Better bidding: Mexico's public works contracts face changes. (Spotlight).

Every year, the Mexican government spends approximately US$5.7 billion on public works contracts for the construction of facilities in the electricity, oil, petrochemical, health and water sectors, among others. These contracts are subject to strict regulations and are usually awarded through a bidding process, involving technical, economical, financial and legal requirements.

Lately, public works contracts have been approached differently than they were before the early 1990s, when all public works were undertaken exclusively by the public sector. The increase of private sector involvement has caused an important change of perspective in the treatment of construction projects, especially from the legal and financial point of view.

There has also been an important change in the comptrolling and auditing of the public works contracts, with the very active and in some times excessive intervention of the Secretariat of Control and Administrative Development (Secodam) and Congress' own auditing body. Both these government bodies have recently, prosecuted public officials for misconduct in the Public Works Contracts projects.

From the invitation to bid to the execution of the contract, there are many aspects of public works that construction firms and government have been discussing in order to establish clearer and more efficient rules, and which are expected to be solved in upcoming modifications to the law. For example, there is a need for projects to be awarded under transparent and clear rules and contracts to be very precise in order to avoid disputes. Also, when disputes arise, to find efficient ways to solve them.

Through transparency programs, the Internet, and invitations to some interested sectors to participate in the public works law amendments; the new regulations are expected to provide a more efficient system. Some of the possible amendments are:

* The creation of a special organism to regulate all the federal biddings criteria which is to be technically independent from Secodam. This organism is intended to create general guidelines for all the Federal Government's biddings in order to promote more transparent and efficient actions. It would also train government officers in procurement, and take some actions to promote more efficient rules.

* The promotion of electronic means in bidding processes. The federal government to present the bidder's proposals in all bidding processes is searching for more use of the existing Compranet system.

* The use of Internet as an official way to divulge information related to bidding processes, awards challenges and contract information among other items, through the Secodam website.

* New regulations that require public officers to respond to questions promptly and clearly.

* Inclusion of the "reverse bid" figure, in which after the economic proposals have been opened, bidders can auction the project, offering the lowest price at a public event. This figure is intended to be developed through electronic means.

* The possibility included in the Goods and Services Procurement Law of celebrating "open public works contracts."

* Not allowing companies that have been part of the lobbying of the project or using privileged information, to participate in the contract.

* Establishing lesser terms for the presentation of awards challenges.

* The possibility of bidders to auction after their proposals have been opened (called "reverse bid"), and the formal in-corporation of arbitration as a dispute resolution system in public works contracts.

Of course, some of these expected reforms may see the light, others will not and new ones may appear, but the only thing that is expected is that the reforms fulfill the real worries and needs in this important field of activity.

Roberto Hernandez Garcia ([e-mail]) is a partner and Operations Director of Car poraci6n Mexicana de Asesores en Derecho, S.C., a Mexican Law Firm (www.comod-lawyers.com).