Mexico’s Government Procurement System

1. Mexico’s Government Procurement System Elizabeth Yáñez Robles Undersecretary of Administrative Responsibilities and Public Procurement November 2011

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3. How were we? Initial Diagnostic • System: • Based on control, not on spending efficiency • Benefited procedural compliance and not the achievement of results • Extensive and highly regulated Legal Framework • Lack of strategic vision and economic and social objectives • Lack of coordination among government agencies • Poor planning of acquisitions and public works • Obsolete electronic public procurement system • Technological incapability to adequately extract information from the electronic system • Lack of skilled professional staff. Personnel with poor technical preparation • Harmful discretionary decisions

4. How were we? Costs • Ineffective and inefficient use of Federal Resources. The Government did not obtain the best value for money. • Traditional procurement practices and cost-ineffective internal controls restricted the capacity to generate important savings in budget implementation. • Government Procurement was not a motor for development. Mexican Public Procurement at a glance 40% of the Government Agencies’ Budgets 24% of the Federal Budget for 2011 8% of the Gross Domestic Product Annual spending of over 80 billion dollars

5. Where were we? Costs • Government Expenditure • Estimated loss of having a non regulated procurement system according with international institutions • Estimated loss for Mexico. • 80 billion USD • 10 – 14% • 8 billion USD • Savings through the Procurement System could be investment in: 5

6. Where were we? Costs • What 1% of savings could be equal: • 15 housing units of 192 apartment each; • 25 centers and houses of culture; • 32 sewage plans; • 2,000 cargo vehicles; • 20 units of general practitioners and 10 general hospitals; • 50,000 personal computers; • 15 public libraries; • 60 bridges; • 40 schools of technological education; • 35 km of electronic transmission lines of 400V powers; • 300 km of roads and 2-lane roads.

7. Results and Effective governance Where do we want to go? Process and Regulatory compliance

8. What have we done? Reform objectives Creating a system to seek improved efficiency and the best value-for-money outcomes for the Government Increasing flexibility and transparency System with accountability

9. What have we done? Legal Reforms BEFORE THE REFORMS Procurement with a lack of a strategic vision AFTER THE 2009 REFORMS New vision for the Government Procurement System • Key modifications to: • Law on Public Works and Related Services (LOPSRM) • Law on Acquisitions, Leasing and Services for the Public Sector (LAASSP) • Federal Law for the Accountability of Public Servants • Penal Code

10. 1. Legal Reforms Strategies Objectives What have we done?2009 Legal Reforms Procurement Policy Pillars Additional Activities Policies for Small and Medium Enterprises (SME’s) • Procurement • policy 8. Process standardization 3. Institutional Reform Preventive Advisory 7. Procurement planning 4. Procurement strategies Social Witnesses 6. CompraNet 5. Professionalization and certification Efficiency Effectiveness Value-for-money Transparency Competition Honesty

11. What have we done?Best Practices of Government Procurement Benefits: • Reduction of Purchase times • Fighting monopolistic practices • Efficient Administration of inventories • Attention of Emergency Operations • Lower Administrative Costs • Strengthening of Purchasing competencies • Simplification of processes • Increases transparency and competition

12. What have we done?Best Practices of Government Procurement Framework Agreements Consolidated Purchases Reverse Auctions • Call Center (SME’s) • Pruning and Gap services (SME’s) • Control Boards • Transformers • Personal Protection Equipment • Vehicle mechanical maintenance • Emergency purchases for medication • Grocery Coupons • Events Organization • Office supplies • Executive transportation • Terrestrial transportation Services • Plane Tickets • Furniture • Information Technologies • Armored Vehicles • Property Insurance • Coal • Medical Equipment • Vehicle Leasing • Medication Savings Framework Agreements 7.69 Million dollars Consolidated Purchases 26.10 Million dollars Reverse Auctions 231.07 Million dollars (April 2009 – March 2011) 264.85 Million dollars

13. What have we done? Institutional Reforms Dispute resolution • Strengthening specialized areas and procedures to resolve disputes and lay sanctions on public procurement • Alignment of processes and criteria Legal certainty– predictable decisions

14. What have we done? Guillotine of duplicate and unnecesary regulations Acquisitions Manual • Elimination of obsolete regulations and a clear set of rules: • Clear and simplified rules • Simplification and precision • Elimination of charges to access • Guarantees reduction • Regulations for vendors payments • Reverse auctions • Framework Agreements Standardizes Procurement processes: • Planning • Contracts awarding • Contract execution 586 procurement regulations were eliminated

15. What have we done? Standardization The World Bank and the SFP have contributed to the Harmonizedstandard procurement documents in the fields of good, works, services and non consulting services. Alignment Documents: Country System Agenda Mexico, is the first country that has these harmonized the bidding documents for non consulting services.

16. What have we done? Collaboration with the World Bank Modality: Technical Assistance. Recommendations on… • Framework contract policy and strategic implementation • Electronic public procurement system • Public procurement performance indexes • Risk management in public procurement • Framework contract for events • Framework contract for Airline tickets • Pharmaceuticals framework agreement • Technology framework agreement 16

17. What have we done? Collaboration with the World Bank • Advances in the implementation of Framework contracts • Review of food stamps case • Regulatory framework review • Project analysis of framework contracts for events and airline tickets • Establish the terms governing framework contracts. • Standardization and flexibility levels for technical specifications • Review of the public procurement general policy 17

18. What have we done? Professionalization • Professionalization of public procurement workforce • Latest updates: • Courses for Public Servants • We have begun giving public procurement courses, to Public sector procurement employees. • Design of a Professionalization Program • We are currently creating a training and professionalization plan with other government and private institutions in order to generate the necessary workforce for the procurement system.

19. What have we done? CompraNet • Training and certification • 308 governmental entities have a certified procurement department • 10,626 users • 2,991 procurement departments • 41,270 registered businesses • 49,300 procedures since 2010

20. Results New Government Procurement System • Constitutional Principles • Efficiency • Effectiveness • Value-for-money • Transparency • Honesty • Competition • Vision • “The main goal is to transit from a system based on procedures and compliance to a system based on effective governance and results, that will achieve the best value-for-money outcomes.”

21. Results Government Procurement System

22. Efficiency & Effectiveness in GPS • Efficiency and Effectivenessin GPS involve issues such as: • Value for money • Savings • Improvement of the supply chain • Avoid or eliminate inelasticity of the government demand • To fight monopolies • To promote fair transactions • Designing competitive tenders • Cost benefit considerations • Maximization of welfare, avoiding economic inefficiencies It facilitates to obtain desirable attributes such as: Governance, Transparency and Accountability

23. What do we need? Future Challenges • The main goal is the delivery of best outcomes for the economy and community • Regulate standards not processes • Accountability will be essential and must be verified through compliance with standards • Development of a professional workforce

24. Thank You ! 24