Chapter 8. Encouraging participation in the dispute resolution system in Nuevo León

This chapter examines the courses of action that suppliers in Nuevo León can take to challenge procurement decisions during the procurement procedure and contract execution. The chapter also discusses how effective these two distinct processes are currently, and whether they have affected public procurement procedures. Furthermore, it highlights some of the strengths and weaknesses of the system, and discusses which steps Nuevo León needs to take to improve system functions. The chapter also highlights relevant experiences in other OECD countries that could prove useful to the State Government of Nuevo León (SGNL).

  

In the state of Nuevo León, there is a clear separation between procedures for the procurement of goods and services and procedures for the procurement of public works. There is also a clear separation between procedures concerning complaints that arise during the tendering process, and procedures concerning issues that come up during the execution of contracts. Limited information is available regarding the number of challenges to procurement decisions that take place. However, during the OECD fact-finding mission to Nuevo León, civil society members and suppliers revealed that the number of challenges is very low – given the lack of trust in the actual system. Nuevo León is not an isolated case; the same problem can be found in Mexico City (OECD, 2017[1]). Furthermore, stakeholders raised concerns during the fact-finding mission about the integrity of the system. Criticism was specifically directed at the tendering process, with claims of corruption occurring at different stages. Some stakeholders also alleged that public funds are regularly diverted to companies, individuals and groups due to favouritism among procurement officials.

To be effective, a remedies system must be well designed, capable of offering protection, accessible to suppliers, uncomplicated, inexpensive and efficient in processing cases. Any stakeholder, including unsuccessful tenderers, who believe that the public procurement process has been conducted in violation of relevant laws must have access to effective review and remedy mechanisms. These mechanisms build confidence in the system among businesses. They also increase the overall fairness, lawfulness and transparency of the procurement procedure. In this respect, the 2015 OECD Recommendation of the Council on Public Procurement encourages countries to “handle complaints in a fair, timely and transparent way through the establishment of effective courses of action for challenging procurement decisions to correct defects, prevent wrong-doing and build confidence of bidders, including foreign competitors, in the integrity and fairness of the public procurement system. Additional key aspects of an effective complaints system are dedicated and independent review and adequate redress” (OECD, 2015[2]). Furthermore, the OECD promotes accountability in public procurement by emphasising that states must apply oversight and control mechanisms to support accountability throughout the public procurement cycle. This includes appropriate complaint and sanctions processes (see Box ‎8.1).

Box ‎8.1. OECD Recommendation of the Council on Public Procurement

The Council:

XII. RECOMMENDS that Adherents apply oversight and control mechanisms to support accountability throughout the public procurement cycle, including appropriate complaint and sanctions processes.

To this end, Adherents should:

i) Establish clear lines for oversight of the public procurement cycle to ensure that the chains of responsibility are clear, that oversight mechanisms are in place and that the delegated levels of authority for approval of spending and approval of key procurement milestones are well defined. Rules for justifying and approving exceptions to procurement procedures should be comprehensive and clear, such as in cases of limiting competition.

ii) Develop a system of effective and enforceable sanctions for government and private-sector procurement participants in proportion to the degree of wrong-doing to provide adequate deterrence without creating undue fear of consequences or risk aversion in the procurement workforce or supplier community.

iii) Handle complaints in a fair, timely and transparent way through the establishment of effective courses of action for challenging procurement decisions to correct defects, prevent wrong-doing and build confidence of bidders, including foreign competitors, in the integrity and fairness of the public procurement system. Additional key aspects of an effective complaints system are dedicated and independent review and adequate redress.

iv) Ensure that internal controls (including financial controls, internal audit and management controls), and external controls and audits are coordinated, sufficiently resourced and integrated to ensure:

  1. the monitoring of the performance of the public procurement system;

  2. the reliable reporting and compliance with laws and regulations, as well as clear channels for reporting credible suspicions of breaches of those laws and regulations to the competent authorities, without fear of reprisals;

  3. the consistent application of procurement laws, regulations and policies;

  4. a reduction of duplication and adequate oversight in accordance with national choices; and

  5. independent ex-post assessment and, where appropriate, reporting to relevant oversight bodies.

