• Government Procurement in the Mexican Legal System
  • August 13, 2012
  • Law Firm: Arriaga y Dominguez S.C. - Mexico, D.F. Office
  • I. Constitutional Frame

    Article 134 of the Mexican Constitution states as follows:

    Article 134.- The economic resources available to the Federal Government and to the Government of the Federal District, and to the respective decentralized agencies or government controlled companies, shall be managed with efficiency, effectiveness and honesty in order to comply with the purposes for which they are intended.

    “Any acquisitions, leases and transfers of any kind of goods, rendering of services of whatever nature and the engagement of works undertaken, shall be awarded or carried out through public biddings, through the issuance of public summons so that the solvent propositions may be submitted in a closed envelope, which shall be opened in public with the aim of assuring the best conditions available in benefit of the State in regards to price, quality, financing, opportunity and all other pertinent circumstances.

    “Whenever the biddings referred under the paragraph hereinbefore should not be suitable to assure said conditions, the laws shall establish the bases, procedures, rules, requirements and any other elements to demonstrate the economy, effectiveness, efficiency, impartiality, and honesty required to assure the best terms for the State.

    “Management of federal economic resources shall be subject to the principles set forth in this Article.

    “Public officers shall be responsible for complying with these principles in accordance with the terms provided by Title Fourth of this Constitution”[1].

    According to such dispositions, any Mexican Government Agency has to follow very strict procedures to acquire, lease and/or transfer of any kind of goods and rendering of services of whatever nature. The elements of this article have been subject to interpretation by the precedents of the Federal Courts[2], of which the most important issues are the following:

    A) Stages of the Administrative Procedure of Public Biddings in their Chronological Development.- The administrative procedure of public bidding, in its chronological development, constitutes a chain of events deployed in the following steps: I. The specifications of conditions under which the call to the concerned is made; II. The submission of tenders; and III. The study of these by the administration, which culminates with the acceptance of the more desirable in terms of price, quality, financing, opportunity and other relevant circumstances (under Article 134 of the Political Constitution of the United Mexican States) through a resolution and its notification to the applicant. In this last stage it must be established what are the rights of bidders that were not winners, should they have any, because although they are not entitled to the award, they do have to participate in fair competition. In this sense, it is clear that if there are any acts that would vitiate the bidding process, participants have remedies to defend their legitimate interests, which must be understood as the power to ensure that administrative action conforms to the law, even if it does not result in a benefit for them.

    B) Essential principles that govern the Administrative Procedure of Public Biddings.- The administrative procedure of tender is governed by the following main principles: 1) Attendance, which assures the public the participation of a greater number of bids, which allows greater possibilities for selecting and obtaining better conditions in terms of price, quality, financing and timing, among others, 2) Equality, which is the position to keep the suppliers in the administration, and the position of each of them against others, 3) Advertising, which implies the possibility of interested parties to know everything about the corresponding bid, from the call to make offers to its concluding stages, and 4) Opposition or contradiction, which derives from the principle of due process involving the intervention of interested parties in discussion of controversial interests of two or more individuals, empowering them to challenge the proposals of others and, in turn, to defend their own.

    C) Legal Nature of the Public Bidding[3].- The public tender is a call that the government makes to individuals in an impersonal way to make offers to perform a contract, which, according to the doctrine, has two consequences: a) Who presents and makes an offer must strictly adhere to the conditions specified in the call, being forced to keep them during the time that it is established, and b) The management may accept or reject the offers presented, without liability, provided it respects the legality of the procedure. Thus, this call involves a set of acts that constitute a preparatory process of the government contracting, so that the legal nature of a bidding is that of an administrative procedure consisting of a variety of administrative acts and acts of simple administration as preparation forms for its legal contracting activity, in which any omission invalidates contracts rendering them to be absolutely invalid or void, which can be invoked by the administration, the particular contractor and third parties.

