Chapter 6. Ensuring the integrity of public procurement processes
in Nuevo León

This chapter assesses the system for ensuring the integrity of public procurement processes in Nuevo León against the 2015 OECD Recommendation on Public Procurement and the 2017 OECD Recommendation on Public Integrity. The chapter analyses the state’s existing integrity policies and legal framework to establish how effective they are at reducing the risk of corruption during the public procurement cycle. Furthermore, the chapter recommends measures to enhance integrity rules, such as a code of ethics, use of declarations and a whistle-blower programme. The chapter discusses measures to ensure accountability and control with regards to the sanctioning of suppliers. It also underlines the importance of actively engaging the private sector and civil society. Finally, the chapter looks at the experiences of other OECD countries in order to illustrate potential improvements Nuevo León could make to its integrity framework.

  

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

In OECD countries around the world, public procurement activities present a high risk of integrity violations and corruption. The main reason for this is that public procurement requires a significant level of expenditure, and the procurement cycle as a whole is quite complex. In addition, a lack of transparency, a weak governance system, and the close interaction between public officials and businesses also expose countries to integrity risks

Like other Mexican states, Nuevo León, is susceptible to such risks. While the state is currently developing initiatives and mechanisms to promote integrity in government activities and decisions, it still faces a number of challenges. These challenges include the complexities of building a coherent and comprehensive integrity system, and instilling a culture of integrity in the state’s public administration.

Public procurement is particularly vulnerable to mismanagement, fraud and corruption – which can occur in all phases of the procurement cycle and at all levels of government. These issues can have a significant impact on publicly funded projects in many different sectors. This holds true in Mexico. Indeed, according to the Superior Audit Office of the Federation (Auditoría Superior de la Federación, ASF), the lack of sanction of corruption offences cost Mexico an average of USD 86 billion from 2005 to 2015. Specialists attribute these losses to deviations, underspending, waste of resources and undue payments within the government (Casar M.A, 2016[1]).

This chapter analyses Nuevo León’s integrity policies, and the legal framework it applies to public procurement operations. The chapter highlights recent developments, and emphasises areas where further efforts are needed. Specifically, the chapter discusses corruption risk-mapping, disclosures and management of conflicts of interest, as well as integrity training and awareness programmes, and whistle-blower protections. It also addresses the key role of the private sector in these issues, and the importance of setting high integrity standards for all stakeholders in the procurement cycle. The chapter undertakes a discussion of how states implement anti-corruption and integrity initiatives in the public procurement sector. Finally, the chapter assesses these issues against the key principles of the OECD Recommendation on Public Procurement (OECD, 2015[2]), and the initiatives taken in the context of establishing Nuevo León’s local anti-corruption system.

In Mexico, public procurement represents 5.2% of GDP and 70% of this activity is carried out at the sub-national level, as described in Figure ‎6.1 and Figure ‎6.2 Public procurement activities in Nuevo León account for nearly USD 546 million. Spending on public procurement in Nuevo León is concentrated in the areas of public safety, social development, education and health, as mentioned in Chapter 2.

Figure ‎6.1. General government procurement as percentage of GDP in 2007, 2009 and 2014
picture

Source: IMF Government Finance Statistics (IMF GFS) database. Data for Mexico are based on the OECD National Accounts Statistics database. Data for Peru and Paraguay are recorded on a cash basis. For Costa Rica and Jamaica, the part of government procurement related to gross fixed capital formation does not include the consumption of fixed capital. Costs of goods and services financed by the general government are not included in government procurement because they are not accounted separately in the IMF Government Finance Statistics database) Data for El Salvador and Mexico refer to 2013 rather than 2014. Data for Colombia refer to 2008 rather than 2007. The Figure includes the average for Latin American countries (LAC).

Source: (OECD, 2016[3])

Figure ‎6.2. Share of general government procurement in the region by level of government, 2007 and 2014
picture

Source: (OECD, 2016[3])

Corruption and integrity breaches in public procurement have major consequences for the allocations of resources. These consequences range from economic losses due to misappropriation of public funds and the deterioration of competition, to the corrosion of citizen trust in public institutions and public officials. This lack of trust extends to officials’ use of taxpayer money in the public interest. Accordingly, the OECD Recommendation on Public Procurement underscores the importance of preserving the integrity of a public procurement system (see Box ‎6.1).

Box ‎6.1. The OECD Recommendation on Public Procurement

The Council:

III. RECOMMENDS that Adherents preserve the integrity of the public procurement system through general standards and procurement-specific safeguards.

To this end, Adherents should:

i) Require high standards of integrity for all stakeholders in the procurement cycle. Standards embodied in integrity frameworks or codes of conduct applicable to public sector employees (such as on managing conflict of interest, disclosure of information, or other standards of professional behaviour) could be expanded (e.g. through integrity pacts).

ii) Implement general public-sector integrity tools and tailor them to the specific risks of the procurement cycle as necessary (e.g. the heightened risks involved in public-private interaction and fiduciary responsibility in public procurement).

iii) Develop integrity training programmes for the procurement workforce, both public and private, to raise awareness about integrity risks, such as corruption, fraud, collusion and discrimination; develop knowledge on ways to counter these risks; and foster a culture of integrity to prevent corruption.

iv) Develop requirements for internal controls, compliance measures and anti-corruption programmes for suppliers, including appropriate monitoring. Public procurement contracts should contain “no corruption” warranties, and measures should be implemented to verify the truthfulness of suppliers’ warranties that they have not and will not engage in corruption in connection with the contract. Such programmes should also require appropriate supply-chain transparency to fight corruption in subcontracts, and integrity training requirements for supplier personnel.

Source: (OECD, 2015[4])

While integrity can be defined in different ways, the OECD Recommendation on Public Integrity (OECD, 2017[13]) considers public integrity to be “the consistent alignment of, and adherence to, shared ethical values, principles and norms for upholding and prioritising the public interest over private interests in the public sector”. In the context of public procurement, maintaining the integrity of the system requires the following factors, among others:

  • procurement procedures are transparent, and promote fair and equal treatment of bidders

  • public resources linked to public procurement are used in accordance with intended purposes

  • procurement officials’ behaviour is in line with the public purpose of their organisation

  • systems are in place to challenge procurement decisions, ensure accountability and promote public scrutiny (OECD, 2007[6]).

Fighting corruption is a major issue in Nuevo León. A high percentage of citizens perceive that corruption is taking place in the state; in fact, the percentage of citizens who report perceiving government corruption in Nuevo León surpassed the percentage of citizens who perceived corruption at the national level in Mexico (as shown in Figure ‎6.3). The high volume of expenditure on goods and services carried out by local governments in Mexico is detailed in Figure ‎6.2.

Figure ‎6.3. Perception of Corruption in Nuevo León in comparison with other Mexican States
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Source: (INEGI, 2015[7])

The results of the general population survey made by the National Institute of Statistic and Geography (Instituto Nacional de Estadística y Geografía, INEGI) in 2015 shows that corruption of officials and authorities in Nuevo León is by far the main problem perceived by citizens. Citizens in the state are also increasingly concerned about the integrity of government decisions (Figure ‎6.4).

Figure ‎6.4. Perception of corruption in Nuevo León by sector of activities
picture

Source: (INEGI, 2015[7])

Citizen perceptions are not wrong. Corruption and integrity breaches in Nuevo León were noted in the report, Observations to the General Public Accounts 2015, (submitted to the Mexican Congress by the ASF in February 2017). The report states that 11.4% of the total funds transferred to the state of Nuevo León in 2015 were the subject of observations related to the proper use of resources (as detailed in Figure ‎6.5 and Table ‎6.1.

Figure ‎6.5. Observations made to amounts allocated to Nuevo León and other Mexican states in the Public Account
picture

Source: Author based on the information reported in the Audit Report of Public Accounts 2015 made by the Superior Audit Institution, (Autoridad Superior de la Federación (ASF), 2015[8])

The ASF considers the main problem with public expenditure resulting from procurement to be that Mexican states use an exception set out in the Law on Procurement, Leasing and Services of the Public Sector (Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público, LAASSP) to carry out their purchasing. This exception allows states to act in accordance with the parameters of the law, but to also make decisions that are not justified in terms of value for money. The exception also allows the states to make purchases without requiring suppliers to pay penalties or deductions in case of non-compliance with the terms and conditions of their contracts.

