Public Procurement 2017

Last verified on Thursday 8th June 2017

Mexico

Javier Arreola E and Vanessa Franyutti J
Nader, Hayaux y Goebel SC

    Applicability of international treaties and conventions

  1. 1.

    Is your jurisdiction a member of the WTO Agreement on Government Procurement (GPA)? If so, what products and services are covered?

  2. No, Mexico is not a member of the GPA.
  3. 2.

    What government ministries and other agencies are covered by the commitments under the GPA? To what extent are provincial or local governments covered?

  4. Not applicable.

  5. 3.

    Does your jurisdiction have bilateral or plurilateral agreements with other nations providing for reciprocal treatment of the other nation

  6. Mexico has a large number of free trade bilateral agreements across the globe. The most commonly used commercial trade treaty in Mexico is the North American Free Trade Agreement (NAFTA). NAFTA sets the rules for international trade and investment among Mexico, the United States and Canada. Some of the most relevant provisions under NAFTA include protection of foreign investment, protection of intellectual property, rules of origin, environment protection, labour cooperation and access to government procurement. Regarding the latter, the general guidelines on public procurement provided under NAFTA have been gradually adopted into Mexican legislation, including ‘national treatment’ for all NAFTA members, whereby governmental ministries, agencies and entities of member countries are required to admit participants of other member countries to their public procurement processes for all products and services regulated under the treaty and to treat such participants in the same way as any other national participant in the procurement process. In the case of Mexico, only federal governmental offices and entities are required to observe this principle, as state and municipal agencies would only be required to do so if the relevant state congress so chooses. Mexico is also part of other multilateral and bilateral agreements, including reciprocal benefits in public procurement, such as:

    • the Central American Free Trade Agreement;
    • the free trade agreement between Mexico and Colombia;
    • the free trade agreement between Mexico and Costa Rica;
    • agreements signed between Cuba and Mexico in furtherance of the 1980 Montevideo Treaty;
    • free trade agreements with Brazil, Chile, El Salvador, Guatemala, Honduras, Nicaragua, Peru and Uruguay;
    • the free trade agreement between Mexico and the states of the European Free Trade Association; and
    • multiple agreements with countries of the Asia-Pacific region.
  7. 4.

    Are there regional treaties that affect procurements?

  8. Yes. As mentioned above, Mexico is part of NAFTA and the Central American Free Trade Agreement – regional trade treaties providing for reciprocal treatment in bidding processes for government procurement as regulated in such treaties.

    Local preferences; tax and tax penalties

  9. 5.

    Does your jurisdiction have preferences for goods produced and services performed domestically? What are they and when do they apply? Are they subject to exceptions?

  10. The main objective of the Mexican public procurement system is to acquire goods and services at the lowest possible price and highest quality to meet government requirements. Nevertheless, procuring agencies or offices also support secondary purposes such as the development of small local producers and suppliers known in Mexico as micro, small and medium enterprises (MiPyMEs). In this regard, public procurement laws provide that the Ministry of Economy will be responsible for setting the rules that government ministries, agencies and entities must follow in a procurement process to promote the development of local MiPyMEs.

    Also, many bid rules provide for a minimum national content in the works, products and services offered, especially regarding public works. Finally, it is important to note that, under the Mexican public works procurement law, 30 per cent of the labour force to be used in public works contracted under such statute must be Mexican, unless otherwise agreed in an applicable international treaty. Under equal circumstances, bids introducing the use of national resources and products may be preferred in certain industries.

  11. 6.

    Does your jurisdiction have requirements that some portion of the procurement be awarded or subcontracted to local firms, bidding preferences for local companies or requirements that in-country work be done by local companies? If so, what is the definition of a local company? Are there limits on the amount of foreign ownership and control?

  12. See question 5. In addition, bid processes may be fully reserved to Mexican nationals, when not in violation of any treaty. However, even in international bids, foreign suppliers may also be required to participate through associations or joint ventures where a Mexican company remains as the majority and controlling holder, or as a subcontractor or supplier. In any case, foreign companies may participate in a national bid by means of forming a Mexican subsidiary for that specific purpose. There are no general restrictions as to what percentage of capital may be foreign; however, tender documents may require national capital or expertise, or both, which may force a foreign entity to partner with a Mexican entity.

    Even if a bid allows for international participants, participants (whether national or international) may be required, under the tender documents or by law (under certain laws, such as the specific law for public-private partnerships), to incorporate a Mexican special purpose vehicle in the event that they are awarded a contract.

  13. 7.

    Is there any requirement for a supplier or contractor to have a local registered office, or to supply through a domestic company? Are there other local requirements?

  14. See questions 5 and 6. Also, and as already noted, public procurement bidding processes may be national or international. For those that are strictly national, only Mexican entities or individuals may participate. Under international bids, there are two alternatives:

    • bids open only to Mexican bidders and foreign participants from countries with which Mexico has a free trade agreement including a government procurement chapter; or  
    • bids open to Mexican bidders and foreign participants regardless of the origin of the goods or services tendered.

