Egypt - Selling to the GovernmentEgypt - Selling to the Government
It is the experience of this office that, notwithstanding the letter of the law as described in the following paragraphs, the Ministry of Defense, the Ministry of Interior, the Egyptian Intelligence Service and State-owned Enterprises affiliated with these government bodies are not required to comply with procurement rules that apply to Civil Ministries. Over recent years, Civil Ministries have increasingly turned to the “power” Ministries to manage procurements on their behalf. These purchases are not conducted according to the requirements of Egypt’s Tenders Law.
In selling to the Government of Egypt (GOE), companies will need to deal directly with the client agency. Egyptian government procurement is conducted using national budgetary funds, via the U.S. Foreign Military Sales (FMS) program or funds from other donors. In the case of FMS, information can be obtained on Federal Business Opportunities. For questions about upcoming procurements, contact the Office of Military Cooperation (OMC) via the U.S. Embassy in Egypt.
Other projects open to U.S. bidders may come from donor-funded bilateral projects such as the Government of Japan's United Overseas Development Assistance (ODA) and from multilateral assistance such as the World Bank, the African Development Bank, and the European Bank for Reconstruction and Development. The following information pertains to contracting directly with the GOE. It is also relevant for donor-financed projects, to the extent that Egyptian law applies to them.
Tenders Law
The Tenders Law No. 89/1998 governs GOE procurement by all civilian and military agencies (“ministries, departments, local government units and public and general organizations”) unless they are specifically exempted from this law. A few key principles include:
(1) No negotiation of bids after bid opening or “momarsa (“auction” in Arabic), referring to a common Egyptian business practice for determining a fair price for goods and services – sometimes called a Dutch auction, in which the price of an item is lowered until it gets the opening and winning bid. A tender may not be transferred into a momarsa;
(2) No cancellation of a purchase order won through a competitive bid without reason. Moreover, rejected bids and awarded bids will contain the reasons on which the decision was based;
(3) Bid bonds will be refunded immediately upon expiration of tender;
(4) Publication of bid and open competition for at least 30 days;
(5) Fifteen percent price preference for Egyptian bidders. The Tenders Law 89 of 1998 requires the government to consider both price and best value, however, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent. There is one exception, however: Ministry of Defense (MOD) tenders are treated differently due to the Reciprocal Defense Procurement Memorandum of Understanding. This rule allows Egyptian companies to compete as U.S. companies on DOD procurements and U.S. companies to compete for MOD tenders as Egyptian companies. If a U.S. company is competing with an Egyptian company on a MOD procurement, regardless of funding source, it must be treated the same. If an Egyptian company receives a 15% price preference, then so does the U.S. company. Not all Department of Defense procurement committees are aware of this requirement. In the event of a dispute, please contact the U.S. Embassy’s Office of Military Cooperation to inform it of MOD non-compliance with this provision of the Memorandum of Understanding;
(6) A two-phase decision-making process: in the first phase, a technical committee reviews submission. Upon acceptance of a bid, it may require further discussions and/or samples from the bidder. During the second phase, a financial committee reviews prices as well as the terms and conditions. In some cases, a bid-opening committee convenes a public session, to which all bidders are invited and bid prices are read aloud; the committee either decides or, if the value is over USD 50,000, recommends a decision to the relevant ministry;
(7) Bid bonds of one or two (generally two) percent are required; and a performance bond by the winning firm of (generally) ten percent. Preference is given to Egyptian public-sector companies and Egyptian cooperatives, both of which are exempt from the bonding requirements, provided they do the work themselves and do not request an advance payment;
(8) Fraud, bribery ("either personally or through a third party, directly or indirectly"), or bankruptcy by the contracting party annuls the contract and allows any outstanding bid or performance bond to be confiscated;
(9) Sole-source decisions are permitted in special instances: monopoly sources of supply; goods whose import is monopolized; specialized products or services; and goods and services needed urgently; and
(10) Advance payments are permitted, against a letter of guarantee. U.S. standby letters of credit (which can be insured for political risk by the U.S. Overseas Private Investment Corporation) are acceptable in Egypt.
Practical Problems related to the Tenders Law
There is no time limit for the decision-making committees to meet, make or announce their decision. If a bidder withdraws a bid prior to bid opening, the bid bond is forfeited. Bidders often are "held hostage" to a government agency that stalls the bid opening for various reasons, including running out of funds for the project. Costs of extending bid bonds are borne by the bidders. If a winning firm withdraws from a project before beginning or completing a project, its performance bond similarly will be confiscated. This has happened when a client delays the start-up because of budget shortfalls, expecting the contractor/supplier to carry the burden of maintaining the performance bond.