Source: (OECD, 2015[2])

The structure of Nuevo León’s supervisory system is similar to what can be found in other states in Mexico. Despite having a moderately strong supervisory and control culture, a remedies framework has not been implemented. The system as whole is quite complicated from a supplier’s perspective. For example, the remedies process is different depending on whether the source of the funding for a project is federal or state. In addition, the process for goods and services is not the same as for public works. The Secretariat of Administration (SA) is responsible for handling complaints regarding goods and services procurement, with the involvement of the Office of the Comptroller and Government Transparency (Contraloría y Transparencia Gubernamental). However, for public works, the comptroller receives the complaints. The process for conciliation and arbitration during the execution of contracts is normally predetermined in the contract, (see Table ‎8.1). Clauses specifying the arbitration and conciliation process may be included in contracts for public works. The procedure stated in the Law of Alternative Methods for the resolution of Conflicts of the State of Nuevo León is accessible for both parties in case of goods, services and public works.

Table ‎8.1. Mechanisms to solve disputes during the tendering process, and resolution processes during the execution of the contract

Phases

Activity

Goods and services

Public works

Tendering

Complaints

Submit to the unit issuing the decisions which is then submitted to the management of the Secretariat of Administration

Complaints should be presented to the Comptroller or to the corresponding municipal comptroller. They can also appeal to the Administrative Contentious Court the decision of the Comptroller.

Execution of contract

Conciliation and arbitration

Parties may agree to use a dispute resolution mechanism to resolve disputes concerning the interpretation or implementation of contracts or (and) can resort to arbitration based on the Alternative Methods for Conflict Resolution Act of Nuevo León (Ley de Métodos Alternos para la Solución de Conflictos del Estado de Nuevo León, LMASCENL

Arbitration clause may only be agreed in contracts with respect to those disputes that the Secretariat and the Comptroller jointly determine, by means of general rules.

Source: Information provided by the state of Nuevo León.

The approach of this chapter is to assess two distinct mechanisms Nuevo León uses to resolve complaints raised during the tendering stage and the post-tendering stage of public procurement. With regards to the tendering stage, the chapter aims to assess to what extent remedies are in place that allow economic operators to request the enforcement of public procurement regulations. The chapter also looks at the rights of economic operators under these regulations in cases where contracting authorities, either intentionally or unintentionally, fail to comply with the legal framework for public procurement. For the post tendering stage, the chapter assesses the processes in place for mediation and conciliation during the execution of contracts. Finally, the chapter looks at the arbitration process that normally follows if parties are unable to reach a settlement.

While Nuevo León has some measures in place to resolve procurement disputes, several issues inhibit the functioning of the system. The central problem is that the state’s public procurement process is fragmented. In addition, when officials make mistakes or violate procedure, these mistakes generally go unreported. This should be of great concern to the state of Nuevo León. It begs the question – how are issues resolved if not through official processes? How can the state of Nuevo León improve its procurement system or its remedies processes if no one complains, and the system is never tested? To put the situation in context, a lack of complaints is not the norm in Latin America. Two recent reviews carried out by the OECD in Colombia and Peru found that, in both countries, public procurement complaints per year numbered in the hundreds (OECD, 2016[3]) (OECD, 2017[4]).

The aim of the remedies system in the state of Nuevo León should be to allow irregularities to be challenged and corrected as soon as they occur during the procurement procedure. It is an important part of any public procurement framework that suppliers have an instrument that is accessible to them to enforce procurement rules. However, they can only do this when adequate courses of action are available to them. To be effective, a remedies system must be well designed, clear and capable of offering protection in an accessible, uncomplicated, inexpensive and speedy manner. Box ‎8.2 shows some core requirements for an effective remedies system.

Box ‎8.2. Requirements for an effective remedies system

It is important for suppliers to have remedies available to them to enforce procurement rules. If suppliers have remedies, they can be motivated to monitor procurement procedures and require that procurement rules be followed so that their chances of being awarded a contract are not unlawfully diminished. Thus, remedies both enhance the lawfulness of procedures and encourage competition.