    When a contract is awarded to a foreign company, it is often requested that such participant incorporate a Mexican company to be the vehicle with which the government enters into the corresponding contract; however, the specific requirement, for all bidders, will be set forth in the bidding guidelines issued by the calling authority. As a practical matter, in such instances where a foreign bidder is awarded a contract requiring substantial time spent in Mexican territory in order to provide or supply the services or products that are the subject matter of the bid, it is recommended that a Mexican entity be formed for contract management purposes.

  15. 8.

    Is cross-border contracting affected by any currency rules?

  16. Although Mexico does not have any currency control laws, foreign currency does not have legal standing in Mexico, except in cases where the law expressly provides otherwise. Payment obligations in foreign currency incurred in or outside of Mexico to be paid within Mexican territory can be paid by delivering an equivalent amount of national currency, at the exchange rate in force, at the place and date on which the payment is made. However, if payment is to be made outside Mexican territory, such rule is not applicable.

  17. 9.

    Are there tax burdens or penalties for non-local contractors? Are there traps for the unwary in the tax code or regulations that apply to international procurements? Are there common ways of structuring procurements to accommodate tax issues of international suppliers?

  18. There are no specific rules regarding tax in government procurement. Tax regulations applicable to public contractors and contracts are the same as in private commercial transactions.

    Procurement procedure

  19. 10.

    Does your jurisdiction have a law or administrative code that governs procedure for the award of contracts?

  20. Yes. Unless there is a specific law regulating the service, works, supply or product to be tendered, all contacts entered into by federal government agencies are regulated by the provisions of the Public Works Law, Public Procurement Law or the Public-Private Partnerships Law, and the regulations of each. Furthermore, each entity must issue procurement guidelines applicable to the corresponding entity, agency or ministry.

    Regarding the Public Private Partnerships Law, this February, amendments to the Public Private Partnerships Law Regulations were published. Many of these amendments address budgetary and planning matters and do not majorly affect the procurement process rules.

    Regarding federal road concessions, electricity, and oil and gas, among other sectors with specific laws, special laws and rules apply in connection with procurement.

    In addition, Mexico is a federation and, as such, state and municipal contracting is governed at the corresponding level and each state or municipality has its own set of procurement rules.

  21. 11.

    Does the local administrative code govern procurement procedure even if foreign law governs the resulting contract? If another jurisdiction

  22. Regardless of the governing law applicable to a specific contract, the actual procurement process for a Mexican government entity or agency to award that process will always be governed by the relevant Mexican procurement law.

    When goods, leases, services and works of foreign origin are to be used or provided in Mexico, the procurement process must be conducted in Mexico and Mexican law will govern the agreements. If it is determined that the procurement process and the relevant contracts cannot be performed within Mexico, the goods, leases, services and works may be contracted from abroad, always applying the principles set forth under Mexican law. In this case the contracting agency must justify the selection of the supplier or contractor from abroad, including criteria of economy, efficiency, effectiveness, impartiality, honesty and transparency to ensure the best conditions for the Mexican government.

    As for Pemex and the Mexican Federal Electricity Commission, according to their respective laws, the general rule is that every dispute will be solved by Mexican federal courts. Nonetheless, it is also possible for Pemex and the Mexican Federal Electricity Commission and their productive subsidiary entities to agree on alternative dispute dissolution mechanisms or even to enter into arbitration agreements according to the applicable mercantile laws and international treaties. Furthermore, when contracts entered by Pemex or by the Mexican Federal Electricity Commission, will be effective or executed outside Mexico, it is possible to agree on the application of foreign laws.

  23. 12.

    Are your jurisdiction's procurement provisions based on the UNCITRAL model procurement code, or any other international model?

  24. Mexican procurement laws are in line with the objectives referred to in the UNCITRAL Model Law to ensure efficiency and transparency in procurement, to promote competition among suppliers and contractors, and to provide fair and equal treatment between suppliers and contractors. Examples of such measures include:

    the mandate that all information related to public procurement processes be publicly available; announcements for each procurement procedure are required to be made through the issuance of a tender call; and the obligation for agencies, ministries and entities to publish ex post facto notices of the award of procurement contracts.

    According to the Model Law, procurement laws should mandate that tender guidelines specify and detail qualification procedures for suppliers and contractors, an element that is also present in Mexican federal procurement laws. 

  25. 13.

    What procedures are mandated to promote transparency and a fair and objective award process?

  26. In recent years, Mexican procurement laws, in order to promote transparency, have included and regulated many provisions, such as obligating entities to contract through public bids, having a website in which all federal agencies must publicise their bidding processes, requiring objective and fair parameters of evaluation and including restrictions and sanctions for infringements to procurement laws for both participants and public officers.

