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 public procurement scenario 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 the Public Sector (Ley General de Adquisiciones, Arrendamientos y Servicios del Sector Público, or LAASSP) and the Law on Public Works and Related Services (Ley de Obras Públicas y Servicios Relacionados con las Mismas, or LOPSRM), both with respective regulations.

The sub-federal level falls under state government and municipal authorities. It is autonomous under its own constitution and therefore has its own regulation – although in most cases it is like 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 procurements. 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 public state enterprises – Petroleos Mexicanos (PEMEX) and the Federal Electricity Commission (Comisión Federal de Electricidad, or CFE) – and those applicable to autonomous constitutional bodies.

Other specific regimes apply to:

• concessions granted for works and services, which are regulated by different laws (depending on the work or service);
• public-private partnerships for long-term contractual relationships between the public and private sectors for the provision of services to the public sector or the final user, which are regulated by the Public-Private Partnership Law; and
• legislative and judicial powers, which follow their own public procurement rules.

According to the public procurement laws, the entities that are subject to these regulations are:

• the presidency’s administrative agencies;
• federal ministries of state and the legal executive office;
• the federal prosecutor;
• federal state-owned companies or trusts; and
• Mexican states, municipalities and public agencies that totally or partially use federal resources.

The contracts that are mainly subject to the LAASSP are:

• the acquisition and leasing of movable goods;
• the acquisition of movable goods that are intended to be incorporated into immovable goods for the fulfilment of public works;
• the acquisition of movable goods that will be installed into immovable goods under the responsibility of public agencies or bodies; and
• the hiring of services related to consultancy, advisory and investigative work. 

The contracts that are subject to the LOPSRM are mainly those with a main purpose to build, install, extend, remodel, restore, preserve, maintain, modify or demolish immovable goods.

According to the LAASSP and LOPSRM, it is possible for foreign suppliers to take part in Mexican bids under two specific types of procedures: (i) public tenders covered by international treaties that include 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.

The main obligations for contracting authorities include the following:

• prior to the procurement procedure, conducting a market study to determine the potential bidders and the conditions under which the required goods, works or services can be acquired;
• adequately substantiating the type of contracting procedure to be carried out, based on a prior market study;
• publicising the acts of the procedure (the call and bases, clarification meetings, acts of presentation and opening of bids, and decisions);
• evaluating the proposals submitted in accordance with the criteria established in the call for the respective procedure; and
• awarding the respective contract to the bidder whose proposal is solvent and offers the best conditions to the state.

Under public procurement regulation, the authority has the obligation to disclose and publish the call for public tenders via the electronic platform CompraNet.

This free-access platform is the electronic system administered by the Anti-Corruption and Governance Ministry 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:

• the name of the calling entity;
• the type and nature of the bid (ie, either national or international under international treaties or open) and the languages (besides Spanish) permitted for the proposals;
• the description of the contract and the specific requirements;
• the schedule for each of the stages of the procedure;
• the requirements that participants must fulfil to qualify for the bidding process;
• in certain cases, the requirements and conditions for trials;
• the criteria for the evaluation of proposals;
• the criteria for disqualifying the proposals; and
• the draft of the framework contract.

In general, prior to any contracting procedure, the awarding authority requires a market study to establish the optimum price that will be accepted for 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... 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 to determine the market price of the service or supplies that will be acquired. The results of the market study must include the following:

• verification of the existence of the goods, leases or services and the identification of possible international and national suppliers;
• identification of replaceable goods or services;
• alternative processes;
• the prevalent price at the time of the research; and
• an analysis of the competitive market.

This investigation seeks to eliminate the possibility that the contract is being granted at a cost in excess of the market price, and allows the identification of two different price parameters: (i) the unacceptable price; and (ii) the 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 legislation provides the following procurement procedures:

• public bidding, also known as open tender (as a general rule, this is the main procurement  process);
• restricted invitation, to at least three suppliers; and
• direct award.