Table ‎6.1. Major irregularities observed in the expenditure of funds allocated to Mexican states in the 2015 Public Accounts (in mdp)

Irregularities observed during audits made

Amounts observed

%

Resources transferred not used

33 449.1

51.3

Supportive documentation of expenditures missing

7 893.7

12.1

Transfer of resources to other bank accounts

6 106.0

9.4

Resources used that not reach the specific objectives of each fund or programme

4 936.0

7.6

Undue or not justified payment of salaries to personnel

2 639.7

4.0

Undue Tax retention to third parties

2 017.8

3.1

Expenditures not authorised by the federal Coordinator entity

1 112.9

1.7

Undue payment of benefits not related to salaries

1 005.6

1.5

Other concepts

6 033.0

9.3

Total amount observed

65 193.8

100

Source: (Autoridad Superior de la Federación (ASF), 2015[8])

In this context, Nuevo León has made enhancing the integrity of the public procurement system a clear priority. The state is developing a framework to prevent, identify and sanction corrupt and unethical behaviours. This framework is described in both the State Development Plan 2016-2021 (Plan Estatal de Desarrollo del Estado de Nuevo León 2016-2021) and the Strategic Plan for the State of Nuevo León 2015-2030 (Plan Estratégico para el Estado de Nuevo León 2015-2030).

6.1. Enhancing Nuevo León’s policy framework to address integrity issues in the state’s public procurement processes and activities

6.1.1. Nuevo León should consider strengthening its commitment to fighting corruption by developing integrity strategies for public procurement

Recognising the gravity of corruption in the state and its negative impact on state development and the appropriate use of government resources, Nuevo León took steps in 2014 to enhance integrity in the public sphere. That year, it passed the Strategic Planning Law (Ley de Planeación Estratégica del Estado de Nuevo León) and its regulatory framework (Reglamento de la Ley de Planeación Estratégica del Estado de Nuevo León), which created the Council for Strategic Planning of Nuevo León (Consejo Nuevo León para la Planeación Estratégica). The Council for Strategic Planning of Nuevo León is a public body in which citizens, representatives from academia and the government collaborate to ensure the sustainable development of the state according to a long-term vision. The council’s main objective is to elaborate and continuously update the Strategic Plan for the State of Nuevo León 2015-2030. The strategic plan was issued on 1 April 2016. It describes a strategic vision for the state, and is meant to guide the action items in the State Development Plan 2016-2021. Both the strategic plan and state development plan are meant to be utilised by Nuevo León’s current and next administrations.

One of the pillars of the strategic plan is effective and transparent government (gobierno eficaz y transparente), along with other priorities like human development, sustainable development, economic development and security and justice. The effective and transparent government (gobierno eficaz y transparente) pillar has a specific section on transparency and fighting against corruption. During public consultations, efforts such as transparency and fighting corruption were among the efforts citizens most voted for as the means they thought would effectively decrease the high perception of corruption at the state level. Nuevo León’s strategic plan contains an in-depth analysis of the existing situation in the state, a strategic approach going forward and areas of opportunity. The strategic plan also contains a methodology to prioritise areas of opportunity (considering feasibility and impact). By prioritising these areas, officials hope to define a set of strategic areas, initiatives and projects to work on. They also hope to define eight overarching “central themes” that will guide integrity work. One of the central themes is making the use of public resources transparent in order to fight and sanction corruption (transparentar el uso de recursos públicos, combatir y sancionar la corrupción). This strategic work is commendable, but it is incomplete, as the strategic plan does not contain any reference to how the state can effectively fight corruption in public procurement.

The State Development Plan 2016-2021 sets out the six governmental priorities. They are: citizen government, rebuilding the social fabric to deter poverty, mobility and transport to reduce the time and cost of transportation for the population, fighting corruption and impunity, public safety so citizens can live in peace and infrastructure for development. The State Development Plan provides a detailed and evidence-based analysis of transparency and anti-corruption issues. Each issue is linked to one of fourth topic areas under which action plans are to be developed.

Topic number three of the State Development Plan focuses on the creation and implementation of the State Anti-Corruption System (Sistema Estatal Anticorrupción). It refers to accountability, citizen participation, social audit, institutional coordination, legislative harmonisation and procurement transparency. The State Anti-Corruption System organises its strategies and guidelines according to two major objectives: 1) ensuring transparency of public sector activities, accountability and the fight against corruption; and 2) ensuring the sustainability of public finances. It is under this latter objective that the State Development Plan makes a reference to public procurement as a key priority area. The plan states that Nuevo León should seek to create the most efficient public procurement system possible based on results, and that the state should implement the electronic registration of public procurement processes (Gobierno del Estado de Nuevo León, 2016[9]). At present, Nuevo León is establishing the pillars of its Anti-Corruption Plan, based on the National Anti-Corruption System’s institutional and legislative framework. This framework was approved at the federal level in May 2015 through the publication of a decree modifying several articles of the Mexican Constitution, the enactment of the General Law of the National Anti-Corruption System and seven secondary laws. Nuevo León started building its anti-corruption strategy by approving amendments to its constitution in March 2017, and by laying the foundations for the institutional framework of the local anti-corruption system. Considering that public procurement is a high-risk area for corruption and integrity breaches, and that the current legal framework does not make a precise reference to this, Nuevo León could consider developing a targeted and tailored anti-corruption strategy for procurement or an integrity regime, as countries such as Austria and Canada have done (see Box ‎6.2 and 6.3).

Box ‎6.2. The Anti-Corruption Strategy of the Austrian Federal Procurement Agency

Integrity is at the heart of the Anti-Corruption Strategy developed by the Austrian Federal Procurement Agency (BBG). The strategy is rooted in the following actions:

  • set precise organisational procedures (a clear definition of roles and structures)

  • integrate anti-corruption measures into the workday

  • constantly re-assess and improve the strategy

  • constantly raise awareness among staff

  • sharpen the focus of employees on the consequences of corruption.

The strategy contains an explicit regulation of the main values and strategies that are vital to the prevention of corruption. It also includes a clear definition of grey areas (e.g. the difference between customer care and corruption), clear rules on accepting gifts and rules on additional employment. Finally, the strategy offers employees a clear view of emergency management.

Source: (OECD, 2016[10])

Box ‎6.3. The Integrity strategy of the government of Canada aims to ensure value for money and uphold the public interest in procurement processes

The Government of Canada upholds the core principal of being committed to open, fair and transparent contracts and property agreements at the best value for Canadians. As the government's principal contracting arm and manager of its property portfolio, Public Works and Government Services Canada (PWGSC) has implemented a number of additional measures to further strengthen the integrity of its procurement and property transactions, as well as those it manages on behalf of its clients. PWGSC is continuously improving its procurement processes by issuing guidelines and directives to foster ethical business practices, ensure due process for suppliers and uphold the public trust in the procurement process.

In its 2015 Economic Action Plan, the Government of Canada committed to introducing a new, government-wide integrity regime for the procurement process. It did so to ensure that Canada does business with ethical suppliers internally and abroad. The new regime aims to be transparent, rigorous and act in a manner that is consistent with best practices in Canada and abroad. It also aims to support transparent competition and an ethical Canadian marketplace. The key features and rules of the regime are:

  • A supplier convicted of a listed offence in Canada or abroad will remain ineligible to enter into a contract with the government for a period of ten years.

  • A supplier can apply to have its ineligibility period reduced by up to five years if it addresses the causes of the conduct that led to ineligibility.

  • A supplier will no longer be automatically penalized for the actions of an affiliate with which it had no involvement.

  • New tools, such as independent expert third-party assessments and administrative agreements that specify required, corrective actions and ensure their effectiveness.

  • The government has the ability to suspend a supplier for up to 18 months if it has been charged with of a listed offence or has admitted guilt.

Canada’s integrity regime is centrally administered by PWGSC through a bilateral Memoranda of Understanding (MOU). The integrity regime consists of: ineligibility and suspension policies, directives issued to further these policies and address emerging issues, clauses used in instruments relating to contracts, and information bulletins developed to provide greater clarity and guidance to clients and stakeholders of the integrity regime. To date, five directives and ten information bulletins have been issued, all of which are available on the public integrity regime website.

Presently, 77 MOUs have been signed by federal organisations for the provision of integrity verification services, including two crown corporations. Only three federal organisations required to adopt the integrity regime have yet to sign a MOU. Revised MOUs have been drafted and distributed across departments to reflect updates made to the integrity regime in April 2016.

Canada launched a database services portal in September 2015 to implement the integrity verification, and to simplify the process for submitting an integrity verification request. To date, since the inception of the portal, a total of 148 289 integrity verifications have been conducted, with 54 139 completed since April 2016. On 3 October 2016, the final version of the integrity verification portal was launched, with all modules operationally deployed. This enhanced version provides a centralised point of access for procurement officers to submit integrity verification requests and communicate directly with the integrity database team.

Notable statistics for the operation of the integrity verification portal include:

  • Officials take action on 98.3% of requests within four hours.