    One of the most recent transparency measures is the obligation for federal agencies to appoint a ‘social witness’ when the value of the contract to be awarded exceeds a certain threshold amount. Social witnesses are representatives of civil society acting as external observers in public procurement tenders. The Ministry of Public Administration is responsible for managing the Public Registry of Social Witnesses, where all accredited public witnesses must be registered.

    Social witnesses will participate in all stages of the procurement procedures as overseers, without participating in the actual decision-making process. As a general rule, social witnesses will issue a final report compiling a testimonial of all phases of the tender. Social witnesses will issue comments and recommendations to which any participant or interested party will have access through the ‘CompraNet’ federal website (the internet system for government contracting) in the corresponding bid process documents’ file. To promote transparency, diminish corruption risks and improve the overall efficiency and reliability of public procurement, social witnesses must be honourable persons or companies who are independent from the parties involved in the tender. Social witnesses will be selected through a public bidding and must meet several requirements, such as not having held public office, not having been sentenced to imprisonment, have an academic degree and work experience and professional or academic recognitions. Furthermore, to be selected, they must submit a written statement under oath that they will refrain from participating in contracts where a conflict of interest may exist. Social witnesses may propose improvements to strengthen transparency and fairness, and even legal provisions on procurement, to public entities and the Ministry of Public Administration. If the social witness finds irregularities in procurement procedures, he or she has to present his or her testimony to the internal complaints department of the authority in charge of the corresponding bid process and to the corresponding commission of the Mexican House of Representatives.

    Mexico has endorsed a number of multilateral agreements and conventions, such as the Inter-American Convention against Corruption, the Organisation for Economic Co-operation and Development’s Convention against Bribery, and the United Nations Convention against Corruption, as part of its strategies for combating and preventing corruption. 

  27. 14.

    Are there specified numbers of bidders that must participate, a minimum or maximum number of rounds of bidding, or limits on negotiations or meetings with potential bidders outside the official rounds of bidding?

  28. As a general rule, procurement contracts must be tendered through an open invitation with no minimum or maximum number of potential bidders. In a small number of cases the government will be afforded the flexibility to directly award a contract or to conduct a restricted invitation where at least three participants would have to be included.

    Mexican law does not provide for one-on-one negotiations and actually does not allow for negotiations to take place. All public bids must have at least one clarification meeting to allow for participants to request information or clarification regarding information already provided in connection with the corresponding bid documents.

  29. 15.

    Are bid bonds, performance bonds, advance payment bonds or other bonds required? For what types of contracts? Are there meaningful exceptions or permitted waivers? How do they affect the bidding process?

  30. Certain bonds are required under Mexican procurement laws. General procurement laws and regulations provide for certain parameters that are further specified by each ministry, entity or agency’s tender regulations and further detailed in the bid documents for the specific service, good or work to be tendered. Generally, bid documents will request either bonds or letters of credit as possible guaranty instruments in order to cover the following risks: application of initial or advance payments, performance under the contract, hidden defects and, on certain occasions, not withdrawing the offer tendered by the participant and executing the awarded contract.

    In this regard, there are exceptions where the public ministry, entity or agency tendering a contract may, at its own risk, waive the requirement to obtain a performance guarantee. Despite the existence of this provision, it is extremely rare for a public servant to agree to waive this requirement.

  31. 16.

    Are there laws or rules against waste of government assets that apply to the procurement process? Are officials subject to civil or criminal penalties for wrongful conduct of procurements? How do such provisions affect the procurement process in practice?

  32. Public officers are responsible under Mexican law for any misuse of public resources and for acts of nepotism or favouring companies where they have an economic or other significant interest. In this regard, such liabilities have caused government procurement regulations to, among other measures, proscribe governmental ministries, entities or agencies from receiving proposals or awarding contracts to participants who:

    • have a family, business or labour relationship with a government official participating in the bidding process, or from which relationship the governmental official could otherwise benefit from the relevant contract;
    • have a conflict of interest with the contracting governmental agency or a participant in the tender process;
    • have been condemned by a final and non-appealable judgment in the previous three years in connection with governmental procurement contracts;
    • have had a governmental agency terminate or revoke a contract or concession, as applicable, for breach or wrongful misdoing;
    • are insolvent or subject to an insolvency proceeding; or
    • have been vetoed by the Ministry of Public Administration for underperformance, breach of law or wrongful conduct, in terms of applicable law.

    The foregoing is in addition to civil and criminal penalties that may be applicable to the public officer or the contracting party, or both. Regarding public officers, the Federal Law of Administrative Responsibilities of Public Officers establishes administrative sanctions consisting of, inter alia, public warning, public or private reprimand, suspension, dismissal, economic sanctions and temporary disqualification from holding public positions or commissions. The Ministry of Public Administration, through its public procurement regulation unit, gathers and publishes information regarding public officials who have been sanctioned for breaches of public procurement laws and regulations.

    More restrictive laws against corruption have caused bid processes to become extremely rigid in Mexico and have reduced public officers’ ability to act at their own discretion in instances where there is not a clear rule governing certain aspects of a bid process.