Government agencies often delay giving the "final acceptance" of goods or work projects. This holds up final payment and final retirement of the performance bond. There are no time limits for making payment from the date of acceptance of a bid, nor any provision for implied or automatic acceptance of a supplied good or service. The client must explicitly acknowledge “final acceptance” before the contractor can receive final payment and retire the performance bond. If award decisions are delayed beyond the validity date specified by a bidder, extra costs incurred by the delay cannot routinely be passed on. If the client adds new requirements to an ongoing contract, any extra monies requested by the supplier/contractor must be endorsed by a special "price study committee," which sometimes takes years to issue approval. In the meantime, of course, the supplier/contractor is expected to fulfill the revised contract without delay or complaint.
The Tenders Law makes no reference to dispute resolution, which therefore must be negotiated prior to contract signing. Arbitration in Egypt or abroad (the latter can include foreign law and foreign arbitral procedures) is preferred to the court system, although enforcement of arbitral awards is not assured because the losing party can appeal Egyptian or foreign arbitral decisions in Egyptian courts. If no specific dispute settlement procedure is mentioned, any future dispute with a government party will go to the government's Council of State. This is a government agency that both reviews the constitutionality of proposed laws and regulations and functions as a court for all non- criminal matters to which the government is a party. If the government party does not honor an arbitration decision, the Tenders Law does not permit the winning party to use the arbitration settlement documents to settle claims with other government entities (customs, tax, social insurance, etc.).
There is no provision allowing the supplier to delay work if payments are delayed. There is no provision to reduce the performance bond progressively according to the rate of completion of the work.
Recently, the Ministry of Defense (MOD) has been involved in many procurement decisions, especially national projects. The government views the military’s efficiency, high standards, discipline, and promptness in implementing projects as justification for its involvement in procurement decisions. The MOD has awarded several infrastructure projects from the Ministries of Health, Transportation, Housing and Youth. Furthermore, the MOD has also concluded agreements with numerous foreign corporations.
For assistance with Egyptian tenders, you may engage the staff of the U.S. Commercial Service in Egypt, as well as the Advocacy Center at the U.S. Department of Commerce in Washington, DC.
Other Practical Considerations in Selling to the Government:
Egyptian commercial agents are required for foreign firms to bid on most government tenders. By contrast, commercial agents cannot be used to bid on military tenders, although use of Egyptian "consultants or representatives" may be allowed if the arrangement is properly structured. Commercial agents are optional when bidding on tenders issued by the petroleum companies, or when selling to the private sector.
Poorly written specifications may force bidders to guess what the customer wants. U.S. firms must stay in close touch with client agencies to minimize doubts and uncertainties. Do not assume the "best" is desired, since superior features may not be understood, or the price may be too high. The law is silent about who writes tender specifications and neither encourages nor discourages hiring of consultants to do so. Foreign firms that are trusted by government officials often voluntarily propose tender specifications to prospective bidders, which give them a chance to determine the specifications. In the decision-making committee, the technical representative (typically an engineer) must concur in the award decision. Such qualified specialists have considerable influence.
An important element in conducting business in Egypt is establishing a relationship with decision-makers via frequent visits of foreign principals and their local representatives. Decision-makers must feel comfortable with a supplier and will generally not select a low-bidder who is unknown to them. However, while “sweetheart deals” are known to take place, many Egyptian sources affirm that the majority of decisions are openly competitive and straightforward. While the decision-making process may seem opaque, details of bids are readily obtainable through informal channels.
Government entities expect performance bonds to cover the full warranty period for the product or work in question, and drawdowns proportional to work completed are not usual. U.S. suppliers, by contrast, generally want performance bonds limited to safe delivery and/or set-up.
U.S. Commercial Service Liaison Offices at the Multilateral Development Banks (European Bank for Reconstruction and Development, African Development Bank, and the World Bank):
The U.S. Commercial Service maintains Commercial Liaison Offices in each of the main Multilateral Development Banks, including the European Bank for Reconstruction and Development, the African Development Bank and the World Bank. These institutions lend billions of dollars to developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education and advancing infrastructure development. The Commercial Liaison Offices at these banks help U.S. businesses learn how to participate in bank-funded projects, and advocate on behalf of U.S. bidders. Learn more by contacting the Commercial Liaison Offices to the European Bank for Reconstruction and Development, the African Development Bank and the World Bank.