  • 2 491 procurement officers use the portal throughout the government.

  • 40 794 searchable vendors are listed within the portal.

  • Emergency verification responses are available within 30 minutes.

Source: (Public Services and Procurement Canada,(n.d.)[11])

At present, Nuevo León’s integrity framework for public procurement is based on certain provisions. These provisions stem from two different legal systems, as mandated by state and federal laws and regulations (see in Table 6.2).

Table 6.2. The current regulatory framework for public procurement in Nuevo León

Legislations and regulations applicable in case of procurement made with federal resources

Legislations and regulations applicable in case of procurement made with State resources

Law on Procurement, Leases and Services of the Public Sector (Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público, LAASSP);

Law on Procurement, Leases and Contracting Services of the State of Nuevo León (Ley de Adquisiciones, Arrendamientos y Contratación de Servicios del Estado de Nuevo León, LAACS);

Regulation for Procurement Leases and Services of the Public Sector (Reglamento de la Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público, RLAASSP);

Regulation of the Law on Procurement, Leases and Contracting Services of the State of Nuevo León (Reglamento de la Ley de Adquisiciones, Arrendamientos y Contratación de Servicios del Estado de Nuevo León);

Law on Public Works and Related Services (Ley de Obras Públicas y Servicios relacionados con las mismas, LOPSR).

Law of Public Works for the State of Nuevo León (Ley de Obras Públicas del Estado de Nuevo León, LOPNL).

Source: Author based on information submitted by Nuevo León.

Other regulations that are also part of this complex legislative framework are the Organisational Law of the State of Nuevo León’s Public Administration (Ley Orgánica de la Administración Pública para el Estado de Nuevo León) and the Regulation of the Law for Acquisitions, Leasing and Procurement of Services for the State of Nuevo León (Reglamento de la Ley de Adquisiciones, Arrendamientos y Contratación de Servicios del Estado de Nuevo León). The former establishes the institutional framework under which public procurement activities will take place. The latter establishes the rules applicable to actions and operations related to procurement and the contracting of services.

While this legislative framework includes various requirements and rules to structure and guide public procurement activities, it does not specifically address integrity and corruption risks. The Law on Procurement, Leasing and Contracting Services of the State of Nuevo León (Ley de Adquisiciones, Arrendamientos y Contratación de Servicios del Estado de Nuevo León, LAACS), for instance, ensures to some extent the integrity of the procurement process through several provisions. These provisions include: the establishment of a procurement committees (Article 16), citizen participation (Article 28), blacklisting of suppliers (Article 92), control of procurement plans and budgets, deadlines to submit bids and provisions increasing risks of collusion, clarification meetings with written and oral questions (Article 34), public meetings to present tender results with the possibility of suppliers submitting a better offer during the meeting, the possibility of bidders attending the opening meeting for bids and organisation of joint site visits for bidders when required by the tender (Article 35). Nuevo León also has other provisions referring indirectly to public procurement integrity, which have been amended as detailed in the next sections of this chapter.

In this context, developing a specific local anti-corruption plan for public procurement would help Nuevo León to reaffirm its high level of commitment to effectively fighting corruption in public procurement. A local anti-corruption plan would also help the state to recognise the specific areas and activities vulnerable to risks of corruption and integrity breaches. To accomplish these aims, the Council for Strategic Planning of Nuevo León should consider updating its strategic plan and recommending that a similar exercise be done with the State Development Plan 2016-2021. The strategic plan should be updated to effectively curb corruption and uphold integrity in public procurement in ways that are in line with the objectives of the local anti-corruption system. The plan should also identify priorities, and recognise the risks of corruption and integrity breaches in public procurement in the state. In developing this plan, the Secretariat of Administration should be named as the responsible entity for administering material and human resources. The central administration of Nuevo León could contribute to this exercise by analysing risks and identifying national priorities in coordination with the relevant authorities.

6.1.2. Creating a coherent and effective integrity framework as a mechanism to reduce corruption risks in the public procurement process

Nuevo León could benefit from enhancing integrity rules in order to set up a coherent legal framework for integrity and corruption prevention.

In advancing its integrity and anti-corruption strategy, Nuevo León needs to pay specific attention to its procurement activities and the vulnerability of its public investments. Around the world, public investment in public procurement is put at risk due to different types of malfeasance, including foreign bribery. There are, indeed, other types of conduct that have a negative impact on the integrity of public procurement. This conduct includes undue influence, the capture of investment projects by specific interests and conflicts of interests. These risks affect all stages of the procurement cycle, as they exert different kinds of pressure at all steps of the project – from the needs assessment phase to the execution and evaluation phases (see Table ‎6.3). Efforts to mitigate behaviours that violate the principles of integrity should be seen as the shared responsibility of the government and other involved stakeholders.

Table ‎6.3. Corruption risks associated with the different stages of the procurement cycle

Risks of the pre-tendering phase

Needs assessment

  • Lack of adequate needs assessment

  • Influence of external actors on officials decisions

  • Informal agreement on contract

Planning and budgeting

  • Poor procurement planning

  • Procurement not aligned with overall investment decision-making process

  • Failure to budget realistically or deficiency in the budget

Development of specifications/ requirements

  • Technical specifications are tailored for a specific company

  • Selection criteria is not objectively defined and no established in advance

  • Requesting samples of goods and services that can influence

  • Buying information on the project specifications.

Risks of the tendering phase

Choice of procurement procedure

  • Lack of procurement integrity for the use of non-competitive procedures

  • Abuse of non-competitive procedures on the basis of legal exceptions: contract splitting, abuse of extreme urgency, non-supported modifications

Request for proposal/bid

  • Absence of public notice for the invitation to bid

  • Evaluation and award criteria are not announced

  • Procurement information is disclose and made public

Bid submission

  • Lack of competition or cases of collusive bidding:

    • o. cover bidding

    • o. bid suppression

    • o. bid rotation

    • o. market allocation

Bid evaluation

  • Conflict of interest and corruption in the evaluation process through:

  • Familiarity with bidders over time

  • Personal interests such as gifts or future/additional employment

  • No effective implementation of the "four eyes-principle"

Contract award

  • Vendors fail to disclose accurate cost or pricing data in their price proposals, resulting in an increased contract price (i.e. invoice mark-ups, channel stuffing)

  • Conflict of interest and corruption in the approval process (i.e. no effective separation of financial, contractual and project authorities)

  • Lack access to records on the procedure

Risks of the post-award phase

Contract management/ performance

  • Abuses of the supplier in performing the contract, in particular in relation to its quality, price and timing:

  • Substantial change in contract conditions to allow more time and/ or higher prices for the bidder

  • Product substitution or sub-standard work or service not meeting contract specifications

  • Theft of new assets before delivery to end-user or before being recorded

  • Deficient supervision from public officials and/or collusion between contractors and supervising officials

  • Subcontractors and partners chosen in an on-transparent way or not kept accountable

Order and payment

  • Deficient separation of financial duties and/or lack of supervision of public officials leading to:

  • False accounting and cost misallocation or cost migration between contracts

  • Late payments of invoices

  • False or duplicate invoicing for good and services not supplied and for interim payment in advance entitlement

Source: Based on (OECD, 2009[12])

Officials in Nuevo León need to keep in mind that integrity risks can arise during the pre-tendering phase. Risks are also sometimes associated with the procurement method used by contracting authorities (CAs). Finally, risks can arise during the post-award phase, as some authorities engage in late payment of invoices, and false or duplicate invoicing. All of these risks are possibilities, and some have been documented in Nuevo León.

The OECD Recommendation on Public Procurement promotes the use of open and competitive tendering. The OECD recommendation states that this type of tendering should be the standard method for conducting procurement, as it increases efficiencies, fights corruption, obtains fair and reasonable pricing and ensures competitive outcomes. If exceptional circumstances justify limitations to competitive tendering and validate the use of single-source procurement, such exceptions should be limited, pre-defined and should require appropriate justification when employed. These exceptions should also be subject to adequate oversight that takes into account the increased risk of corruption, including by foreign suppliers (OECD, 2015[4]).

Nuevo León employs four methods of procurement, as detailed in Chapter 2. Direct award is the most popular method, even though it increases the risk of corruption. Moreover, public procurement in Nuevo León is subject to various integrity risks, as the state uses many different methods of procurement, each subject to different rules, as described in Chapter 1 of this review.