  33. 17.

    Must the lowest price tender submitted by a qualified bidder be selected? Or do procurement agencies or commercial companies have flexibility to choose a more attractive (higher quality, more functionality) but higher-priced bid? Is there mandatory weighting of specific factors (such as price, technical attributes and other terms of the bid)?

  34. Government procurement laws provide the tendering authorities with the flexibility to establish in the tendering documents the specific rules to be considered for the evaluation of the proposal; such rules should be outlined in the tendering documents for the information and benefit of all participants. Depending on the type of procurement contract, the winning tender will be determined based solely on price or on the overall quality of each proposal, considering a weighted average of price and the merits of the proposal tendered. In all instances, minimal requirements regarding experience and performance are usually requested as part of a technical proposal in order for a bidder’s economic proposal to be considered.

    Among the most common mechanisms used to award a contract, the pricing component is weighted as follows:

    • lowest price wins (commonly used for supplying goods or services), provided that the goods or services offered are consistent with the tender documents;
    • the technical proposals are evaluated separately and, among those that reach a certain minimum score, the contract is awarded to the proposal with the lowest price; or
    • on a score basis tender, many aspects of the proposals are individually evaluated and scored (including pricing), and the bid with the highest overall score is awarded the contract.

    The internal regulations of a particular governmental agency may require certain weighted averages of the price and the technical proposal to award a procurement contract.

  35. 18.

    Are official records kept of the procurement and do they need to be certified by the officials conducting the procurement, by participants or by the winning bidder?

  36. All relevant information regarding federal government procurement is made available by the federal government through CompraNet, and includes:

    • the annual spending programme of, and projects to be conducted by, the relevant governmental contracting agency or body;
    • the authorised suppliers’ list;
    • calls for public bids and closed invitations, as well as amendments thereto;
    • calls for clarifications regarding meetings and the outcome thereof; and
    • contracts’ award notices, including those directly awarded outside of a bidding process.

    Government procurement regulations set forth that the tender process and all relevant information in connection therewith should be disclosed and made equally available to all participants. However, certain information may be reserved and not disclosed if it is deemed to be restricted or confidential in accordance with the Federal Law of Transparency and Access to Public Governmental Information or any other applicable laws and regulations (eg, the procurement of goods or services related to national security, documents or information used in or considered to be part of an ongoing tender process and information submitted by participants as confidential).

    The general public can also request information through the Federal Institute of Access to Information, which will request information from the corresponding entity and provide all information not considered reserved or confidential, pursuant to the Federal Law of Transparency and Access to Public Governmental Information.

    During a bid process, at least one bidder and a government official present at the bid will sign the bid documents. These original documents will be kept with the procuring agency’s records. No further certification of such documents is required.

    Anti-corruption

  37. 19.

    To what extent is corruption a problem in the award of public contracts? Are there civil or criminal penalties for bribery or the improper exercise of influence in regard to the award of public contracts?

  38. Corruption imposes great challenges on the award of public contracts, both on the government side or on the provider of services and contractors’ side. Sometimes, corruption may even occur before the procurement procedure begins, when companies make deals to submit pre-agreed economic proposals. Criminal penalties apply to public officers who, directly or indirectly, request or improperly receive for their benefit, or for the benefit of another person, money or any other gift. Fines and other sanctions are also imposed on public officers agreeing to act in a certain manner or refraining from carrying out a certain action in exchange for cash or any kind of asset or gift.

    Although corruption has been an issue in the past, with existing public procurement rules encouraging transparency and criminal liabilities applicable to both public officers and participants, corruption within federal processes has become less common and only taints very few awards. 

  39. 20.

    To what extent do anti-corruption laws or practices influence procurements? What anti-corruption provisions apply to bidders, as opposed to public officials? Are there any traps for the innocent but unwary bidder?

  40. Anti-corruption laws strongly influence public procurement in Mexico. Public officers and participants are deterred from carrying out corrupt acts knowing that sanctions are applicable if found out. Also, the public has become more aware of corrupt acts and demands enforcement of anti-corruption measures.

    In general, anti-corruption laws do not generate ‘traps for the unwary’. However, bidders need to be careful to strictly abide by the bid rules, which sometimes contain unclear provisions that can cause participants to become disqualified. To this effect, bidders are afforded the right to pose questions through clarification meetings. Because of the fear of being sanctioned, public officers tend to draft bids requiring many specific qualifications, which must be complied with verbatim.

    Mexico has a Federal Law Against Corruption in Public Procurement establishing sanctions for individuals and companies, either local or foreign, arising from illicit conduct related to national public procurement and even international commercial transactions. In addition to anti-corruption provisions, public officers are also subject to liability under public servant liability laws aimed at ensuring diligence in service. These laws have different forms of sanctions, from economic penalties to dismissal and, in some instances, criminal liability, depending upon the infringement. 

    Challenging awards

  41. 21.

    What judicial or administrative procedures are available for tenderers to challenge the award of a public contract?