In order for remedies to be effective, they must be:

  • clear and straightforward (i.e. understandable and easy to use);

  • available to all economic operators wishing to participate in a specific contract award procedure without discrimination, in particular on the grounds of nationality;

  • effective in preventing or correcting instances of unlawfulness on the part of suppliers or public authorities.

Source: (OECD, 2016[3])

8.1. The functioning of the review and remedy system

8.1.1. The process for handling non-conformities during the tendering process

Nuevo León needs to make its mechanism for remedies more effective for goods and services by ensuring anonymity and impartiality throughout the process

According to Nuevo León’s public procurement legislation, there is a mechanism in place to challenge procurement decisions made during the tendering process for goods and services. Participants may submit complaints or disagreements within 30 working days after the winning bidder of a procurement procedure has been announced. Once that time has passed, the right to submit a complaint is over. The authority who receives the complaint must forward it the following day to their oversight authority in order for the authority to decide whether to revoke, modify or confirm the result of a purchasing process. Within three days of receiving a complaint from the oversight body, the Secretariat of Administration (SA) has to accept or discard the appeal (see Figure ‎8.1). If the SA accepts the appeal, it will inform the requesting unit and the party that has raised an objection. They are both then given five working days to provide further evidence. The procurement procedure will only be suspended if there are obvious irregularities that jeopardize the attainment of the purposes of the acquisition, lease or service. The Secretariat of Administration must review grievances, weigh evidence and resolve the complaint within 45 working days. If the SA is unable to resolve the complaint on time, the original decision will be considered confirmed. That said, following this procedure, the party that has appealed the procurement decision can take the case before a competent court. The decisions of the SA and court with regards to challenges and appeals are published on the electronic procurement platform.

Figure ‎8.1. The process for challenging non-conformities of goods and services
picture

Source: Information provided by the state of Nuevo León

The number of challenges to procurement processes reported every year in Nuevo León is unclear. The data provided seems to suggest that the state has faced two reported challenges since 2015. This figure is rather low for such a large state. Based on these figures and on interviews with officials during the OECD fact-finding mission, it is apparent that the process has not really been tested. The culture discourages reporting of non-conformities. This culture of silence is a roadblock for the state. If it hopes to improve its procurement system, stakeholders will have to feel comfortable expressing their grievances. In addition, if bidders and suppliers are concerned about being blacklisted if they complain, the procurement system will become less effective. This fear of reprisal prevents the state from achieving real value for money in its purchases. The problem of non-reporting of complaints is not exclusive to procurement. The culture within the public sector in Nuevo León seems to regard complaints as a failure of the system. Hence, more controls might be needed to prevent any further complaints from being reported. Furthermore, the repercussions of complaints can be substantial for public employees who make the mistakes that lead to violations of legislation or breach of protocols. When this happens, staff are can be reprimanded or even charged. The punitive quality of the system gives staff less incentive to encourage reporting of complaints. There is a need for greater understanding within the public sector that a complaint does not necessarily signal a failure of the system or of officials. Complaints should be considered normal, as bidders often want to see things go differently. If a bidder is willing to take the necessary steps to challenge the system through a complaint process, the bidder should be able to do so. Public officials should try to view complaints as an opportunity. By addressing the complaint in a structured and fair manner, officials can strengthen the system from within.

It is important to have a clear definition of the legal and structural basis of the remedies system. Remedies are legal actions that allow economic operators to request the enforcement of public procurement regulations and their rights under those regulations in cases where contracting authorities, either intentionally or unintentionally, have failed to comply with the legal framework for public procurement (OECD, 2016[5]). The remedies system should try to delineate clear methods for different scenarios. These scenarios could include: complaints relating to tender invitation and clarification meetings, call for invitation to at least three suppliers, submission and opening of proposals and announcement of contract award, and cancellation of the tendering procedure by the contracting entity. Furthermore, it has to be clear who has the right to submit a complaint, when it must be filed, which body can consider complaints, what costs are placed on a claimant, what are the possible outcomes of the complaint and what remedies are available after the resolution of a formal complaint.