Another integrity risk that Nuevo León faces is the complexity of its legal framework for public procurement. Indeed, like in other Mexican states, in Nuevo León, public procurement activities have to follow two distinct systems based on the origin of the financial resources. If the budgetary resources come from the federal level, contracting authorities and requesting units have to follow the federal public procurement procedures set out in the LAASSP, as detailed in Table ‎6.3. In addition, contracting authorities and requesting units have to use the electronic platform, CompraNet, administered by the Ministry of Public Administration (Secretaría de la Función Pública, SFP). Parastatal entities mainly use CompraNet for their purchases, as they receive federal funds and manage various programmes. However, when these financial resources come from the state, CAs have to follow the public procurement procedures developed by Nuevo León in the LACCS. In addition, they have to use the Electronic Public Procurement System (Sistema Electrónico de Compras Públicas del Estado de Nuevo León, SECOP) administered by the Secretariat of Administration of Nuevo León (Secretaria de Administracion de Nuevo León, SANL) and the Electronic Integrated Government Resources System (Sistema Integrador de Recursos Electrónicos Gubernamentables, SIREGOB). One difficulty of this arrangement is that the functionalities and objectives of each of these systems are quite different. In addition, the SIREGOB is not fully implemented yet. Another issue is that, in practise, most of the communication between public procurement officials and companies is still performed via face-to-face meetings or emails. Unfortunately, these practices increase integrity and corruption risks.

At the municipal level, the scenario is worse. Municipal authorities do not use SIREGOB or SECOP. Similar to the central administration, procurement at the municipal level is a paper-based activity. Furthermore, municipal procurement requires the presence of participants during different stages of the process. This results in a high risk of integrity violations.

An additional risk to the integrity of public procurement in Nuevo León is that providers participating in tenders are still required to register in person, though this requirement varies depending on the applicable procedure. Indeed, in the case of procurement made with state funds, registration in person is mandatory while in the case of procurement using federal funds CompraNet is used for a voluntary registration. It should be mentioned that while Nuevo León is working on finding a way to ensure that public procurement procedures are made electronically, there are still some challenges to their efforts. The reasons for this are that officials do not have full authority to make all public procurement procedures electronic, and officials are still working to link the different procurement platforms. Moreover, 35% of public investment made in Nuevo León is concentrated in areas such as health and education. These fields manage their own public procurement, and are not yet integrated into the consolidated purchases system established by the government. This arrangement opens the state up to risks, and represents a challenge for Nuevo León. The state should reform the applicable legal and regulatory mandates so that it can transition to an electronic system for public procurements across all different types of public purchasing.

Indeed, despite the fact that Nuevo León is consolidating its public procurement system, there are still 48 federal initiatives and programmes that have financial resources that need to be allocated and used properly. If the state does not follow appropriate procedures with regards to these programmes, it can be audited by the Superior Audit Office of the Federation (Autoridad Superior de la Federación (ASF), 2015[8]).

In order to prevent integrity violations and corruption, Nuevo León needs to ensure a comprehensive and effective integrity framework for staff working in public procurement. Nuevo León’s public procurement workforce is composed of a total of 114 public officials. These officials work in the contracting authorities, the General Directorate for Acquisitions and General Services of the Secretariat of Administration (Dirección General de Adquisiciones y Servicios Generales, DGASG) and in 40 of the 65 parastatal entities that still carry out their own public procurement activities (as they have not yet signed a co-operation agreement with the SA). While these public officials receive ethics training, currently there is no certification mechanism to ensure they have sufficient knowledge and skills to solve ethical dilemmas and conflict of interest issues that may arise in their daily work. This situation, coupled with the current lack of skilled public officials, is concerning. Indeed, many procurement officials in the state do not use the appropriate methods for procuring goods and services – which results in a failure to stimulate competition and prevent favouritism. Indeed, interviews with public officials revealed that specific training options for officials starting new positions in public procurement are not well publicised, as detailed in Chapter 4.

In light of this, Nuevo León would benefit from strengthening its culture of integrity and instilling the values of moral conduct and integrity in its public servants. It should also set clear expectations of ethical behaviour from all actors entering into a relationship with the government. Moreover, it is important that the state adopt measures to detect wrongdoings and report them using existing channels and appropriate mechanisms (Corruptel and Corrupnet). All of these efforts will help the state build a culture of integrity where public officials, citizens and private businesses feel confident about coming forward to report breaches of integrity and wrongdoing.

6.2. Establishing effective mechanisms to enhance integrity in Nuevo León’s public procurement cycle as a whole through the implementation of consistent and coherent integrity policies and stronger management of conflicts of interest

Maintaining the integrity of the public procurement system requires establishing general standards and procurement-specific safeguards for all stakeholders. This is vital, considering the fact that numerous actors participate in the system, and the procurement system grants a large number of contracts with distinct terms, conditions and values. Safeguarding integrity is a key pillar of any strategy to curb corruption in public procurement. Integrity means a consistent alignment of and adherence to shared ethical values, principles and norms for upholding and prioritising the public interest over private interests in the public sector (OECD, 2017[13]). In the context of public procurement, integrity of the system implies the following (among other factors):

  • Integrity standards applicable for all public officials are enacted by the government.

  • A dedicated government unit, directorate or office must be devoted to developing, updating and diffusing the government code of conduct, and may provide advice, guidance and practical examples to ensure its implementation.

  • Specific standards of conduct for public officials working in public procurement should be adopted in order to mitigate the specific risks related to the complexity and characteristics of the public procurement process.

  • Conflicts of interest must be properly managed to ensure that the involvement of public officials in the public procurement cycle does not improperly influence the performance of the public duties and responsibilities of these officials.

  • The government sets out rules and procedure to protect whistle-blowers.

Maintaining the integrity of a public procurement system requires effective and strong co-ordination between the various actors in the procurement cycle. This co-ordination should ensure the highest standards of conduct throughout all public institutions. The current institutional framework in Nuevo León involves various actors in charge of preventing, investigating or sanctioning corruption acts – as well as solving conflict of interest issues and ethical dilemmas. Indeed, the Office of the Comptroller and Governmental Transparency (Contraloría y Transparencia Gubernamental) and its different units and directorates are responsible for promoting the best practices of internal monitoring. The comptroller and its units are also responsible for guiding the government to maintain the legality, honesty and responsibility of its public officials in the context of public procurement activities. The units of the comptroller involved in this work include the Anti-Corruption Unit (Unidad Anticorrupción), the Legal Counsel Directorate (Dirección Juridica) and the Directorate of Internal Control Bodies and Monitoring (Dirección de Órganos de Control Interno y Vigilancia). The comptroller has jurisdiction per the Organisational Law of the Public Administration of Nuevo León (Ley Orgánica de la Administración Pública para el Estado de Nuevo León) and the Internal Regulation of the Office of the Comptroller and Governmental Transparency (Reglamento Interior de la Contraloría y Transparencia Gubernamental). That said, the jurisdiction only extends to ministries and entities of the state public administration – not to municipalities. However, the comptroller may intervene at the municipal level regarding state public expenditure and federal public expenditure transfers.

Nuevo León’s Anti-Corruption Unit is tasked with following up on complaints, conducting investigations and sanctioning misconduct by public officials, including by those who participate in public procurement. The Superior Audit Office of the State of Nuevo León (Auditoría Superior del Estado de Nuevo León, ASENL) also ensures the effective implementation of integrity rules. It does this by assisting the state congress in reviewing public accounts and the good management and budgetary exercises of public entities.

Another institution ensuring the integrity of public sector decisions is the Commission of Transparency and Access to Information of the State of Nuevo León (Comisión de Transparencia y Acceso a la Información del Estado de Nuevo León, CTAINL), which promotes transparency and accountability within the state government, and determines what information should be classified or considered confidential.

In addition to these entities, Nuevo León’s current integrity framework also mandates that an ethics committee be created and maintained to analyse and advise on public officials’ compliance with ethics rules, per the Agreement of the Ethics Code for Public Officials of the Public Administration of Nuevo León. This committee was created in 2012. Since then, the Ethics Committee has born the responsibility of providing support to the integrity system by ensuring that public officials and citizens are informed of Nuevo León’s ethics rules. Its members occupy an honorary position, and its role is an advisory one. While its decisions are non-binding, its opinions and suggestions are supposed to enhance integrity within Nuevo León’s public sector. It should be mentioned, however, that this committee is not currently operating. The reason for this is that most of its members resigned last year after a controversy connected to the purchase of blankets by the state of Nuevo León.

Other federal institutions such as the National Institute for Transparency, Access to Information and Protection of Data (Instituto Nacional de Transparencia, Acceso a la Información y Protección de Datos Personales, INAI) and the Ministry of Public Administration (Secretaría de la Función Pública, SFP) participate in ensuring the integrity of public procurement activities when applicable to the area of their expertise.