In selling to the Government of Egypt (GOE), companies will need to deal directly with the client agency. Egyptian government procurement is conducted using national budgetary funds, via the U.S. Foreign Military Sales (FMS) program or funds from other donors. In the case of FMS, information can be obtained on Federal Business Opportunities. For questions about upcoming procurements, contact the Office of Military Cooperation (OMC) via the U.S. Embassy in Egypt.
Other projects open to U.S. bidders may come from donor-funded bilateral projects such as the Government of Japan's United Overseas Development Assistance (ODA) and from multilateral assistance such as the World Bank, the African Development Bank, and the European Bank for Reconstruction and Development. The following information pertains to contracting directly with the GOE. It is also relevant for donor-financed projects, to the extent that Egyptian law applies to them.
Tenders Law
The Tenders Law No. 89/1998 governs GOE procurement by all civilian and military agencies (“ministries, departments, local government units and public and general organizations”) unless they are specifically exempted from this law. A few key principles include:
(1) No negotiation of bids after bid opening or “momarsa (“auction” in Arabic), referring to a common Egyptian business practice for determining a fair price for goods and services – sometimes called a Dutch auction, in which the price of an item is lowered until it gets the opening and winning bid. A tender may not be transferred into a momarsa;
(2) No cancellation of a purchase order won through a competitive bid without reason. Moreover, rejected bids and awarded bids will contain the reasons on which the decision was based;
(3) Bid bonds will be refunded immediately upon expiration of tender;
(4) Publication of bid and open competition for at least 30 days;
(5) Fifteen percent price preference for Egyptian bidders. The Tenders Law 89 of 1998 requires the government to consider both price and best value, however, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent. There is one exception, however: Ministry of Defense (MOD) tenders are treated differently due to the Reciprocal Defense Procurement Memorandum of Understanding. This rule allows Egyptian companies to compete as U.S. companies on DOD procurements and U.S. companies to compete for MOD tenders as Egyptian companies. If a U.S. company is competing with an Egyptian company on a MOD procurement, regardless of funding source, it must be treated the same. If an Egyptian company receives a 15% price preference, then so does the U.S. company. Not all Department of Defense procurement committees are aware of this requirement. In the event of a dispute, please contact the U.S. Embassy’s Office of Military Cooperation to inform it of MOD non-compliance with this provision of the Memorandum of Understanding;
(6) A two-phase decision-making process: in the first phase, a technical committee reviews submission. Upon acceptance of a bid, it may require further discussions and/or samples from the bidder. During the second phase, a financial committee reviews prices as well as the terms and conditions. In some cases, a bid-opening committee convenes a public session, to which all bidders are invited and bid prices are read aloud; the committee either decides or, if the value is over USD 50,000, recommends a decision to the relevant ministry;
(7) Bid bonds of one or two (generally two) percent are required; and a performance bond by the winning firm of (generally) ten percent. Preference is given to Egyptian public-sector companies and Egyptian cooperatives, both of which are exempt from the bonding requirements, provided they do the work themselves and do not request an advance payment;
(8) Fraud, bribery ("either personally or through a third party, directly or indirectly"), or bankruptcy by the contracting party annuls the contract and allows any outstanding bid or performance bond to be confiscated;
(9) Sole-source decisions are permitted in special instances: monopoly sources of supply; goods whose import is monopolized; specialized products or services; and goods and services needed urgently; and
(10) Advance payments are permitted, against a letter of guarantee. U.S. standby letters of credit (which can be insured for political risk by the U.S. Overseas Private Investment Corporation) are acceptable in Egypt.
Practical Problems related to the Tenders Law
There is no time limit for the decision-making committees to meet, make or announce their decision. If a bidder withdraws a bid prior to bid opening, the bid bond is forfeited. Bidders often are "held hostage" to a government agency that stalls the bid opening for various reasons, including running out of funds for the project. Costs of extending bid bonds are borne by the bidders. If a winning firm withdraws from a project before beginning or completing a project, its performance bond similarly will be confiscated. This has happened when a client delays the start-up because of budget shortfalls, expecting the contractor/supplier to carry the burden of maintaining the performance bond.