    D) Fulfillment of the Bases of the Public Bidding.- According to the provisions of Article 134 of the Constitution, the holding of public works contracts, is preceded by a specific procedure, which besides being a legal requirement for the formation of the contractual agreement, will serve to select their counterpart. That procedure is called "tender", because through it the government (federal, state or municipal), elects the person or entity that offers the most convenient conditions in terms of price, quality, funding, timeliness, efficiency, effectiveness and honesty, to celebrate a particular contract and to this end calls on individuals in an impersonal or personal way, to formulate their bids to perform the contract. Based on this constitutional provision in Mexico the tenders are public. Under the doctrine, competitive bidding is a method by which the government selects a person or entity, to perform the construction, conservation, maintenance, repair or demolition of any immovable or movable property in the public interest and consisting of an invitation to all interested parties to present their propositions according to the bases established, submitting their bids, among which the most convenient will be selected. The principles that govern the tender and the steps to integrate the procedure, according to the doctrine are as follows. The four principles are: a) attendance, which refers to the participation of a large number of bidders, b) equality, which consists that in the tender there should not be any discrimination or favoring  of one of the bidders to the detriment of others; c) advertising, which involves the possibility that the subjects are aware of all matters relating to the corresponding bid, from the call to make offers, to its concluding stages, and d) opposition or contradiction, which lies in the challenge of tenders and the same defenses. The steps that integrate the procedure are divided into seven: 1. The existence of a budget by the government; 2. The development of the bases or specifications, where the consideration required is detailed. The bases or terms constitute a set of clauses unilaterally prepared by the government, aimed at both, the formulation of the contract to celebrate as its implementation, since they detail in good grounds the contract, its legal regulation and the rights and obligations of the parties, i.e. on the one hand include specific conditions of legal, technical and economic type, which translate into real legal provisions regarding regulations governing the bidding process itself, and on the other hand, include special provisions that are specific provisions of the contract, rights and obligations of the convener, suppliers and contractors. In addition, the basis of a tender produce legal effects, which the convener cannot change after making the call for the tender, but within certain limits, but which cannot modify under any circumstances, once the bid opening ceremony. Also, the bases oblige suppliers to maintain their proposals to the time their offers are discarded or excluded, and continue to force the contractor, with the contract itself, so that their modification or non compliance, would be a breach of the contract that is to be signed, because the bidding rules are the main source of rights and obligations of the administration and its contractors, and thus its rules should be strictly in compliance with the principle of pacta sunt servanda. In summary, the bases are the conditions or qualifications necessary to regulate both the bidding process and award the contract for the work and that the convener agencies have broad discretion to impose. 3. The publication of the notice. This phase is of such importance, since through it an invitation is made to persons or entities that may be interested in doing the work cause of the tender and should be done in the Federal Official Gazette and in a private newspaper of circulation in the whole country, as well as in one of the state, where the public works will be carried out. 4. Submission of tenders. In this phase bidders that meet the terms of the call, will be entitled to submit their proposals and to that end must prepare them carefully, since the acceptance of their offer depends on its drafting, preparation and presentation. Bids must meet three requirements: a) subjective, referring to the legal capacity to enter into an agreement of the person making the offer; b) objective, which relate to the content of the offer, according to the prescriptions of the bases, and c) formal, that relate to the making of the offer, which must be in writing, signed, clear and unconditional, secret and must be presented at the venue and date that has been indicated in the notice. 5. Bid opening. In it, as its name suggests, the envelopes containing the bids of the participants shall be opened and it will be determined which of the proposals are to be discarded for not covering documentation or requirements in the bidding rules, raising a detailed affidavit to the effect of what happens at this stage of the tender, which will announce the date due on the respective resolution. 6. Award, is the act in which the convening state agency, determines which of the proposals is most advantageous or convenient for the public. Prior to the award, the convener, shall conduct a technical ruling which should consider both quantitative and qualitative requirements of bidders, in order to determine which meets the legal, technical and financial terms required by the convener, and, 7. Executing of the contract, which is the last stage of the tender, where once the name of the winner is known, the convening agency as the awarded bidder shall formalize or execute the relevant contract. Then, according to the earlier stages of the tendering procedure, the most important phase of it, is the development of the bases or specifications, since as noted above, they are the main source of rights and obligations for the government and its contractors, and thus its rules or provisions should be strictly observed so that their violation or modification after the submission of tenders would be a violation of the contract which is to be signed, so that the convening agency, at examining and evaluating the entire bidding procedure, as a primary and unavoidable obligation, should review the formal requirements, which are the essence and substance of the contract that is to be executed, i.e., verify whether bidders covered each of the requirements set in the basis and if that procedure was followed in all its stages without any violation to it, because only this way can it be achieved that the relevant contract is not affected from its origin, since should there be irregularities in the procedure or non compliance of the tender basis by any of the bidders, not taken into notice by the convening agency, regardless of its evidence or significance, and the contract is awarded to the non complying bidder, both the convener and the winning bidder would violate the principle, not only of administrative law derived from the nature of administrative contracts, consisting in the pacta sunt servanda, but also for compliance with administrative law (Public Works Act and its regulations), invalidating in that form the respective contract; therefore, to award a public works contract, the convening agency should always verify the formal requirements, and then analyze the proposals in terms of content or background, all in accordance with the rules fixed in the bases or specifications of the tender.