8.1.2. Process for handling non-conformities in public works

Nuevo León needs to work closely with other stakeholders and members of civil society to ensure the anonymity of public works claimants, and to prevent any conflict of interest in relation to the resolution of complaints

The legislation on public works for the state and municipalities of Nuevo León describes the procedure by which interested parties can file complaints. These parties can file complaints against acts that contravene the provisions that govern the subject matter clarifying irregularities. Claimants may do so if, in their judgment, violations of these provisions have been committed during the tendering procedure or execution of the contract – so that these violations can be corrected. The legislation implies that the interested parties may represent themselves before the internal control body of the convening entity or procuring entity when describing the reasons for their complaint. However, the legally established procedure indicates that the complaints should be presented to the state comptroller or to a corresponding municipal comptroller. Claimants can also appeal the decision of the comptroller to the Administrative Contentious Court (Tribunal de lo Contencioso Administrativo del Estado de Nuevo León). However, this court does not have jurisdiction over conflicts arising during the execution of procurement contracts (see Figure ‎8.2).

Figure ‎8.2. The process for non-conformities for public works
picture

Source: Information provided by the State of Nuevo León

The deadline for filing a complaint about a decision during the tendering procedure, according to Nuevo León’s public works legislation, is:

  • 10 working days following the day on which the contested act occurred. Parties filing a complaint must inform the comptroller in writing of the acts that contravene the provisions governing the subject matter of the law. Subsequently, parties must adhere to the following deadlines:

  • Parties filing a complaint have 5 business days to complete their complaint once the comptroller's office advises them of how to improve the filing (in cases where briefs do not meet requirements).

  • Following the receipt of a complaint, agencies and entities have 5 business days, to provide the comptroller with the information required for its investigation.

  • The comptroller's office has 45 working days from the date on which the corresponding investigations were initiated to resolve a complaint.

  • The law does not establish deadlines for appealing to the Administrative Contentious Court.

During the investigation, the adjudication process may be suspended in certain circumstances. In addition, the resolution issued by the comptroller may have the following consequences:

  1. nullifying the procurement procedure and establishing a new procedure that is legally sound;

  2. nullifying the procurement; or

  3. the declaration that the complaint is unfounded, which will produce confirmation of the validity of the contested acts.

According to information provided by the comptroller, in the few cases where complaints are filed, contracts rarely get nullified and procurement entities always comply with legal decision on remedies As stated previously, irregularities detected by bidders may also be reported to the internal control body of the convenor. Based on the principle of definiteness, the comptroller must issue the resolution corresponding to the case, so that, if the complainer does not agree with it, he can file another appeal before the Administrative Contentious Court or another competent authority. However, there are no reports of any appeals against the comptroller's resolution regarding challenges. The lodging of an appeal with the comptroller based on issues of non-conformity is likely to incur a cost for the claimant. These costs can include time and money spent within the company, as well as possible external legal fees. However, claimants are not required to pay administrative charges in order to get a claim reviewed.

Overall in the state of Nuevo León, there is limited data on public procurement, and remedies for public works are no exception. That said, during the OECD fact-finding mission, government representatives suggested that the reason no data were available was that complaints are rarely raised during the tendering process. The suppliers met during the fact-finding mission stated that they didn't raise complaints – but not because they didn’t have complaints. Rather, they said nothing out of a fear of being blacklisted. The limited use of the remedies system is a cause for concern, as it suggests that there is a culture of fear of reprisal if bidders do exercise their right to complain.

There are several measures that the state of Nuevo León should take to remedy this situation. First, the state should ensure that those that complain can submit their appeals without having to disclose their identities to the requesting unit that is involved. This process should be developed by the comptroller. Second, it is important to normalise the process of filing complaints. The state of Nuevo León could do so by promoting a broad communications strategy that increases awareness of the complaint and remedies process. The state should use various channels to raise awareness and normalise these processes, including doing so by engaging with civil society.