The public tender, as the main procurement procedure, comprises the following stages:

• advertising the call to tender, and publication of the call to tender (in Spanish) on the official website (CompraNet) and/or in domestic newspapers;
• the submission by each bidder of technical and economic proposalsin two separate sealed envelopes, which will be opened in a public session at which a quantitative analysis of all the bids will be made; and
• the holding of at least one clarification meeting so that competitors can eliminate any doubts.

As mentioned in 2.3 Tender Procedure for the Award of a 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 certain 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.

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.

Specific scenarios where these types of procedures apply are established in law.

As mentioned in 2.3 Tender Procedure for the Award of a Contract and 2.4 Choice/Conditions of a Tender Procedure, 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 tender or restricted invitations are unsuccessful.

Moreover, in terms of the legislation, agencies and entities may contract without subjecting themselves to a public bidding procedure, but through direct award, for example when:

• there are no alternative goods or services or technically reasonable substitutes, or there is only one possible bidder in the market, or it is a person who holds the ownership or exclusive licensing of patents, copyrights or other exclusive rights, or because it involves works of art;
• the social order, economy, public services, health, safety or environment of any area or region of the country is endangered or altered because of an act of God or force majeure;
• circumstances exist that may cause significant losses or additional costs;
• the award is carried out exclusively for military purposes or for the navy;
• due to an act of God or force majeure, it is not possible to obtain goods or services through the public bidding procedure in the time required to meet an eventuality;
• a contract awarded through public bidding has been terminated;
• a public bidding has been declared void, provided that the requirements are maintained;
• there are justified reasons for the acquisition or leasing of goods of a specific brand;
• in the case of acquisitions, leases or services where the contract is carried out by peasants or marginalised urban groups, as individuals or legal entities;
• in the case of maintenance services of goods in which it is not possible to specify their scope, establish the quantities of work or determine the corresponding specifications;
• the purpose of the contract is the design and manufacture of a good that serves as a prototype to carry out the tests that demonstrate its operation;
• it is for specialised equipment, substances and materials of chemical, physico-chemical or biochemical origin to be used in experimental activities required in scientific research and technological development projects;
• it is for the acquisition of goods and services related to the operation of nuclear facilities; or
• it is for the subscription of specific contracts derived from a framework contract.

Public entities are obliged to make their annual acquisition programme available to the public through the digital system CompraNet at the beginning of each 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 or provide in order to participate and keep to the terms and conditions set therein.

In a public bid, 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 government bodies or agencies from receiving proposals from, or awarding contracts to, participants that:

• have a family, business or labour relationship with the awarding authority, or where a government officer that participates in the bidding process could otherwise benefit from the relevant contract;
• have a conflict of interest with the awarding authority or other participants in the same tender process;
• have been condemned by a final and non-appealable judgment in the previous three years in connection with government procurement contracts;
• have had a public procurement contract terminated;
• are insolvent or subject to an insolvency proceeding;
• have been administratively disqualified;
• have delayed in the execution of another contract with the same authority;
• present proposals on the same item of goods or services in a procurement procedure that may be linked by a partner or subsidiary; and
• intend to participate in a public procurement before they have carried out, by themselves or through subsidiary companies, the specific works or activities established in the contract.

Certain tenders may be limited to only national participants, such as when the products to be acquired are manufactured in Mexico and have national content of at least 50%.

The awarding authority can, as an exception, 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 to ensure the best purchase conditions for the government.

In any case, the potential suppliers must have the capacity for an immediate response, as well as sufficient economic and technical capacity and all the necessary resources. In addition, economic or professional activities must 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:

• points and percentages, which evaluate the best ranking based on quality and price;
• cost-benefit, which evaluates the economic proposal and the direct benefits in monetary terms; or
• the binary system, which is used in exceptional cases and is based on the lowest price, when it is impossible for the entity to use any of the above-mentioned criteria.