Other actors, such as the Central Purchasing Body of the Secretariat of Administration and the Procurement Committee are also responsible, to some extent, for ensuring the integrity of the whole procurement process. The Procurement Committee, for instance, evaluates proposals submitted by bidders in public tenders. These tenders can be requested by the 21 ministries and parastatal entities that have arrangements with the central public administration. The Central Purchasing Unit verifies whether exceptions to competitive procedures in public tendering proceed in accordance with the rules set out in Article 42 of the LAACS. It also verifies the integrity of the whole tendering process. In practice, however, as observed during the OECD fact-finding mission, this evaluation consists more of verifying if documents have been integrated into procurement files.

The recent amendments made to the Constitution of Nuevo León (Constitución Política del Estado de Nuevo León) have created two new institutions to implement Nuevo León’s integrity framework to investigate and sanction breaches of integrity rules. These new institutions are the Specialised Division of Administrative Responsibility within the Tribunal of Administrative Justice (División Especializada en Materia de Responsabilidad Administrativa del Tribunal de Justicia Administrativa) and the Office of the Specialised Anti-Corruption Prosecutor (Fiscalía Especializada en Combate a la Corrupción). The specialised division will impose sanctions on public officials in cases of serious offences or corrupt conduct, and will sanction citizens if they participate in these corrupt acts. Pecuniary sanctions for damages and prejudices caused to public funds or assets of the state of Nuevo León, its municipalities or any state or municipal entity will also be imposed by this specialised division.

While corrupt acts and cases involving high-level administrative responsibilities are investigated by the Superior Audit Office of the State of Nuevo León and the internal control units, rulings will be made by the Administrative Tribunal. Other types of contraventions and administrative sanctions will be examined and solved only by the internal control units.

While it is a good thing that Nuevo León is creating new institutions aimed at halting corruption, the state needs to give these institutions the authority to do their jobs. The specialised division will intervene alongside the internal control units in matters where other authorities have imposed administrative sanctions. However, the specialised division cannot begin operations until it receives the appropriate disciplinary powers. In addition, fitting operational procedures and mechanisms still need to be approved (such as reforms to secondary legislation following the creation of the State Anti-Corruption System). In the case of the Office of the Specialised Anti-Corruption Prosecutor, Nuevo León’s constitutional reform mandates that it will be vested with financial, technical, budgetary, management and decision-making autonomy to investigate and prosecute corrupt acts. That said, the appointment of the head of this office requires the full implementation of the local anti-corruption system.

Nuevo León needs to effectively co-ordinate this new institutional arrangement with aspects of the current public procurement governance structure so as to ensure integrity in the whole procurement process. In the context of these constitutional amendments, Nuevo León will need to ensure coherence of all new public actors in charge of preventive, investigatory and punitive functions. The state must enforce consistency in order to strengthen the integrity system and make sure that the allocation of financial resources through public procurement is not distorted. The integrity framework that results from the Local Anti-Corruption Law and other secondary laws may also change this current framework.

6.2.1. Nuevo León should consider developing a code of ethics for public procurement officials to guide their conduct during the whole public procurement cycle, as well as providing practical guidelines to public procurement officials and suppliers

The current integrity framework in Nuevo León is composed of a series of laws, regulations and policies. The framework sets the standards of conduct that public officials should follow as they do their jobs and interact with citizens and the private sector (see Table ‎6.4).

Table ‎6.4. Integrity framework setting the standard of conduct for public officials in the public administration of Nuevo León

Legal provisions

Descriptions

Constitution of Nuevo León which most recent version is dated as of 14 April 2017.

Article 105 and ss sets out that the responsibility regime of public officials will be established by the Law of responsibilities and mentions who are covered under the scope of these articles in case of misconduct. These provisions lay out the pillars of the integrity system, establish the administrative disciplinary framework and create the institutional arrangement of the new local anti-corruption system.

State Law on Anti-Corruption (Ley del Sistema Local de Anticorrupción de Nuevo León, LACS of Nuevo León) enacted the 6 July 2017

In addition to create the local anti-corruption system, this law sets out in its article 5 the values of the public service and provides that the public sector entities are obliged to create and maintain structural and normative conditions allowing the appropriate management of the whole government and the ethical and accountable behaviour of all public servants.

General Law on Administrative Responsibilities (Ley General de Responsabilidades Administrativas, LGRA) which will enter into force following the precisions of the transition provisions

Articles 26 to 42 set out among other things the obligation to submit a declaration of conflict of interest as well as fiscal and assets declarations that will be contained in the National Digital Platform. Articles related to other aspects than the conflict of interest declaration will not apply in Nuevo León as they are regulated in the LRSPEMNL. This law contains a definition of what constitutes a conflict of interest situation. The third transitory provision mentions that this law will guide public official’s behaviour working at the federal level and in the states until the Co-ordinator Committee of the National Anti-Corruption System (Sistema Nacional Anticorrupción, NACS) issue the guidelines, criteria and other resolutions to implement the new anti-corruption system.

Law of Responsibilities of Public Servants at state and municipal level of the State of Nuevo León (Ley de Responsabilidades del Estado y Municipios de Nuevo León, LRSPEMNL) enacted the 29 January 1997 and amended in various occasions.

Articles 7, 11 and 50 and Fraction XXIII of this law set out the minimum rules to prevent corruption and to sanction administrative faults committed by public officials. Article 50 sets out prohibited conflict of interest situations in the context of the exercise of public servants duties, such as prohibited activities, recusal, gifts and the misuse of insider information, undue influence and prohibition of use of public funds for political purposes, as well as applicable sanctions in cases of integrity breaches.. It does not contain, however, clear rules on what constitutes a conflict of interest situation. It prohibits public procurement officials from contracting with any person that has been prohibited from holding a job, position or commission in the public administration (Article 50, Fraction XI); intervening in any situation that may create any personal or business-related conflict of interest (Article 50, Fraction XIII); refraining from acting or failing to act as to not comply with any of the obligations related to the public service (Article 50, Fraction XXII); contracting with any person who performs a public function, or with any company in which such a person participates (Article 50, fraction XXIII); using public funds for political purposes (Article 50, Fraction XXXIV); inhibiting whistle-blowing or the filing of a complaint (Article 50, Fraction XXVI); and contracting without obtaining the documentation required to prove banking, accounting and financial resources of providers (Article 50, Fraction XXVII). Article 51 and ss set out the disciplinary sanction regime. Other situations that could lead to an integrity breach are regulated in Articles 112 -124 and 131-135, and contain rules on disclosure of assets, gifts disclosure and subsequent forfeiture to the internal control units.

Organic Law of the Public Administration of the State of Nuevo León (Ley orgánica de la administración del Estado de Nuevo León) which most recent version dated as of 8 April 2016

Article 33 fraction XVIII describes one of the functions of the Office of the Comptroller and Governmental Transparency and sets out the principles that should guide officials when delivering service to the whole community.

Code of Ethics (Código de ética) enacted in accordance with article 140 of the LRSPMNL in August 2016.

This code contains three articles. Article 1 of the code refers to seven principles and integrity rules that should guide their conduct. It also sets out that its dissemination will be responsibility of the Office of the Comptroller. These ethics standards are the following: Say no to corruption; service, respect and empathy; austerity and sustainability; innovation and efficiency; inclusion, and transparency.

Law to promote report of corrupt acts of public officials (Ley para incentivar la denuncia de actos de corrupción de servidores públicos), enacted 30 June 2013

Article 2 defines what constitutes a corrupt act and refers to contraventions of Article 50 of the LRPSMNL) with the purpose of obtaining an undue advantage for the public official and/or a third party. It also defines who is considered a public servant for the purpose of its application. Article 9 imposes the obligation to report an act of corruption to the superior or to the Office of the Comptroller and provides that failure to comply with this obligation constitutes an administrative fault. It also contains a series of protection measures that could be implemented to protect the public servant or the citizen who reports misconducts or corrupt acts

As detailed in Table ‎6.4, this framework also includes the Ethics Code for Public Officials of the Public Administration (Código de Ética de Servidores Públicos de la Administración Pública). The code of ethics was adopted in August 2016, and was developed in a consultative way, as per Article 140 of the LRSPEMNL and the LAACS. It sets out seven ethics standards public officials should comply with in their daily work. Principle one (say no to corruption), principle three (austerity and sustainability) and principle four (innovation and efficiency) refer to behaviours that public officials should exhibit when managing funds or state assets. It does not contain rules on how to solve ethical dilemmas and conflicts of interest that may arise in their daily work. Its scope covers all individuals do work and are paid with public resources, as long as they are engaged in the exercise of public service activities. As such, the ethics code does not include suppliers and consultants whose behaviour could also impact public sector integrity.

