Contributed By Mejía, Guizar y Kargl, SC and Creel Abogados, SC
In recent years, due to various constitutional reforms, there has been a great fragmentation of the representative institutions of public power. This fragmentation was aimed at establishing greater autonomy for these institutions and preventing them from being contingent on the effects resulting from the changes that were previously experienced with government transitions, especially every six years when there is a new administration. Such fragmentation and the constant search for autonomy has permeated the public procurement regimes, creating as many regimes as institutions and making public procurement regulation in Mexico even more complex.
The legal basis for public procurement in Mexico is Article 134 of the Federal Constitution, which provides the principles pursuant to which public procurement is governed.
Despite the complex scenario on public procurement in different sectors, the most common public procurement can be divided according to the type of authority at the federal level and the sub-federal level; there are as many local contracting regimes as there are states in the country.
The federal level is ruled by the Law on Procurement, Leases and Services by Public Sector (LAASSP) and the Law on Public Work and Related Services (LOPSRM), both with their respective regulations.
The sub-federal level comprises state government and municipal authorities. The sub-federal level is autonomous under its own constitution and therefore has its own regulation – although in most cases it is similar to the federal legislation – and must be analysed on a case-by-case basis.
The regulating procurement procedures at local level sometimes reveal important discrepancies in the areas and stages of procurement. However, there are also great similarities, and sometimes even total correlation in the rules that regulate such procedures.
There are also special regimes, such as those applicable to productive state enterprises – eg, Petroleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE) – as well as those applicable to autonomous constitutional bodies.
Other specific regimes apply to:
According to the public procurement laws, the entities that are subject to those regulations are:
The contracts that are mainly subject to the LAASSP are:
On the other hand, the contracts that are subject to the LOPSRM are mainly those whose main purpose is to build, install, extend, remodel, restore, preserve, maintain, modify or demolish immovable goods.
According to the LAASSP and the LOPSRM, it is possible for foreign suppliers to take part in Mexican bids under two specific type of procedures: (i) public tenders covered by international treaties that comprise a specific chapter on public procurement; and (ii) international open tenders that allow any national or foreign supplier to participate in the bids even if they have not signed an international treaty with Mexico. This option is available when a national tender has been declared uncontested or when it is being financed with foreign credit.
On a case by case basis, there could be some limitations for specific sectors like hydrocarbons or electricity.
There is no special requirement or obligation that foreign companies or private parties shall comply with in order to participate in tenders or other public procurement processes, provided that foreign suppliers are allowed to participate under the law.
Nevertheless, there are some restrictions for any private party intending to participate in the public procurement procedures and award of contracts, established in both LAASSP and LOPSRM, as well as in other pieces of legislation, such as the Federal Anti-Corruption Law on Public Procurement (FACLPP). The main prohibitions under FACLPP are the following:
Moreover, according to LAASSP and LOPSRM, it is important to consider that government bodies shall refrain from receiving proposals or awarding any contract with among others, the following persons:
Under public procurement regulation, the authority has the obligation to disclose and publish the call for public tenders via the electronic platform CompraNet: https://compranet.hacienda.gob.mx/web/carta.html
This free-access platform is the electronic system administrated by the Secretariat of Public Function where all the information related to the call for competition on public tenders and all the activity related to the process can be found.
Among other things, the call for bids must include:
Tenders financed entirely or partly by foreign credit are published according to the guidelines of the authorised credit institution.
In general, prior to any contracting procedure, the awarding authority requires a market study to establish the optimum price that will be accepted by a proposal made by the bidders or participants.
According to the applicable regulation, this is defined as: “The prior verification of the effective existence of goods, leases or services of national or international suppliers and the estimated price based on the information provided by the dependence or entity, public or private organisations, manufacturers of goods or providers of the service, or a combination of the mentioned sources.”
The aims of the market study are to provide the pertinent information to carry out the corresponding public procurement process, to ensure the best economic conditions and determine the market price of the service or supplies that will be acquired. The results of the market study shall include the following:
This investigation seeks to eliminate the possibility that the contract is granted at a cost in excess of the market price, and allows the identification of two different price parameters: (i) unacceptable price; and (ii) maximum reference price.
Based on the above, the entity will be able to choose the best cost-benefit option from the proposals that does not exceed the maximum reference price.
The LAASSP and the LOPSRM establish the following procurement procedures:
The public tender, as the main procurement procedure, comprises the following stages:
As mentioned in 2.3 Tender Procedure for Award of Contract, the general rule for public procurement is to deliver an award via an open tender, however, by exception and under specific circumstances, the awarding authority can choose either of the other two types of procedure if those conditions are met.
For the restricted invitation, at least three suppliers who meet certain prerequisites are preselected and the contract is awarded to the one that presents the best bid. Specific scenarios where this type of procedure applies are established in law.
For the direct award, the contract is directly awarded to a supplier without any competition. This is usually when the value of the purchase is low or when public tenders or restricted invitations are unsuccessful.
Public entities are obliged to make available to the public through the digital system CompraNet their annual acquisition programme at the beginning of the year, no later than 31 January.
In addition, the awarding authority must publish the call with all the necessary requirements, formats and documents that participants must meet in order to participate and keep to the terms and conditions set therein.
In public bids, participants must submit their technical and economic proposals on a specific date within 15 to 20 days after publication of the call for competition.
