A retired judge serving as arbitrator, Eitan Ornstein, ruled this week that Raanana will pay about 10 million shekels to Rectec Ra'anana Neve Zemer, a company in the Shikun & Binui group, and return bank guarantees worth 3.4 million shekels. The arbitrator partly accepted the company’s claim, originally filed for 34 million shekels, and also partly accepted the city’s counterclaim.
The dispute centered on a contract to build and operate for 25 years a pneumatic waste collection system in the Neve Zemer neighborhood. Rectec argued that the project’s business model collapsed after it became clear that the neighborhood produced about 50% less waste than the tender forecasts. Because its operating fee was tied directly to the amount of waste collected, the shortfall made the project loss-making.
Ornstein said that since Rectec financed part of the construction costs expecting to recover them during operations, and those operations were hurt by the mistake in the projected volumes, the city could not keep the system without paying the full actual construction cost. He found that both sides had acted on a “mutual mistake” about expected waste quantities, which affected the deal’s economics and the allocation of risk. Other claims by the company were rejected.
The counterclaim was also partly upheld. Rectec must complete certain technical operating requirements within six months, including setting up a computerized call center and submitting structured work plans. Raanana was ordered to pay 8.05 million shekels for construction costs, plus indexation and interest from the date of filing, bringing the total to about 10 million shekels. The court also found the city unlawfully held excess bank guarantees, ordered the performance guarantee cut to 100,000 shekels, and required the return of about 3.4 million shekels. The city said the arbitration rejected most of Rectec’s claims and said the company will still have to meet its operating and maintenance obligations until the contract ends in 2038. Shikun & Binui said the sides continued to cooperate professionally to serve residents.