  42. An award must be challenged by someone who has an interest in the process (eg, purchased the bid basis document, actually submitted a proposal, etc) and should be filed in writing with the Ministry of Public Administration or through CompraNet within the six business days following the date on which the award was made public. This proceeding is of an administrative nature and is the most commonly used proceeding for award or tender challenges.

    The challenging participant may request that the tender process be suspended and the execution of the procurement contract with the winning bidder be stalled. In the event that the Ministry of Public Administration approves the request to suspend the process, such suspension would only be granted if the challenging participant actually posts a bond guaranteeing to indemnify for any damages that the suspension may cause, as requested by the Ministry of Public Administration. Such guarantee would have to be for an amount between 10 per cent and 30 per cent of the amount of its bid, as determined by the competent authority. The winning bidder may counter-guarantee in order for the execution not to be suspended; such counter guarantee must be for the same amount as the suspension bond. Resolutions by the Ministry of Public Administration may be contested or appealed at federal courts.

    In certain instances, it is also possible to challenge an award through an ‘amparo’ proceeding, which is a specific judicial proceeding stemming from the Mexican constitution and aimed at authority abuse.

  43. 22.

    What are potential grounds for overturning an award?

  44. Challenges submitted to the Ministry of Public Administration may only be made in connection with legal irregularities or claims regarding:

    • invitations to tender and in connection with clarification meetings;
    • restricted invitations to at least three participants (only such participants may contest);
    • submittal and opening of bid proposals;
    • the award;
    • the cancellation of the tender process; or
    • acts and omissions from the tendering agency that impede the execution of the relevant contract.

    The final resolution issued by the Ministry of Public Administration may dismiss the challenge, declare the tender process null and void, or declare the nullity of the specific act being challenged (such as the award), in which case the challenged act would need to be restored.

    Grounds for overturning any of the above-mentioned acts need to be based upon:

    • the violation of a legal provision;
    • not following the rules and requirements set forth in bid documents; or
    • the fact that the bid documents do not comply with applicable law.

    The most common challenges are related to participants whose proposals were dismissed for not complying with a requirement of the bid documents, such as experience or technical requirements. 

  45. 23.

    How common is it for awards to be challenged, and how receptive are the adjudicators to such challenges? To what extent has a body of legal precedent regarding public procurement developed?

  46. Challenging awards is common in Mexico, but not generally abused. Procurement laws have included deterrents to frivolous challenges, such as requesting bonds and imposing economic sanctions. If a complaint process is followed, and the administrative or judicial authority resolving the challenge determines that the action was initiated to delay or hinder the contracting process, the complainant will receive an economic sanction.

    Adjudicators do not like their processes being challenged; however, they are prepared to receive challenges and are bound by law to resolve them.

    Throughout the years, significant judicial precedents have been resolved in connection with public procurement. Although Mexico is a civil law country, judicial precedents and administrative rulings have helped in decisions regarding public procurement and public contract controversies.

  47. 24.

    Are bid protest decisions published or otherwise publicly available?

  48. Public procurement laws require decisions issued by the Ministry of Public Administration or any other governmental body to be published on the CompraNet website. Similarly, in complaints before a court of law, the courts’ rulings will be published on the Federal Judiciary Council’s website, which is also publicly available. The Federal Judiciary Council’s website has different search methods to facilitate finding court rulings and, sometimes, the district court or circuit court issuing the ruling may publish the whole judgment; however, if only an extract of the ruling is published, it is possible to formally make a request before the Federal Institute for Access to Information and Protection of Personal Data, in order to gain access to the full version of the ruling.

    Contract terms

  49. 25.

    Does your jurisdiction specify any standard terms for procurement contracts? To what extent are they subject to negotiation? Are any standard terms considered particularly business-friendly or difficult to comply with as a matter of commercial practice?

  50. The Mexican federal procurement laws set forth minimum requirements for public contracting as well as certain provisions regarding pricing and termination, among other matters. Furthermore, each agency, entity or ministry issues its own policies, basis and guidelines for public procurement contracts, and they may vary according to their needs. In any case, the Ministry of Public Administration is the authority in charge of issuing a guide stating the minimum content of provisions that should be taken into consideration by entities while preparing their own public procurement guidelines. Some of the common provisions that should be found in every public procurement are the following: bonding policies, mechanisms to ensure effectiveness in developing procurement procedures, the terms and conditions of the product return policy as a consequence of low quality or because the product does not meet the specifications required, reasons for early termination or cancellation and the consequences of such action, and the level of public officers who are empowered to enter into contracts.

    Public contracts in Mexico are generally not subject to negotiation and are only modified through clarification meetings before the award. Amendments to terms after an award are generally minimal and cannot include amending terms that are on a more favourable basis than the documents included as part of the bid documents. However, Pemex and the Federal Electricity Commission have more flexibility regarding contracting terms.