The issue of impartiality remains with the committee for public works comité de fallo which provides opinions on all awarding decisions made for public works. In theory, having an internal committee of this nature would help ensure that the process is carried out according to the rules. That said, Nuevo León’s committee has limited time to review all the documents, which has led to mistakes. Members of the comptroller’s office also sit on this committee. While they cannot vote, they can speak out and discuss issues with the other members of committee. This is questionable. Having employees of the comptroller on the committee raises red flags, as, subsequently, appeals go to the comptroller for reviewing. This fact could be considered a conflict of interest, and might undermine the credibility of the decisions made by the comptroller.

8.2. Conflicts that arise during execution of contracts

8.2.1. Dispute resolution system

Nuevo León needs to have a clear role in relation to mediation, conciliation and arbitration, whether that is supervising, managing or actively being involved in the resolution process

According to Nuevo León’s public procurement legislation, contracting parties can agree to use negotiation or mediation as a dispute settlement mechanism to resolve their distinct interpretations of the execution of contracts. Such dispute settlement mechanisms may be agreed upon in the contracts themselves, or in an independent agreement. In any case, dispute settlements must agree to the following:

  1. the stage of negotiation or mediation, as well as an agreement of the time period when this negotiation will take place;

  2. the parties agree to conduct bargaining or mediation procedures in good faith;

  3. the applicable laws shall be those of the state;

  4. negotiations or mediations must be carried out in Spanish;

  5. the agreement resulting from the negotiation or mediation shall be binding to both parties.

The parties to a contract may also agree to an arbitration procedure to resolve disputes about compliance with the contract in terms of the provisions of the Law of Alternative Methods for Conflict Resolution of the State of Nuevo León. The use of negotiation, mediation or arbitration are not mutually exclusive, nor do they restrict the actions of the parties in cases of possible invalidity of acts of authority, violation of human rights or crimes. The arbitration procedure may be agreed upon in the contract itself or in an independent agreement. With the Alternate non-adversarial method (negotiation or mediation), one or more alternate methods service providers intervene in a dispute, without the authority to decide on the basis of the agreement that could be reached. These providers are not permitted to issue a judgment or sentence, but will facilitate communication between the participants in the conflict. The purpose of this process is that these providers take control of the case and arrive at a solution. Cases can go to a civilian court after a ruling from a provider.

In the event of a serious breach of the obligations contracted by the supplier, the contract is terminated or the guarantee of compliance. For example, according to Article 111 of Nuevo León’s procurement legislation, suppliers who, for reasons other than delay in complying with the agreed dates for the delivery of goods or the provision of services, fail to comply with their obligations for any other cause established in the contract, are subject to the termination procedure of the contract, in accordance with the following procedure:

  • Termination will start as soon as the supplier is notified in writing of the breach that has incurred, within a term of five working days.

  • After the five working days, the Central Purchasing Body (Unidad Centralizada de Compras, UCC) will have a period of fifteen days to resolve the issue by considering the arguments and evidence that the supplier has put forward. The determination to maintain or terminate the contract must be duly substantiated, reasoned and communicated to the supplier within that period.

  • When the contract is rescinded, a corresponding settlement will be made in order to record the payments that must be made by the agency or entity for the goods received or services rendered up to the moment of termination.

Even after a procedure has begun, the UCC may suspend the termination procedure. The UCC may decide not to terminate a contract when, during the procedure, it is advised that termination of the contract may cause damage or impairment to the procurement functions of the state. The UCC must prepare an opinion in which it justifies that the economic or operating impacts that would be caused by the termination of the contract would be greater than those generated by the supplier's default, and must specify how. When the decision is made not to terminate the contract, the UCC establishes another term with the supplier, which will allow it to remedy the non-compliance that caused the start of the procedure. Early termination of contracts shall not be subject to arbitration according to the public procurement regulation for goods and services, except to settle the settlement resulting from such acts.

Currently there is no data available about the frequency of cases going to mediation or arbitration relating to issues arising during the execution of public procurement contracts. The procedure has been used rarely, according government information. Hence, the effectiveness of the process is unknown, as is any impact these procedures may have had on works in progress. During the OECD fact-finding mission to Nuevo León, officials mentioned several lapses that have occurred during the execution of contracts, starting with excessive delays in orders and excessive delays in payments. These are valid issues. Unfortunately, however, officials are not going through the proper channels currently to address them.