    As it is easily noticed, the Federal Courts have defined very detailed and enforceable requirements for the acquisitions, leases and transfers of any kind of goods, rendering of services of whatever nature, and the engagement of works by the government agencies. In this sense it is important to point out that in the Mexican Legal System, even when the precedents of Federal Courts are not mandatory (this is when there are not yet five resolutions in the same sense by the same Federal Court) for all courts of the Republic, according to articles 192 and 193 of the Amparo Law, they are considered to be guiding the criteria of all authorities[4]. It is also significant, that any case that goes to trial, will inevitably end in a Federal Court in the Constitutional Trial of Amparo. Therefore, it is unavoidable to comply with the precedents stated (equivalent to the stare decisis) at some point, even if there are irregularities in the procedures.

    II.- Legal Frame

    There are several laws that regulate these matters: the Federal Laws and the Local Laws, all of which have to comply with the Federal Constitution. In the Federal level of competence, there are on the one hand, the Acquisitions, Leasing and Public Services Sector Law and its Regulations; and on the other hand, the Law of Public Works and Related Services and its regulations, and there are thirty two States that have each its own local provisions regarding these subjects, all of which have to comply with the Federal Constitution as well. In all of the mentioned laws, there are common elements such as the following:

    A) Types of Bids.- There are National and International Public Bids; Restricted Invitations and Direct Awarding of Agreements, all of which have very precise rules.

    1.- National Bids.- This type is in which only Mexican nationals can participate and property to buy or rent are produced in the country and have, at least, a fifty percent local content, which will be determined taking into account the cost of production.

    2.- International Bids under International Treaties.- Where it is mandatory under the provisions of treaties, only Mexicans and foreigners from countries that are part of those treaties may participate as bidders (free trade treaties or agreements), when they contain provisions for public sector procurement.

    3.- Open International Bids.- Mexican and foreigner bidders may participate, whatever the origin of the goods to be purchased or leased and contract services, if:

    a) After performing a market research, the convening agency comes to the conclusion that there is no supply of domestic suppliers or countries with which Mexico has a free trade agreements or treaties with a government procurement chapter, for goods or services required quantity or quality, or desirable in terms of price;

    b) Having made a national or international bid under the applicable treaties or agreements, there is no proposal or non of the presented comply with the requirements;

    c) It is determined that the Bid must be an open international one in case the contracts to be awarded are financed by foreign loans granted to the federal government or with its endorsement.

    4.- Exceptions to the Public Tender.- Only in the cases provided for in the law, may the convening agencies under their responsibility, decide not to carry out the procedure for public procurement, and award contracts through the procedures of invitation to at least three people or direct award.

    The choice of procedure made by the convening agencies shall be supported and motivated, according to the circumstances in each case, the criteria of economy, effectiveness, efficiency, fairness and honesty to ensure the best conditions for the state.

    In any event people will be invited only if they have immediate response capability and technical, financial and other necessary resources, and whose business or professional activities are related to the object of the contract to be awarded.

    The cases in which the agencies, may exercise these options, are determined by the law, considering the object of the contract to be awarded; the exclusive legal rights of ownership that there may be (licensing of patents, copyrights or other exclusive rights); the nature of the convening agency and the purpose of the bid (military purposes or for the Navy, or necessary for national security); etc., but always under a legal specific provision.