    In general, contract terms are relatively business friendly and, at the very least, are likely to be accepted by commercial entities. Many contracts need to be bankable and, under this scenario, authorities will generally include provisions that will allow financial institutions to consider financing.

  51. 26.

    What standard public contract terms depart from usual commercial practice or pose noteworthy costs or risks for suppliers or contractors?

  52. Procurement laws in Mexico usually set out many contractual standards to be included in public contracts. Some of these terms are not common in commercial law and are usually related to the following:

    • unilateral early termination rights in favour of the contracting agency;
    • ability of the governmental authority to suspend a contract;
    • limitations on modifying or amending contracts (eg, variations in contracting terms, scope and quality of services and works);
    • payment terms (either long periods of time for payment or inability to adjust prices); and
    • very limited instances in which the authority agrees to be held liable.

    In many cases, authorities are reluctant to allow for arbitration in contracts.

  53. 27.

    Are there any rules of liability or standards of performance for public contracts that differ from the civil law rules generally applicable to commercial contracts?

  54. Rules of liability and standards of performance for public contracts and commercial contracts have certain differences, but in general follow the same principles. As an example, in a traditional works contract, the owner may terminate the contract and be bound to pay all the expenses and work done until the termination notice is given, plus the revenue that the contractor could have obtained from the work had the contract not been terminated. On the other hand, in a public works contract, liabilities of the government are usually capped and limited to specific circumstances; if the contract is suspended due to the public entity’s fault or is terminated early by the public entity, the relevant authority will pay the builder for the works done as well as non-recoverable expenses, as long as these are reasonable, duly verified, and directly related to the public works contract (ie, as a general rule, only out-of-pocket expenses are refunded, but not expected revenue). 

  55. 28.

    What do you consider the most important challenges facing a company that seeks to contract with public entities in your jurisdiction?

  56. One of the most important challenges in public procurement is managing tight deadlines. Public entities are often in a hurry to tender, leaving little time for the bid process. This can be especially challenging for international players participating in public procurement bids. In most cases, all the bidding documents must be in Spanish and translating proposals from countries where Spanish is not the primary language involves carrying out official translations and formalising documents before a Mexican Notary Public, in addition to corporate and tax planning to be thought through in case of an award.

    Furthermore, bid processes and contract management are very formal matters and can be burdensome; becoming an expert in these matters is frequently key to obtaining an award, but a real challenge for many participants.

    Finally, in many projects the tendering entity does not comply in a timely manner with obligations imposed upon it in the bid documents, which can cause serious delays and damage to the project (a very common example is when the authorities are required to release rights of way for a project).

    Governing law for public contracts

  57. 29.

    Must public contracts use local law as the governing law? Are there exceptions?

  58. As a general rule, contracts awarded for goods, leases, services and works that should be used or provided in Mexico are governed by Mexican law, as are the procurement process for the awarding of such contracts.

    When goods, leases, services and works of foreign origin are to be used or provided in Mexico, the agreements may be governed by foreign law, but Mexican law will be preferred. If it is determined that the procurement process and the relevant contracts cannot be performed within Mexico, the goods, leases, services and works may be governed by foreign law, always applying the principles set forth under Mexican law. 

  59. 30.

    If local law is not mandated, is it often used in practice?

  60. Yes, Mexican law is the general choice of law for contracts retained by federal agencies.

  61. 31.

    If foreign law may be used for procurement contracts, what laws are most often used as a matter of practice? Is there a practice of specifying the law as part of the procurement, or may the choice of law be negotiated by international bidders?

  62. Choice of law is not a negotiable issue. The procurement process will always be governed by Mexican law and the actual contract, as a general rule, will also be subject to Mexican law. If a particular service will be received abroad or goods being purchased are to be delivered abroad, other laws may apply.

  63. 32.

    Are the rules substantially different for commercial companies that are wholly or partly government-owned?

  64. Commercial companies in which the government is not the controlling party are basically subject to commercial laws and, therefore, have substantially different procurement rules. Government-owned companies and partially government-owned companies where the Mexican state is a majority equity holder are subject to certain procurement rules, but may be allowed more flexibility than that available under the procurement rules applicable to governmental ministries, agencies or entities.

    In the oil and gas and electricity sectors, with regard to Pemex and the Federal Electricity Commission, procurement provisions are even more flexible and both entities have certain independence in setting out their bidding rules. 

  65. 33.

    Are disputes involving the performance of public contracts subject to the same courts' jurisdiction as commercial contracts, or are there distinct fora or procedural rules? Do international contracts typically authorise or require arbitration? If so, in what forum and subject to what set of rules?

  66. As a general rule, conflicts arising from government procurement contracts will be reviewed, in the first instance, by administrative authorities from the executive branch. Challenges and appeals to resolutions stemming therefrom would then be processed by the federal courts of the Mexican Judicial System that specialise in public and administrative proceedings, as opposed to civil and commercial courts, which would resolve conflicts arising from private contracts.