The conciliation and the mediation process in Nuevo León has several stages. It generally starts with the two parties trying to resolve an issue among themselves. If that doesn't work, a third party is brought in, but its role and authority can vary. If the disagreement continues, the matter can be brought to arbitration.

The state of Nuevo León should clarify its role in the process, as it is not clear to what extent the state supervises or runs mediations. According to the regulations for public procurement of goods and services in Nuevo León, both procuring and supplying parties should endeavour to carry out actions that promote the total execution of the works, the delivery of the goods, the rendering of services and the complete resolution of controversies during negotiation or mediation. If both parties cannot reach an agreement on a dispute, they can, at their own expense, appoint an expert who issues his or her opinion on the disputed points. Then, a competent authority is appointed to hear the proceedings, in order to enable the parties to reconcile their interests. The costs and fees of the arbitration are supposed to be borne by the contracting parties, unless otherwise determined in the contract. In Peru, there is an institutional arbitration system managed by the Government Procurement Supervising Agency (OSCE) that specialises in dispute settlement in public procurement. It is autonomous and governed by its own regulations and by the legislative decree establishing norms for arbitration (see Box ‎8.3).

Box ‎8.3. Arbitration proceedings in Peru

The SNA-OSCE (National Arbitration System) is responsible for organising and administering institutional arbitration proceedings in Peru, with the objective of settling disputes that occur during the execution of contracts, in accordance with the regulatory framework between contractors and public entities. SNA-OSCE only organises and administers those arbitration proceedings where parties mutually agree to, as well as those that by legal mandate should be administered, in accordance with the following assumptions:

a. If the contract does not include an arbitration agreement, the clause referring to institutional arbitration will refer to SNA-OSCE as the body responsible for such an assignment.

b. If the arbitration agreement does not make reference to a determined arbitration institution, it is understood that the arbitration shall be under the responsibility of SNA-OSCE.

c. In case the arbitration agreement indicates that the organisation and administration of the arbitration shall fall to any of the functional authorities of the SNA (National Arbitration System), it will be understood that the SNA-OSCE shall be in charge of such assignment.

Additionally, there are arbitration institutions in the private sector that also administer and organise institutional arbitration.

picture

Source: (OECD, 2017[4])

8.2.2. Mediation and conciliation for the execution of public works

Nuevo León should take steps to ensure the transparency and integrity of its mediation, conciliation and arbitration processes by raising awareness and taking measure to ensure the proper registration of conflicts that arise between parties

The Public Works Act for the State and Municipalities of Nuevo León establishes that, in contracts, an arbitration clause may be agreed upon with respect to those disputes that may be jointly determined by the Secretariat of Finance and General Treasury and the comptroller's office. If this is the case, the agreement in a contract for its "execution" should be reviewed. The process of negotiation or mediation has rarely been used according to government officials in Nuevo León. There are mainly two courses of action that are applied in the state to disputes during the execution of contracts. Both actions include some kind of a conciliation clause or mediation clause – but not necessarily with a third party.

In Europe, there isn’t as elaborate an arbitration system for public procurement conflicts as can be found in Latin American countries like Mexico and Peru. There is a tendency for civil courts to be used in Europe when an issue cannot be settled. In many Latin American countries, there is often a public process (i.e. with public institutions or specific courts that have a role to play once parties reach mediation or arbitration). The final phase can sometime be a civil court.

As previously mentioned, there is a law of alternative methods for the resolution of general conflicts in the state of Nuevo León. The object of the law is to promote and regulate alternative methods for preventing complaint. The law also aims, where appropriate, to resolve conflict, as well as create public and private centres that provide mediation and conciliation services to the population, and activities developed by the providers of such services. The government of Nuevo León is likely to use the alternate non-adversarial method for public procurement disputes. Under this method one or more alternate method service providers intervene in a dispute. These providers are independent, neutral, impartial, confidential and have the capacity to serve as mediators. They do not, however, have the power to make decisions. This fact facilitates communication between the parties in conflict. The goal is that these parties take control of the process, and arrive voluntarily at a solution that puts an end to the conflict in whole or in part. For arbitration in public works, the Alternate adversarial method, regulated by the Code of Civil Procedures of the State, is applied. In this case, one or more providers of alternate methods of service (who are called arbiters) issue a definitive and mandatory award for the participants in the conflict, in order to finalize it.