Government agencies often delay giving the "final acceptance" of goods or work projects. This holds up final payment and final retirement of the performance bond. There are no time limits for making payment from the date of acceptance of a bid, nor any provision for implied or automatic acceptance of a supplied good or service. The client must explicitly acknowledge “final acceptance” before the contractor can receive final payment and retire the performance bond. If award decisions are delayed beyond the validity date specified by a bidder, extra costs incurred by the delay cannot routinely be passed on. If the client adds new requirements to an ongoing contract, any extra monies requested by the supplier/contractor must be endorsed by a special "price study committee," which sometimes takes years to issue approval. In the meantime, of course, the supplier/contractor is expected to fulfill the revised contract without delay or complaint.
The Tenders Law makes no reference to dispute resolution, which therefore must be negotiated prior to contract signing. Arbitration in Egypt or abroad (the latter can include foreign law and foreign arbitral procedures) is preferred to the court system, although enforcement of arbitral awards is not assured because the losing party can appeal Egyptian or foreign arbitral decisions in Egyptian courts. If no specific dispute settlement procedure is mentioned, any future dispute with a government party will go to the government's Council of State. This is a government agency that both reviews the constitutionality of proposed laws and regulations and functions as a court for all non- criminal matters to which the government is a party. If the government party does not honor an arbitration decision, the Tenders Law does not permit the winning party to use the arbitration settlement documents to settle claims with other government entities (customs, tax, social insurance, etc.).
There is no provision allowing the supplier to delay work if payments are delayed. There is no provision to reduce the performance bond progressively according to the rate of completion of the work.
Recently, the Ministry of Defense (MOD) has been involved in many procurement decisions, especially national projects. The government views the military’s efficiency, high standards, discipline, and promptness in implementing projects as justification for its involvement in procurement decisions. The MOD has awarded several infrastructure projects from the Ministries of Health, Transportation, Housing and Youth. Furthermore, the MOD has also concluded agreements with numerous foreign corporations.
For assistance with Egyptian tenders, you may engage the staff of the U.S. Commercial Service in Egypt, as well as the Advocacy Center at the U.S. Department of Commerce in Washington, DC.
Other Practical Considerations in Selling to the Government:
Egyptian commercial agents are required for foreign firms to bid on most government tenders. By contrast, commercial agents cannot be used to bid on military tenders, although use of Egyptian "consultants or representatives" may be allowed if the arrangement is properly structured. Commercial agents are optional when bidding on tenders issued by the petroleum companies, or when selling to the private sector.
Poorly written specifications may force bidders to guess what the customer wants. U.S. firms must stay in close touch with client agencies to minimize doubts and uncertainties. Do not assume the "best" is desired, since superior features may not be understood, or the price may be too high. The law is silent about who writes tender specifications and neither encourages nor discourages hiring of consultants to do so. Foreign firms that are trusted by government officials often voluntarily propose tender specifications to prospective bidders, which give them a chance to determine the specifications. In the decision-making committee, the technical representative (typically an engineer) must concur in the award decision. Such qualified specialists have considerable influence.
An important element in conducting business in Egypt is establishing a relationship with decision-makers via frequent visits of foreign principals and their local representatives. Decision-makers must feel comfortable with a supplier and will generally not select a low-bidder who is unknown to them. However, while “sweetheart deals” are known to take place, many Egyptian sources affirm that the majority of decisions are openly competitive and straightforward. While the decision-making process may seem opaque, details of bids are readily obtainable through informal channels.
Government entities expect performance bonds to cover the full warranty period for the product or work in question, and drawdowns proportional to work completed are not usual. U.S. suppliers, by contrast, generally want performance bonds limited to safe delivery and/or set-up.
U.S. Commercial Service Liaison Offices at the Multilateral Development Banks (European Bank for Reconstruction and Development, African Development Bank, and the World Bank):
The U.S. Commercial Service maintains Commercial Liaison Offices in each of the main Multilateral Development Banks, including the European Bank for Reconstruction and Development, the African Development Bank and the World Bank. These institutions lend billions of dollars to developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education and advancing infrastructure development. The Commercial Liaison Offices at these banks help U.S. businesses learn how to participate in bank-funded projects, and advocate on behalf of U.S. bidders. Learn more by contacting the Commercial Liaison Offices to the European Bank for Reconstruction and Development, the African Development Bank and the World Bank.
- Commercial Liaison Office to the European Bank for Reconstruction and Development
- Commercial Liaison Office to the African Development Bank
- Commercial Liaison Office to the World Bank