    Arbitration may be agreed to settle disputes that arise between parties regarding contract interpretation or issues arising from contract performance; however, administrative termination, early termination of contracts and similar topics are not subject to arbitration. If arbitration is going to be part of a public contract, it shall be expressly contained in such contract or agreed immediately after the execution of the public contract in a separate agreement. The Public-Private Partnerships Law provides that, when using arbitration, the applicable law will be Mexican Federal Law, the arbitration procedure shall be conducted in Spanish, and the award shall be binding and final for both parties. This law also limits the application of arbitration to certain topics. Pemex and the Federal Electricity Commission, and their productive subsidiary entities, may agree alternative dispute resolution methods, such as arbitration clauses, in terms of the applicable commercial law and international treaties to which Mexico is a party.

    Arbitration is not a common choice for government entities in Mexican public procurement and is generally only used by Pemex and the Federal Electricity Commission. Arbitration may also be considered in contracts that, due to their size and cost, would mainly involve international bidders.

    Role of the lawyer in procurement procedures

  67. 34.

    Do most international bidders retain lawyers for procurement transactions in your jurisdiction? Or is it more common to use non-legal consultants? Which roles are typically performed by lawyers and which by other consultants?

  68. In Mexico, most international bidders do retain lawyers for procurement transactions, who perform all the legal-related work, including:

    • providing advice regarding interpretation and terms of the bidding documents;
    • interpreting and analysing answers to the legal-related questions submitted by participants in the clarification meetings;
    • advising bidders on integrating their bids and compliance with local law, legal formalities and the bidding guidelines;
    • providing advice regarding special requirements, such as formalisation of documents; and
    • other tasks related to forming consortia and negotiating the terms thereof.

    Other consultants, such as financial consultants and engineers, are typically also engaged to prepare the economic and technical proposals for a bid. Lawyers, companies and other consultants have to work hand in hand to make sure the bid complies with all the requirements set forth by the tender documents.

  69. 35.

    Are lawyers generally involved in negotiating public procurement contracts on behalf of bidders?

  70. The tendering government agency always proposes the initial draft of a public procurement contract and the only way to contest or comment on its content is through questions and suggestions that are filed during the clarifications meetings. Other than that, lawyers do not directly negotiate with the tendering government agency since such contracts tend to be non-negotiable. However, as the government procurement process is a legal-technical process, lawyers are often also engaged to act as attorneys-in-fact and legal representatives of bidders to appear before the bidding agency in different stages of the process.

  71. 36.

    Are there any restrictions on the involvement of foreign lawyers in procurement negotiations?

  72. No. For large international projects, international lawyers team up with Mexican lawyers to combine international experience of similar projects with Mexican legal knowledge and local know-how. The few negotiations and exchanges of questions and answers with the government authorities are usually carried out by the Mexican lawyers.

  73. 37.

    Are local lawyers subject to rules regarding conflicts of interest? What practical effect do they have on procurements?

  74. In Mexico, there are no rules on conflicts of interest for lawyers issued by a federal governmental body; however, law profession associations, which have, inter alia, the purpose of setting standards of ethical conduct, do have codes of ethics regulating conflicts of interest. Although these provisions are not binding on all lawyers, their members are expected to conduct themselves in line with such provisions. Furthermore, many bid documents will include provisions whereby participants are banned from receiving advice from consultants advising the government in such procurement.

  75. 38.

    Do lawyers have a role in ensuring the transparency of the process? Are official records kept of the procurement and do they need to be certified by the officials conducting the procurement, by participants or by the winning bidder?

  76. Lawyers do not have a role in ensuring transparency and, usually, during a public bid process at least one of the bidders will sign bids jointly with a public official. Notwithstanding the foregoing, some governmental entities elect to include in public procurement processes the presence of a notary public or similar public attester, who is a lawyer invested with the authority to certify the events and facts of a procurement process. Furthermore, governmental authorities do hold all procurement documents for record purposes, for a certain period of time.

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Questions

    Applicability of international treaties and conventions

  1. 1.

    Is your jurisdiction a member of the WTO Agreement on Government Procurement (GPA)? If so, what products and services are covered?


  2. 2.

    What government ministries and other agencies are covered by the commitments under the GPA? To what extent are provincial or local governments covered?


  3. 3.

    Does your jurisdiction have bilateral or plurilateral agreements with other nations providing for reciprocal treatment of the other nation


  4. 4.

    Are there regional treaties that affect procurements?


  5. Local preferences; tax and tax penalties

  6. 5.

    Does your jurisdiction have preferences for goods produced and services performed domestically? What are they and when do they apply? Are they subject to exceptions?


  7. 6.

    Does your jurisdiction have requirements that some portion of the procurement be awarded or subcontracted to local firms, bidding preferences for local companies or requirements that in-country work be done by local companies? If so, what is the definition of a local company? Are there limits on the amount of foreign ownership and control?


  8. 7.

    Is there any requirement for a supplier or contractor to have a local registered office, or to supply through a domestic company? Are there other local requirements?