    B) General Common Provisions.- In all procurement procedures it has to be established that the same requirements and conditions are for all participants, especially in regards of time and place of delivery, form and time of payment, penalties, advances and guarantees. The convening agencies should provide all interested parties equal access to information relating to such procedures, in order to avoid favoring any participant.

    C) Protest (Inconformidad).- In any case a bidding person considers that the procedure has not followed the legal steps correctly; or its proposal has been discarded or excluded; or esteems that its proposal should have been awarded the contract for whichever legal reasons, such bidder may file a protest to be resolved by the Ministry of Civil Service (Secretaría de la Función Pública), which may end with a resolution declaring:

    1.- The invalidity of the act or wrongdoing by establishing, where appropriate, the necessary guidance so that it is restored under the Law;

    2.- The total invalidity of the proceedings;

    3.- The statement that the protest was unfounded; or

    4.- The guidelines for signing the contract.

    In any case, the Ministry of Civil Service may intervene in any Bidding Procedure on its own, if it finds reason to believe that any legal violation is being committed.

    D) Latter Legal Resources.- If a Bidder does not agree with the resolution of a protest, such bidder may file an administrative review appeal at the same Ministry of Civil Service; or a lawsuit before the Federal Court of Fiscal and Administrative Justice, and finally before the Federal Courts in the Trial of Amparo.

    III.- Responsibilities[5].- According to Articles 134 and the Fourth Title of the Constitution (Articles 108 to 114) related to the Liabilities of Public Officers, any public servant that commits irregular acts in a Bidding Procedure, may be subject to Administrative, Criminal and Civil sanctions (they may all coincide and do not exclude each other), in terms of the Federal Law of Administrative Responsibilities; the Criminal Federal Code and the Civil Federal Code (in the Local Competence there are similar laws for each State of the Republic). Also the Federal Law of Patrimonial Responsibility of the State, establishes the possibility to sue the agency where an illegal act was committed, which may end with a resolution that orders payment to be made to the person in whose detriment those acts were perpetrated.

    IV.- Legality in the Mexican System.- The way things present themselves, no one can doubt that our Legal System has many provisions that make it very complicated for any public servant to try to act outside of the law. Mexican provisions derive from the historic doctrine of constitutionalism that recognizes as one of its roots in British Law, the Magna Carta of 1215 agreed by King John of England. Mexico has very important institutions that establish the rule of law and the due process of law (articles 14 and 16 of the Constitution), and has created a unique Constitutional Trial (Amparo) to protect the rights of all people (citizens and foreigners; natural persons or corporations and not only human rights), from any action of any authority, federal or local (laws, executive orders or judicial resolutions), which has been adopted by many countries, like Spain, Argentina, Uruguay, Chile, Colombia, the Philippines, etc.

    The Amparo has a very high success in results, and as Colin Turpin says “It is a cardinal requirement of the rule of law that the government should comply with judgments of the courts given against it”[6], which in any case, occurs on a daily basis in Mexico.

     


    * Managing partner of Arriaga y Domínguez, S.C.; Faculty Member of the Law School at the National Autonomous University of Mexico, in the capacity of Professor of Constitutional Law; Individual and Social Guarantees and Amparo; former Assistant General Judicial Litigious Director to the Secretary of the Comptroller and Administrative Development (Federal Mexican Government).

     

    [1] Political Constitution of the United Mexican States, Supreme Court of Justice of the Nation, Mexico, 2005, pp. 307-309.

