided, more than a year after the original tenders were issued and bids made, to accepted appeals lodged by bidders and award the contracts to build 450 of the units based on those bids. 

They have decided to do so despite the fact that these same bids were found to be insufficient less than a year ago, and despite the fact that since the time they were originally issued, the real estate market in Jerusalem has surged - meaning that the construction rights are worth even more now than when the tenders were issued and the bids submitted. 

The Ministry of Construction is further quoted as saying that it intends to issue additional tenders in Pisgat Ze'ev in the near future. 

A map of Pisgat Zeev showing the new tenders can be viewed/downloaded here.

Is this a normal development with respect to how tenders are handled by the Government of Israel?

No, this is a highly unusual and very serious development.  It means that the government of Israel is going out of its way to award tenders that, had they been left to the natural course of events and market conditions, would have failed.  

Moreover, the extreme irregularity of how these tenders are being handled - with the government in effect reviving previously failed tenders a full year after they were published, rather than issuing new ones - underscores the political motives underlying this decision.  Normally, any appeal by bidders takes place shortly after tenders are issued and bids are refused.  If the appeal succeeds, the ILA generally auctions off the construction rights among the highest bidders. We know of no precedent for an appeal after such a long period of time, and where as a result tenders were awarded based on the original bids.

The normal thing to do in a case like the Pisgat Ze'ev tenders, if the government wanted to promote this construction, would be to re-issue the tenders, based on the new market conditions, and let the bidding process play itself out. 

Why would the Government of Israel decide to take this strange course and revive "dead" tenders?

There is only one reason why the government of Israel would prefer to revive the original tenders, rather than issue new ones: it allows Israeli officials to say, "What are you getting upset about?  There is nothing new here - these are old tenders.  We are just following through with something that was already approved."

It also means that the contracts can be awarded very quickly, meaning that third-party rights - i.e. those of private contractors, who appear to have been interviewed for the story in The Marker - will almost immediately be brought into play.  Once third-party equities are involved, as the government well knows, projects are much harder to roll back. 

So Netanyahu thinks he can get away with new settlement construction - construction that Netanyahu has the authority to stop - by manipulating the technicalities to argue that he is totally innocent of any wrongdoing and bears no responsibility.   If this argument fails, Netanyahu may well argue that the government had no choice but to go ahead with the tenders or face lawsuits - something that sounds good but is simply not true, but will be true once the contracts are awarded.

What do the Pisgat Ze'ev tenders say about the intentions of Netanyahu and his government?

There can be no question: this decision to go ahead with the Pisgat Ze'ev tenders is a deliberate decision by Netanyahu to poke a finger in the eye of President Obama and Special Envoy Mitchell.  It is the latest effort by Netanyahu to use settlement-related developments in East Jerusalem to challenge and undermine President Obama's peace effort. 

Given the centrality of Jerusalem settlement issues to the current political debate (a debate taking place not only between Israel and the US but within Israel itself), it is simply not believable that a decision related to construction in Pisgat Ze'ev or any other East Jerusalem settlement could have been taken without Netanyahu's knowledge and consent.  This applies equally to the earlier decision to freeze the tenders and to the current move to reverse that decision and go ahead with the tenders.  And for Netanyahu, this kind of zigzagging is very much in character.

This is a clear-cut case: Netanyahu and his government made an affirmative decision to proceed with these tenders.  Nothing compelled them to do so.

Thus, this appears to be a case of Netanyahu - just as in the case of the /entries/wp263 (link has expired) Shepherd's Hotel and the Sheikh Jarrah evictions - using East Jerusalem construction to "up the political ante" domestically and with the US.  

Is there any chance that the tenders can or will be "re-frozen"?

What happens next depends on Netanyahu and the Obama Administration. Netanyahu can still stop these tenders, but only if he is convinced that doing so is worth his while (or more precisely, that failing to do so will mean costs that far outstrip any political benefit he thinks he is deriving domestically over this issue).  And the window for such a decision - the time before the tenders are awarded - is likely to be very small, measurable in days, not weeks. 




Produced by Lara Friedman, Director of Policy and Government Relations, Americans for Peace Now, and attorney Daniel Seidemann, Ir Amim (Israel). 

For more information on Ir Amim, an Israeli non-profit organization working for an equitable and stable Jerusalem with an agreed political future, see www.ir-amim.org.il/eng  (Hebrew site is www.ir-amim.org.il)