  9. 8.

    Is cross-border contracting affected by any currency rules?


  10. 9.

    Are there tax burdens or penalties for non-local contractors? Are there traps for the unwary in the tax code or regulations that apply to international procurements? Are there common ways of structuring procurements to accommodate tax issues of international suppliers?


  11. Procurement procedure

  12. 10.

    Does your jurisdiction have a law or administrative code that governs procedure for the award of contracts?


  13. 11.

    Does the local administrative code govern procurement procedure even if foreign law governs the resulting contract? If another jurisdiction


  14. 12.

    Are your jurisdiction's procurement provisions based on the UNCITRAL model procurement code, or any other international model?


  15. 13.

    What procedures are mandated to promote transparency and a fair and objective award process?


  16. 14.

    Are there specified numbers of bidders that must participate, a minimum or maximum number of rounds of bidding, or limits on negotiations or meetings with potential bidders outside the official rounds of bidding?


  17. 15.

    Are bid bonds, performance bonds, advance payment bonds or other bonds required? For what types of contracts? Are there meaningful exceptions or permitted waivers? How do they affect the bidding process?


  18. 16.

    Are there laws or rules against waste of government assets that apply to the procurement process? Are officials subject to civil or criminal penalties for wrongful conduct of procurements? How do such provisions affect the procurement process in practice?


  19. 17.

    Must the lowest price tender submitted by a qualified bidder be selected? Or do procurement agencies or commercial companies have flexibility to choose a more attractive (higher quality, more functionality) but higher-priced bid? Is there mandatory weighting of specific factors (such as price, technical attributes and other terms of the bid)?


  20. 18.

    Are official records kept of the procurement and do they need to be certified by the officials conducting the procurement, by participants or by the winning bidder?


  21. Anti-corruption

  22. 19.

    To what extent is corruption a problem in the award of public contracts? Are there civil or criminal penalties for bribery or the improper exercise of influence in regard to the award of public contracts?


  23. 20.

    To what extent do anti-corruption laws or practices influence procurements? What anti-corruption provisions apply to bidders, as opposed to public officials? Are there any traps for the innocent but unwary bidder?


  24. Challenging awards

  25. 21.

    What judicial or administrative procedures are available for tenderers to challenge the award of a public contract?


  26. 22.

    What are potential grounds for overturning an award?


  27. 23.

    How common is it for awards to be challenged, and how receptive are the adjudicators to such challenges? To what extent has a body of legal precedent regarding public procurement developed?


  28. 24.

    Are bid protest decisions published or otherwise publicly available?


  29. Contract terms

  30. 25.

    Does your jurisdiction specify any standard terms for procurement contracts? To what extent are they subject to negotiation? Are any standard terms considered particularly business-friendly or difficult to comply with as a matter of commercial practice?


  31. 26.

    What standard public contract terms depart from usual commercial practice or pose noteworthy costs or risks for suppliers or contractors?


  32. 27.

    Are there any rules of liability or standards of performance for public contracts that differ from the civil law rules generally applicable to commercial contracts?


  33. 28.

    What do you consider the most important challenges facing a company that seeks to contract with public entities in your jurisdiction?


  34. Governing law for public contracts

  35. 29.

    Must public contracts use local law as the governing law? Are there exceptions?


  36. 30.

    If local law is not mandated, is it often used in practice?


  37. 31.

    If foreign law may be used for procurement contracts, what laws are most often used as a matter of practice? Is there a practice of specifying the law as part of the procurement, or may the choice of law be negotiated by international bidders?


  38. 32.

    Are the rules substantially different for commercial companies that are wholly or partly government-owned?


  39. 33.

    Are disputes involving the performance of public contracts subject to the same courts' jurisdiction as commercial contracts, or are there distinct fora or procedural rules? Do international contracts typically authorise or require arbitration? If so, in what forum and subject to what set of rules?


  40. Role of the lawyer in procurement procedures

  41. 34.

    Do most international bidders retain lawyers for procurement transactions in your jurisdiction? Or is it more common to use non-legal consultants? Which roles are typically performed by lawyers and which by other consultants?


  42. 35.

    Are lawyers generally involved in negotiating public procurement contracts on behalf of bidders?


  43. 36.

    Are there any restrictions on the involvement of foreign lawyers in procurement negotiations?


  44. 37.

    Are local lawyers subject to rules regarding conflicts of interest? What practical effect do they have on procurements?


  45. 38.

    Do lawyers have a role in ensuring the transparency of the process? Are official records kept of the procurement and do they need to be certified by the officials conducting the procurement, by participants or by the winning bidder?


Other chapters in Public Procurement 2017

  • Brazil
    TozziniFreire Advogados TozziniFreire Advogados
  • Mexico
    Nader, Hayaux y Goebel SC
  • Peru
    Lazo, De Romaña & CMB Lazo, De Romaña & Gagliuffi Abogados
  • Puerto Rico
    Pietrantoni Méndez & Alvarez LLC