    [2] Several of them have been generated by the cases managed by Arriaga y Domínguez, and prior to those, by the cases managed by the Secretary of the Comptroller and Administrative Development (Federal Mexican Government - currently the Ministry of Civil Service), in the time in which the author was the Assistant General Judicial Litigious Director in that Secretary, and was directly involved in preparing any legal defense of such Federal Agency, among them Precedent I. 4th.A. 588, published in the Ninth Season of the Judicial Weekly of the Federation and its Gazette, Volume XXVI, July 2007, page 2651, PUBLIC BIDDING. STAGES OF THE ADMINISTRATIVE PROCEDURE IN THEIR CHRONOLOGICAL DEVELOPMENT; Precedent I. 4th.A. 587, which appears in the Ninth Season of the Judicial Weekly of the Federation and its Gazette, Volume XXVI, July 2007, page 2652, PUBLIC BIDDING. ESSENTIAL PRINCIPLES THAT GOVERN THE RESPECTIVE ADMINISTRATIVE PROCEDURE; Precedent I. 4th.A. 586 A, Which can be found in the Ninth Season of the Judicial Weekly of the Federation and its Gazette, Volume XXVI, July 2007, page 2653, PUBLIC BIDDING. ITS LEGAL NATURE; Precedent I. 1.A. 16, visible in the Ninth Season of the Judicial Weekly of the Federation and its Gazette, Volume VI, October 1997, page 799, SUSPENSION. THE PROVIDED FOR IN ARTICLE 99 OF THE LAW OF ACQUISITIONS AND PUBLIC WORKS, DOES NOT OBLIGE THE AUTHORITY OF AMPARO; and Precedent I. 3th. A. 572, contained in the Eighth Season of the Judicial Weekly of the Federation, Volume XIV, October 1994, page 318, PUBLIC BIDDING. THE FULFILMENT OF THEIR BASES IS A PREREQUISITE TO ANALYZE THE TENDERS AND AWARD THE CONTRACT.

    [3] In connection with this topic, Vid. Arriaga, Hugo, La Naturaleza Jurídica de la Inconformidad prevista en la Ley de Adquisiciones y Obras Públicas, Lex, Difusión y Análisis, 3&araisd. Época, Año II, Agosto 1996, Número 14, pp. 53-58 (The Legal Nature of the Protest under the Acquisitions and Public Works Law, Lex -Law Review- Dissemination and Analysis, 3rd. Season, Year II, August 1996, Issue 14, pp 53-58).

    [4] There is even a Mandatory Precedent that states so, which is Precedent VI.2.J/90, contained in the Ninth Season of the Judicial Weekly of the Federation and its Gazette, Volume V, February 1997, page 678, PRECEDENTS OF THE SUPREME COURT OF JUSTICE OF THE NATION THAT ARE NOT MANDATORY, APPLIED BY COMMON COURTS.

    [5] Vid. Arriaga, Hugo, Las Responsabilidades de los Servidores Públicos, en 75 Aniversario de la Constitución Política de los Estados Unidos Mexicanos, Editorial Porrúa, S.A., México, 1992, pp. 51-66 (Responsibilities of Public Servants, in 75th Anniversary of the Constitution of the United Mexican States, Editorial Porrúa, S.A., Mexico, 1992, pp. 51-66); Arriaga, Hugo, La Responsabilidad de los Servidores Públicos y su Impugnación, en Tribunal Federal de Justicia Fiscal y Administrativa, Procedimientos en Materia Fiscal y Administrativa, Especialización en Materia Procesal Fiscal, Guía de Estudio, Módulos IV y V, Instituto de Estudios sobre Justicia Administrativa, México, 2000, pp. 365-451 (Responsibility of Public Servants and Means of Controversy, in Federal Court of Fiscal and Administrative Procedures, Fiscal and Administrative Matters, on Procedural Tax Specialty, Study Guide, Modules IV and V, Institute for the Study of Administrative Justice, Mexico, 2000, pp. 365-451); Arriaga, Hugo, Las Responsabilidades de los Servidores Públicos y el Derecho Laboral Burocrático, Laboral, Práctica Jurídico - Administrativa, Revista editada por Ediciones Contables y Administrativas, S.A. de C.V., Año II Número 15 / diciembre 1993, pp. 80-82 (Responsibilities of Public Servants and the Bureaucratic Labor Law, Labor Law -Law Review-, Legal - Administrative Practice, magazine published by Accounting and Administrative Issues, S.A. de C.V., Year II Number 15 / December 1993, pp. 80-82); and Arriaga, Hugo, Las Responsabilidades de los Servidores Públicos y la Ley Federal del Trabajo, Lex, Difusión y Análisis, 3&araisd. Época, Año III, Mayo 1997, Número 23, pp. 39-44 (The Responsibilities of Public Servants and the Federal Labor Law, Lex -Law Review- Dissemination and Analysis, 3rd. Season, Year III, May 1997, Issue 23, pp 39-44).

    [6] British Government and the Constitution, Text Cases and Materials, Third Edition, Butterworths, London, 1995, p. 65.