Despite the fact that Nuevo León has detailed legislation in place on mediation, reconciliation and arbitration measures, limited information is available about its application. Thus, it is difficult to know if suppliers and contractors are using the particular services detailed in the legislation. Furthermore, it is not clear how many service providers of alternate methods are in place in Nuevo León (no public or private data is available).

The state of Nuevo León should clarify its role in the mediation, reconciliation and arbitration process. The state should clarify whether it is just a supervisor or also a mediator. Information on the use of mediation and conciliation should be gathered by a unit within the government. Furthermore, the government should maintain a list of unresolved cases that have gone to court. According to government officials in Nuevo León, no cases have ever gone to court. However, it is unlikely that no issues have been raised during execution of contracts for public works. Public works contracts tend to be more complicated, as the risks involved in infrastructure projects are significantly higher than those incurred when delivering goods and services. In addition, financial commitments are significantly higher in public works contracts.

The low number of contracts needing mediation or going into arbitration indicates that issues are being resolved outside of the proper procedures. It is also quite likely that data registration is poor, and that the state of Nuevo León could be doing a better job of accumulating information from service providers. The state needs to ensure that issues that arise are managed via the proper proceedings. Doing this will ensure transparency. Resolving issues outside of regulations is likely to increase the risk of corruption, as there is no formal process to monitor how the matter is resolved.

8.3. Proposals for action

The situation in the state of Nuevo León is quite unique. There is a rather fragmented system in place for conciliation, mediation and arbitration. This system has not been fully tested, as few complaints have been recorded. The OECD fact-finding mission to Nuevo León did establish that the current system of public procurement can be significantly improved in regards to goods, services and public works. Despite ample reasons for appealing, complaining or raising issues of non-conformities, bidders taking part in tendering processes are reluctant to complain. Currently, the dispute resolution system is not functioning as it should be – partly because the culture needs to change, and partly because of how the structure of the system is set up. Unregistered conflicts arising during the execution of contracts adds to the risk of corruption taking place. There are also concerns about conflicts of interest if cases are actually reported. In addition, suppliers do not trust that requesting units will refrain from retaliating if suppliers complain. These are serious issues that need to be looked at by the relevant authorities. To further enhance the transparency of the review and remedy system in place, and to increase the number of formal complaints being reported and registered, the state of Nuevo León could consider the actions listed below.

The functioning of the review and remedy system:

  • Nuevo León needs to make its mechanism for remedies more effective for goods and services by ensuring anonymity and impartiality throughout the process.

  • Nuevo León needs to work closely with other stakeholders and civil society to ensure the anonymity of public works claimants, and to prevent any conflicts of interest in relation to the resolution of complaints.

Conflicts that arise during execution of the contract

  • Nuevo León needs to have a clear role in relation to mediation, conciliation and arbitration, whether that is supervising, managing or actively being involved in the resolution process.

  • Nuevo León should take steps to ensure the transparency and integrity of the mediation, conciliation and arbitration process by raising awareness and adopting measures to ensure the proper registration of conflicts that arise between parties.

References

OECD (2015), OECD Recommendation of the Council on Public Procurement, http://www.oecd.org/gov/ethics/OECD-Recommendation-on-Public-Procurement.pdf.

OECD (2016), Towards Efficient Public Procurement in Colombia : Making the Difference, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264252103-en.

OECD (2016), “Remedies”, SIGMA Papers, Brief, OECD, Paris, http://www.sigmaweb.org/publications/Public-Procurement-Policy-Brief-12-200117.pdf.

OECD (2017), OECD Integrity Review of Mexico: Taking a Stronger Stance Against Corruption, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264273207-en.

OECD (2017), Public Procurement in Peru: Reinforcing Capacity and Co-ordination, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264278905-en.