See 2.8 Eligibility for Participation in a Procurement Process.

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. The final decision must include:

• the list of the disqualified competitors and the reasons for their disqualifications;
• the list of competitors that fulfil all the requirements;
• the name of the awarded bidder; and
• the date for signing the contract.

The provisions of 3.2 Obligation to Notify Interested Parties Who Have Not Been Selected are applicable.

In addition, the act by means of which the contract award is given to the participants must 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.

Bidders may only be given a prior hearing when the bidder detects a calculation error, so that the bidder can accept or not accept the correction of such error.

It is possible to carry out the so-called “subsequent discount offers”, as an intermediate stage between the submission of bids and the issuance of the award, in order to obtain better economic conditions.

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.

Non-conformity complaints against the tender documents and 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 Anti-Corruption and Governance Ministry (either directly or through the internal comptroller office in 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 courts, 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.

• Cancellation: Entities may at any time administratively terminate contracts when the supplier is in breach of its obligations.
• Conciliation: The suppliers or the agencies and entities may at any time submit a request for conciliation to the Anti-Corruption and Good Governance Secretariat, due to disagreements arising from the fulfilment of the contracts, or upon request.
• Arbitration: An arbitration commitment may be agreed with respect to disputes that arise between the parties due to interpretation of the clauses of the contracts or issues arising from their execution.

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, or may not, be granted.

The procurement proceedings can be challenged by the competitors in the following cases:

• the call for bids and the clarification meeting – only those participants that officially expressed an interest in taking part in the bidding process are able to submit a complaint within six days of the clarification meeting taking place;
• the official restricted invitation – only those who were invited to bid are able to submit a complaint;
• the act of presentation and opening of the proposals – only the competitors that officially submitted a proposal are able to file a complaint;
• the cancellation of the tender – only the competitors that officially submitted a proposal are able to file a complaint; and
• acts or omissions that prevented the execution of the contract under the terms and conditions set forth either in the call for bids or the laws on public procurement – only the awarded bidder is able to file a complaint.

As a 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.

In addition, 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, it is common for the proceedings to 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 be definitively resolved.

The review body for tenders is the Anti-Corruption and Good Governance Secretariat, 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 contracting procedures convened by each entity or agency.

Since most disagreements are resolved by internal control bodies, statistics are not representative of the total number of complaints filed in relation to contracting procedures that are convened throughout the country.

However, it is common for bidders to resort to these means of defence, given the numerous errors and illegal acts committed in the procedures.

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 fulfil 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.

The agencies and entities may at any time administratively terminate contracts when the supplier fails to comply with its obligations.

Moreover, the agency or entity may terminate contracts in advance when there are reasons of general interest, or when, for justified reasons, the need for the goods or services originally contracted is extinguished, and it is demonstrated that continued compliance with the agreed obligations would cause damage or harm to the state, or when the acts that gave rise to the contract are null and void, as a result of the resolution of a competent authority.

In the case of suppliers, to terminate a contract, they must either:

• agree to terminate the contract with the agency or entity; or
• sue for termination before the judicial authority, which must issue a final decision to determine whether the contract should be terminated for causes attributable to the agency or entity.

All entities must refrain from executing any modification related to price, advance payments, progress payments, terms and conditions, or any change that implies giving better conditions to a supplier than those originally agreed.

In the last year, no judicial decisions have been issued that imply any change in legislation, or that are particularly important.

The president of the republic has sent an initiative for a new Public Sector Procurement, Leasing and Services Law to Congress, which is currently being discussed.

Although there are positive issues in the bill, the truth is that it intends to “legalise” many of the irregularities committed in practice in recent years.

The intention is to migrate the entire procurement system of the federal government to a new digital platform and seek a homologation in the regulations on the matter, limiting the possibility for the various entities to issue internal rules governing their procurement procedures, and concentrating those powers in the Anti-Corruption and Good Governance Secretariat (a “comptroller” of the federal government).