This integrity framework provides sanctions that may consist of warnings, suspensions, removals or disqualifications. Sanctions are detailed in the LRSPEMNL. Pecuniary sanctions can also be imposed based on the economic gains and prejudices caused. Administrative responsibility arising from corrupt practices is also regulated under these rules, and any breaches resulting from illicit enrichment are to be sanctioned under the Criminal Code of Nuevo León. These sanctions can range from three months to fourteen years of imprisonment, as well as fines. According to constitutional reforms, superiors are considered liable in cases of serious administrative contraventions or corrupt acts where nepotism or collusion also exist. Further amendments are required to establish which corrupt acts should be investigated and sanctioned by the new institutional framework. Further amendments are also required to determine the actions and omissions that constitute serious and non-serious offences, as well as the mechanism to challenge the decision classifying an action or omission as a non-serious offence.

According to the Constitution of Nuevo León, state and municipal entities should have internal control or monitoring units. These units should operate with a broad mandate consisting of preventing, redressing and investigating facts, actions and omissions that could be considered corrupt – or upon which an administrative sanction could be imposed. However, most parastatal agencies in Nuevo León still lack internal control units. In addition, solid coordination mechanisms between ministries, agencies and the state comptroller to aid in the control and monitoring tasks by allowing for better communication channels between government entities and agencies have not been established.

As for mechanisms that enhance integrity by ensuring appropriate management of conflict of interest issues, the constitutional reforms regarding the establishment of an anti-corruption system establish that public officials should submit two declarations in addition to the assets declaration already required under the LRSPEMNL. They are: the conflict of interest declaration and the fiscal declaration. Failure to submit the assets declaration may be sanctioned by an administrative pecuniary sanction (a fine). That said, the law does not make reference to sanctions resulting from a failure to submit the other two declarations. In addition to the rules mentioned above, specific provisions contained in public procurement laws complement the legal framework (Table ‎6.5). There are some overlaps between the legal framework and these provisions, which can create confusion for public officials. This overlap could be resolved through a complete integration of the national and state anti-corruption systems.

Table ‎6.5. Integrity provisions under the public procurement laws applied in Nuevo León

Legal provisions

Descriptions

Law on Procurement, Leases and Services of the Public Sector (Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público, LAASSP);

The LAAPS in its various provisions (Articles 24, 28, 31 (fraction XII) and 37 (factions I to X), sets out the rules that public officials and providers should follow when participating in public procurement process, such as recusing themselves from not being part of the public procurement procedure, submitting an integrity declaration under oath under which participants commit to conduct themselves in an honest manner during the whole procurement process, not contracting with a provider in case of conflict of interests arising from a variety of situations (incompatibility of certain activities; acting as an expert; when blacklisted, etc.), using insider information, etc. It also sets out the appropriate sanctions in its Articles 97 and 101.

Law on Public Works and Related Services (Ley de Obras Públicas y Servicios relacionados con las mismas, LOPSR)

According to the public works legislation a contract cannot be awarded if public official participating in the procedures is placed in a conflict of interest situation based on a family and business related interests. This law also provides that social witness should avoid participating in public works tenders.

Law on Public Works of the State and Municipalities of Nuevo León (Ley de Obras Públicas para el Estado y Municipios de Nuevo León, LOPNL)

LOPNL provides that public works should be executed based on transparency, economy, impartiality, efficiency, efficacy and honesty criteria as to have the best options in terms on price, quality, financing and opportunity (Article 6), establishes that participants in the tender process should submit an integrity declaration under oath mentioning that they are in compliance with the provisions of Article 44 requiring that contracts are not signed if a public officials who is part of the procurement process is a public official. It also prohibits ministries, entities and municipalities to accept proposals or contract with individuals or legal entities in which their public officials are shareholders, administrators, managers or legal representative or entrepreneurs, and those in which these officials intervening in anyway in the contract award have a private, family related or business interest (Article 44). The non-disclosure of a conflict of interest situation to a superior is considered a contravention of the LRSPEMNL and public officials can be sanctioned administratively.

Law on Procurement, Leases and Contracting Services of the State of Nuevo León (Ley de Adquisiciones, Arrendamientos y Contratación de Servicios del Estado De Nuevo León, LAACS);

Article 37 of this law prohibits CAs to receive proposals and award contracts if public officials, participating at any stage of the public procurement process, or their superiors, including the head of the contracting or administrative unit, have personal, family or business interests or a family member of the public official (up to the fourth degree, by affinity or in-law), a third party with whom they have professional, work or business relations; or partners or companies in which they were part during the two years prior to the date the procurement procedure could receive a potential benefit (Article 37 fraction I). Article 97 of this law provides that conflict of interest arising between a public procurement official and a contractor will be considered a serious offence. Moreover, article 101 fraction II of the law establishes that public officials who do maintain a conflict of interest with providers and do not recuse themselves from participating in the whole procurement process commit a contravention and are liable to sanctions imposed under the LRSPEMNL

As detailed in Table ‎6.5, the LAASSP refers to principles in Articles 24-26 that should guide decisions related to the use of federal funds for procurement processes (including procurements undergone by the state of Nuevo León using federal funds). In contrast, the state law of Nuevo León for procurement, leases and contracting services (LAACS) using state and municipal funds sets out only five ethical principles and excludes the requirement for decisions related to the planning and use of public funds to be taken in an impartial manner.

No specific code of conduct for public procurement officials is a cure-all. Even codes of conduct with specific restrictions and prohibitions cannot ensure with total certainty that officials fulfil their duties and that the government achieves its commitment to greater transparency, accountability and the highest standards of ethical conduct. However, there are some actions governments can take to make their codes of conduct more effective than others. Interviews with public officials in Nuevo León demonstrated that the current ethics code is perceived as a type of regulation. Indeed, officials said they viewed the ethics code as a formal declaration of ethical priorities and a duty-related document for public officials’ behaviour and performance. In spite of this, they did not systematically integrate the ethics code into their day-to-day work. Indeed, public procurement officials mentioned that their priority was to comply with the law, rather than systematically think about how to prevent, for instance, conflicts of interest from arising.

In light of the above, Nuevo León should adopt standards based on the code of ethics for public procurement officials. In particular, the state should establish specific restrictions and prohibitions to ensure that officials’ private interests are not improperly furthered. These standards of conducts will guide public procurement officials’ behaviour, which should be in line with the public purpose of their organisation.

Most common integrity issues involve conflict-of-interest situations. These situations are most often related to: personal, family or business interests and activities; gifts and hospitalities; disclosures of confidential information; and future employment. Because of this, Nuevo León must address these issues in addition to its other efforts (such as asset declaration requirements, whistle-blowing procedures and protection measures for whistle-blowers). A model Nuevo León could look to is the Protocol for Interactions Between Procurement Officials and Suppliers enacted in 2015 by the Federal Government of Mexico. Another model is the Code of Conduct for Procurement issued by the Government Canada. These protocols are described in Boxes 6.4 and 6.5.

Box ‎6.4. Mexican ethics code and rules of integrity – provisions related to public procurement

According to Mexico’s Ministry of the Interior (Secretaría de Gobernación, SEGOB), the ethics code and rules of integrity for public procurements include the following.

“Public contracts, licenses, permits, authorisations and concessions:

The public servant who participates in public contracting or in the granting and providing of extensions to licenses, permits, authorisations and concessions, on the grounds of their employment, position, commission or function or through subordinates, needs to behave with transparency, impartiality and legality, orients his or her decisions towards the needs and interests of the society, and guarantee the best conditions for the state.

The following behaviours violate this rule, among others:

A. Omit to declare, in accordance with the applicable provisions, the possible conflicts of interest as well as particular business and commercial links with persons or organisations registered in the Single Registry of Contractors for the Federal Public Administration.

B. Fail to apply the principle of equal competition that should prevail among participants in the public procurement processes.

C. Formulate requirements differently from those strictly necessary for the fulfilment of the public service, causing excessive and unnecessary expenses.

D. Establish conditions in the invitations or calls for tenders which confer advantages or provide a differential treatment to certain bidders.

E. Favour certain bidders by considering that they meet the requirements or rules foreseen in the invitations or calls for tender when they do not, simulating the fulfilment of them or contributing to their temporary fulfilment.

F. Help suppliers to fulfil the requirements foreseen in the requests for quotes.

G. Provide undue information about individuals involved in the public procurement processes.

H. Be partial in the selection, designation, contracting and, as the case may be, removal or termination of the contract, in the framework of public procurement processes.

I. Influence decisions of other public servants in order for one participant to benefit from the public procurement processes or from the granting of licenses, permits, authorizations and concessions.