All government procurement regulations prohibit governmental bodies or agencies from receiving proposals or awarding contracts from participants that:
Certain tenders may be limited to only national participants, such as when the products to be acquired are manufactured in Mexico and have a national content of at least 50%.
The awarding authority as an exception can opt to award a contract through a restricted invitation process to at least three participants. The selection of this proceeding must be justified according to the specific circumstances allowed by law and must rely on principles such as economy, efficiency, impartiality, transparency, and honesty in order to ensure the best purchase conditions for the government.
The LAASP and the LOPSRM envisage the hypothesis that allowed the awarding authority to choose this via.
In any case, the potential suppliers must have the capacity for immediate response as well as sufficient economic and technical capacity and all the necessary resources. In addition, economic or professional activities shall be directly related to the main object of the contract.
Proposals are evaluated according to the criteria selected by the awarding authority, which can be:
The evaluation criteria and the conditions that must be met by the competitors must be published in the call for bids.
The contract must be awarded in a public meeting within a period of 30 days from the submission of the proposals. The final decision must include:
The contract must be awarded in a public meeting within a period of 30 days from the submission of the the proposals. The final decision must include:
The act by means of which the contract award is given to the participants shall be signed and a copy must be handed to each of them. In addition, the calling entity must make the same information publicly available in its office within no less than five working days.
In addition, the judgment must be uploaded and published on CompraNet.
Once the contract has been awarded, the obligations arising from it become enforceable. The contract must be signed on the date specified in the bidding conditions or within a period of 15 days.
Nonconformity complaints against the contract award decision can be submitted by participants that consider that the judgment is not aligned with the provisions of the law or the terms and conditions of the bidding process.
The Ministry of Public Function through the internal comptroller of the contracting entity will be responsible for deciding the legality of the decision. That verdict can be appealed at the Federal Court of Administrative Justice through a nullity claim. Furthermore, the judgment of the Federal Court can be challenged at the Federal Collegiate Tribunals, with that decision being final.
In the event of disagreements between the government and a contractor in connection with the performance of the contract, the parties can opt for the following proceedings:
After filing the complaint, the procurement process will be suspended until the proceeding is finished. Regarding the final decision, the complaint does not automatically suspend the execution of the contract but the claimant relying on specific and critical circumstances can request an injunction, which may be granted or not.
The procurement proceedings can be challenged by the competitors in the following cases:
As a general rule, the competitors have six days after the execution of the challenged act to submit a complaint and ten days if the bidding is in the framework of an international agreement.
Likewise, the time limits are 30 working days for a nullity claim and 15 working days for an extraordinary constitutional claim before the federal court (amparo).
Considering the complex challenge scheme that exists in Mexico in relation to administrative matters and the existence of optional means of defence, the duration of the claims can vary greatly; however, in the case of disagreements to which they refer LAASSP and LOPSRM, it is common that the proceedings take between three and five months.
It is worth mentioning that the administrative challenge system in Mexico implies the existence of other means of defence such as the administrative contentious trial and the amparo trial, which can often lead to the challenge process taking up to two years to reach a definitive resolution.
The review body for tenders is the Ministry of Public Administration, however, each agency and entity of the federal public administration has an internal control body under the said Ministry of Public Administration. These internal control bodies are responsible for receiving, processing and resolving the disagreements presented by bidders and suppliers on the occasion of the contracting procedures convened by each entity or agency.
According to the 2019 Audit Report, from 1 December 2018 to 31 December 2019, the Ministry of Public Administration received 196 disagreements and resolved 206 files, including matters from previous years, since as of 30 November 2018, there were 52 pending.
However, since the vast majority of disagreements are resolved by internal control bodies, the above statistics are not representative of the total number of complaints filed in relation to contracting procedures that are convened throughout the country.
The review bodies in Mexico are not authorised to charge any kind of fee in the matter of challenging public procurement decisions.
The awarding authority can agree to increase the amount of the contract in justified circumstances provided that such amount does not exceed 20% of the original sum.
In addition, if the supplier is not able to fulfill with the totality of the contract, the authority can cancel part of it provided that the amount does not exceed 10% of the total original amount of the contract.
Public procurement laws usually allow a direct award when the value of the purchase is low. In addition, contracts can be directly awarded when public tenders or restricted invitations are unsuccessful.
The Second Chamber of the Supreme Court of Justice of the Nation has established that because the law does not set a time period for the Ministry of Public Function to initiate its powers of ex officio verification with respect to public procurement procedures, the right to the legal security of individuals is violated.
In that sense, according to the LAASSP, the Ministry of Public Administration may at any time verify that the purchases, leases, and services are carried out in accordance with the provisions of the law, which in the current context allows the government to reopen files of concluded contracting procedures, without any time limit; hence the limitation established by the judiciary is an important tool in avoiding the reopening of files based on merely subjective grounds.
With the beginning of the new administration, there is a new perspective for public procurement. The idea of eradicating corruption has led the new government to centralise the public procurement process within one authority.
On this basis, new faculties have been granted to the Ministry of Finance and Public Credit; this authority will be in charge of issuing the official calls to centralise the process and avoiding further acts of corruption in the different public sectors.
In addition, the new government is in the process of implementing framework contracts to be signed with suppliers.
As this scheme is still being implemented, the real effects of the new centralised public procurement on corruption are yet to be seen.