J. Avoid imposing sanctions on bidders, suppliers and contractors who violate applicable legal provisions.

K. Sending e-mails to bidders, suppliers, contractors or concessionaires through personal e-mail accounts or accounts which are distinct from the institutional e-mail.

L. Meet with bidders, suppliers, contractors and concessionaires outside the official buildings, except for the proceedings related to on-site visits.

M. Request unsubstantiated requirements for the granting and providing of extensions to licenses, permits, authorizations and concessions.

N. Give inequitable or preferential treatment to any person or organisation in the framework of granting and extending licenses, permits, authorisations and concessions.

O. Receive or request any type of compensation, offering, treat or gift in the framework of granting and providing extensions to licenses, permits, authorizations and concessions.

P. Fail to observe the protocol of action in matters of public contracting and providing extensions to licenses, permits, authorisations, concessions and their extensions.

Q. To be a direct beneficiary or through relatives up to the fourth degree of government contracts related to the agency or entity that directs or to which are directed the services.”

Source: (Secretaría de Gobernación, 2015[14])

Box 6.5. Code of Conduct for Procurement in Canada

The Code of Conduct for Procurement in Canada provides all those involved in the public procurement process – public servants and vendors alike – with a clear statement of mutual expectations to ensure a common basic understanding.

The code reflects the policy of the Government of Canada, and is framed by the principles set out in the Financial Administration Act and the Federal Accountability Act. It consolidates the federal government’s measures on conflict of interest and anti-corruption, as well as other legislative and policy requirements relating specifically to procurement. This code is intended to summarize existing laws by providing a single point of reference to key responsibilities and obligations for both public servants and vendors. In addition, the code describes vendor complaints and procedural safeguards.

Source: (Public Works and Government Services Canada, 2016[15])

As set out in the OECD Recommendation on Public Procurement, integrity standards should go beyond minimum requirements. They should prioritise public interests and encourage high standards of conduct, good governance and adherence to public service values. In addition, integrity standards should foster an open culture that facilitates and incentivizes learning in the service of a cleaner public administration. Accordingly, the proposed code of conduct for public procurement officials should be concise, flexible and written in clear language. Such a code can effectively promote integrity and ensure that public procurement officials and their institutions are accountable in case of contraventions.

Ensuring integrity in the public sector requires more than a sound integrity framework; it requires that public sector actors actively behave in an ethical manner. Therefore, in addition to adopting a sound integrity framework, Nuevo León should work to create a common understanding among officials of ethical rules and a common dedication to thinking and acting with integrity during day-to-day activities. To achieve this objective, Nuevo León should disseminate ethical rules via different tools, such as an awareness campaign or trainings of procurement officials, clients and suppliers. Moreover, the state could consider developing a practical manual or guidelines detailing and providing examples of where ethical values and public-sector principles could be put in jeopardy – and the appropriate steps officials are expected to take in these situations. Australia could serve as a model for Mexico in this respect (see Box ‎6.6). The measures proposed above could serve as a reminder to public officials participating in the public procurement process of how to behave when confronted with different situations (e.g. receiving a gift or invitation).

Box ‎6.6. Ethics, probity and accountability in procurement in Queensland, Australia

The following excerpt from the Ethics and Probity and Accountability in Procurement manual describe how procurement officials in Australia should act in situations where they risk committing unethical behaviour. The example below details what officials should do when they receive an invitation to seminar from a supplier:

“Attendance by a procurement officer at a public seminar offered by a potential supplier is unlikely to create a conflict of interest. However, the officer must not discuss confidential matters relating to the tender process, and must not use the tender process to obtain a discount on any registration fee. Officers directly involved in the tender process should inform the tender management team as well as their own manager, and gain approval for their attendance at the seminar, which should be fully documented.”

Source: (Commonwealth Government, 2006[25])

Adopting an awareness campaign, training and practical guidelines in addition to other initiatives for providing public procurement officials with the appropriate skills could help ensure that Nuevo León’s integrity strategy is perceived by public officials as a mechanism for enhancing the reputation of the public sector – rather than a burden and a sanctioning tool. To be successful, superiors and management should be engaged in disseminating these campaign and training instruments across all public sector entities, including the existing parastatals entities. Superiors and management should also motivate by example. They should show their personnel that they embrace ethics, values and integrity standards in their daily activities. Management should also encourage consultation in cases of doubt. This means that improper conduct will be monitored and sanctioned, as well as relevant data published, so that management can clearly demonstrate that ethics standards apply to everyone. As such, consequences will be applied to offenders, regardless of their positions or performance within the government. While sending a clear message of zero tolerance against corruption in public procurement activities is important, Nuevo León also needs to create an environment where public officials and their superiors are able to solve integrity issues and be accountable for them.

6.2.2. Adopting an effective and balanced approach to forming an integrated framework for integrity management

Nuevo León should consider adopting a clear definition of conflict of interest so as to effectively manage conflicts of interest in public procurement and ensure the use of public funds in an efficient manner

Ensuring that conflicts of interest are identified and managed adequately is among the first steps states must take towards safeguarding integrity and transparency in public sector activities. Conflicts of interest should be understood not as inherent acts of corruption, but as normal situations that have the potential to result in corruption if not properly prevented and managed. If conflicts of interest occur in the context of public procurement, they can have important implications. One of the most significant is that conflicts of interest can jeopardize certain fundamental principles of public procurement, like transparency, fair competition and equal treatment of bidders. Therefore, governments need to set out coherent and consistent frameworks with clear definitions of conflicts of interest to enable objective and effective identification and management of these situations. Governments also need to create efficient internal systems to prevent and effectively solve conflicts of interest that arise, while upholding the principles listed above.

In its Guidelines for Managing Conflict of Interest in the Public Service, the OECD provides a definition of conflict of interest. This definition makes a distinction between actual, apparent and potential conflict-of-interest situations. The OECD defines a conflict of interest as a conflict between the public duty and private interests of a public official, in which the public official has private-capacity interests that could improperly influence the performance of his or her official duties and responsibilities (OECD, 2005[16]). An actual conflict of interest is a direct conflict between a public official’s current functions and his or her private interests. An apparent conflict of interest occurs when a public official’s private interests could improperly influence the performance of his or her duties, but this is not, in fact, the case. A potential conflict of interest encompasses, on the other hand, a situation in which a public official has private interests which could create a conflict of interest if the official becomes involved in the future.

In public procurement, implementing appropriate measures to prevent apparent and potential conflicts of interest is as important as implementing measures to manage actual conflicts of interest. One of the reasons for this is the close nature of interactions between the public and private sector in public procurement. Indeed, officials in Nuevo León stated in interviews that sometimes, potential bidders are former public officials. In other cases, newly hired public officials have experience in the private sector (for instance in engineering and architecture). This practice, of working with actors who are closely linked to the sector in which procurement will occur, is known as a “revolving door”, and is not sanctioned by state law. “Revolving door” practices increase the risk of integrity breaches and opportunities for conflicts of interest. Therefore, a clear legal framework for all public officials, and especially for those involved in public procurement activities, is required to ensure that their decisions are not influenced by personal preferences, past experiences or pressure from family, friends or past and future associates. The state of Nuevo León has addressed conflicts of interest in Article 50, Fractions XIII and XIV of the LRSPMNL.

OECD countries have adopted different approaches to managing conflicts of interest based on factors like their political systems and cultures. That said, two major approaches can be identified: the descriptive and the prescriptive approach. The descriptive approach defines conflicts of interest in general terms, and issues specific rules and procedures to indicate what it is expected in these situations. The prescriptive approach defines a range of specific situations that are considered incompatible with public office or in conflict with the public interest and official duties. This approach is based on enforceable rules and standards of conduct set out in law and regulations, but is also based on fundamental public service principles (OECD, 2016[17]).

Conflict of interest rules in Nuevo León are embedded in different laws and regulations which vary in terms of scope and mechanisms (see Table ‎6.5). The LRSPEMNL contains rules on managing conflicts of interest, including in the context of public procurement and public works processes. For example, the LRSPEMNL states that public officials should disclose a conflict of interest in writing to their superior when it arises. It also states that officials should recuse themselves from being a part of any procedure or decision if they have a personal, family-related or business interest that could influence the procedure or decision.

This law sets out rules regarding gifts at the municipal level, and mechanisms to forfeit these gifts based on their nature. That said, information gathered during the OECD fact-finding mission to Nuevo León implied that these rules have not been implemented, as gifts are not systematically disclosed and forfeited in the state. Indeed, despite the rules, public officials in Nuevo León do not seem to understand that receipt of gifts of any nature has the potential to place them in a situation of conflict of interest. Officials mentioned during interviews that receiving gifts is considered normal. Sometimes, individuals offer gifts secretly and give them to public officials personally, rather than the official occupying a specific position within the public sector. That said, the public officials who receive gifts are sometimes later called upon to exercise a duty or function that could advance the giver’s private interests. While according to the law, there is an obligation to report and forfeit gifts, the registry to which the LRSPENNL refers has not been implemented. Currently, the government is encouraging the donation of gifts to public organisations, but only during Christmas, the period of the year when the number of gifts increases. The LRSPENNL also contains post-employment rules, but they are weak. These rules cannot effectively avoid undue influence and "capture" of decision-making processes.

Nuevo León has, adopted a prescriptive approach to addressing conflicts of interest. Nuevo León’s conflict of interest rules makes reference to: 1) situations affecting the legal capacity of the contractor or public officials entering into a contract; and 2) special relationships between parties interested in a selection process and public officials affecting equal treatment. It must be said, however, that none of the existing laws provide a definition of what constitutes a conflict of interest. In addition, these laws do not clearly refer to situations that could lead to a potential or apparent conflict of interest.

A basic definition of conflict of interest is crucial. Such a definition would help public officials to determine whether they can execute their duties and functions in situations where there appears to be a conflict of interest, but this is not or may not be the case. If Nuevo León adopts a definition of conflict of interest, it should label the situation above an “apparent conflict of interest” – which could be as serious as having an actual conflict. The reason for this is the potential for doubts to arise about the official’s integrity and the integrity of the official’s organisation (OECD, 2005[16]). Because potential or apparent conflicts of interest are not listed in Nuevo León’s regulations, detection and enforcement of these types of conflicts is difficult. Whichever approach Nuevo León adopts in its framework for the management of conflicts of interest, it is important that the state clearly defines conflict of interest in its legislative framework (and especially in its procurement legislation). The definitions Canada and New Zealand use could serve as models for Nuevo León (see Box ‎6.7).

Box ‎6.7. Definition of conflict of interest adopted by OECD member countries

Canada

Canada’s Conflict of Interest Act (S.C. 2006, co., sq.) states that “a public office holder is in a conflict of interest when he or she exercises an official power, duty or function that provides an opportunity to further his or her private interests or those of his or her relatives or friends or to improperly further another person’s private interests” (Article 4). Furthermore, in Article 5, the act also specifies the general duty expected of public servants. “Every public office holder shall arrange his or her private affairs in a manner that will prevent the public office holder from being in a conflict of interest.” While the Conflict of Interest Act is primarily aimed at elected and other senior officials, the Treasury Board Code of Values and Ethics applies this definition and similar responsibilities to every public servant in government.

New Zealand:

In New Zealand, the definition of conflict of interest is tailored to targeted groups, such as public servants, ministers or board members of crown companies. Nevertheless, these definitions contain common features. For example, they all cover actual and perceived conflicts of interest, as well as direct and indirect conflicts. In addition to the general definitions developed for the targeted groups outlined here, supplemental documents also list possible types of situations where conflicts of interest arise, together with concrete practical examples.

For public servants:

“Conflicts of interest are defined as, … any financial or other interest or undertaking that could directly or indirectly compromise the performance of their duties, or the standing of their department in its relationships with the public, clients, or ministers. This would include any situation where actions taken in an official capacity could be seen to influence or be influenced by an individual’s private interests (e.g. company directorships, shareholdings, offers of outside employment). […] A potential area of conflict exists for public servants who may have to deal directly with members of Parliament who have approached the department in a private capacity” (Code of Conduct).

For ministers: “Conflicts of interest can arise because of the influence and power they wield – both in the individual performance of their portfolio responsibilities and as members of Cabinet. Ministers must conduct themselves at all times in the knowledge that their role is a public one; appearances and propriety can be as important as actual conflict of interest in establishing what is acceptable behaviour. A conflict of interest may be pecuniary (that is, arising from the Minister’s direct financial interests) or non-pecuniary (concerning, for example, a member of the Minister’s family) that may be either direct or indirect” (Cabinet Manual).

For board members of crown companies, a conflict of interest is defined as a situation in which a board member is “party to, or will or may derive a material financial benefit from” a transaction involving his or her company (The Companies Act 1993, Part VIII, Sections 138 and 139).

Sources: (Treasury Board Code of Values and Ethics in Canada, 2006[18]) (OECD, 2004[19])

In addition, Nuevo León could also consider issuing guidelines to assist public officials to determine how to manage a conflict of interest properly when it arises. Canada uses guidelines that could serve as a model for the state (see Box ‎6.8). In addition, guidelines issued at the federal level in Mexico could be more strenuously applied in Nuevo León. These guidelines were released by the SFP. They are supposed to serve as a reference for all members of the civil service – including employees of federal, state and municipal governments. The guidelines are called Guide to identify and prevent behaviours that may constitute a conflict of interest for public servants (Guía para identificar y prevenir conductas que puedan constituir conflicto de interés de los servidores públicos) and the aim to identify and prevent conduct that could constitute a conflict of interest.

Box ‎6.8. Considerations to take into account to solve an apparent conflict of interest in Canada

The following is an excerpt from Values Alive: A Discussion Guide to the “Values and Ethics Code for the Public Sector that describes for public servants at all levels the values and ethical practices that guide direction, decision making and behaviour within the Government of Canada.

Integrity in action: An example of an ethical dilemma

Situation

Hélène is a public servant in an agency that provides counselling and federal government financial assistance to senior citizens. She has been in her position for many years, and along with having great expertise, Hélène loves her job. She takes pride in providing her clients the best service possible, and she is always careful to be impartial in her dealings. As a result, Hélène has developed a solid professional reputation and excellent relationships with her clients. Hélène was saddened to hear of the death of one of her clients, Mr. Beaulieu, but was very surprised several months later when she was informed that Mr. Beaulieu had left her his retired racehorse in his will. They had often discussed their mutual love of horses, but she had no idea that Mr. Beaulieu was going to do this, and she would have never asked him for anything. Not knowing what else to do, Hélène immediately reported the matter to her agency’s conflict of interest office to seek advice.

Possible steps for resolution

Seeking help from her organisation on this decision was certainly a helpful first step. The analysis to follow could include questions around the nature of the gift and whether it could be considered “minor”. Also, if Hélène accepted the gift, would it compromise her integrity or the integrity of her agency? Would it appear to do so? Any appropriate solution should take the answers to these questions into consideration.

Things to think about

This is an example of how sometimes, by doing nothing more than being excellent at their jobs, public servants find themselves in a conflict of interest. A conflict of interest does not imply that there was any wrongdoing, but simply that the situation presents competing interests, or in this case, the appearance of competing interests. Under the Public Sector Code, it is as important to avoid apparent conflicts of interest as it is to avoid real or potential conflicts of interest.

In the actual case upon which this scenario is based, the Federal Court of Appeal upheld the department’s instruction to the employee to return the legacy. It was not because the employee had committed misconduct, but rather, the acceptance of the legacy and the appearance of a conflict of interest could erode the public’s confidence and trust that the decisions made by public servants in such sensitive areas are based on the highest standards of impartiality and integrity.

Source: (Government of Canada,(n.d.)[20])

Nuevo León needs to provide its public officials with training on how to handle conflicts of interest. This training should be available to all public officials, but should focus on those working in public procurement. The training should create a common understanding of what constitutes a conflict of interest, and how this situation could arise. Officials should learn through this training that conflicts of interest can occur not only through relationships, but also if officials hold certain assets or certain positions, receive gifts, and more.

6.2.3. Maximising the use of the three declarations as prevention tools to ensure the integrity of the public procurement process

Nuevo León should consider using disclosure of assets and interests as a mechanism to prevent conflicts of interest and integrity breaches in the public procurement cycle

Disclosure of assets is a mechanism to preserve and enhance the integrity of the procurement process by making information about assets publically available in order to effectively manage conflicts of interest. These disclosures hold public officials more accountable for their actions. The public availability of this information, in particular, enables involved citizens to serve as a control mechanism. Nevertheless, disclosures of assets sometimes raise concern with regards to public officials' privacy. Therefore, it is important to strike the right balance. In some countries, the nature of the position the official holds and his or her seniority are taken into account. Moreover, if only seen as an administrative formality, this disclosure cannot be used as a mechanism to prevent and properly manage conflicts of interest.

OECD countries have applied a tailored approach to disclosing public procurement officials’ private interests and making them publicly available (see Figure ‎6.6). (OECD, 2017[13]).

Figure ‎6.6. Level of disclosure and public availability of private interests of public procurement officials in comparison to civil servants
picture

Note: Private interests include assets, liabilities, income sources, income amount, paid outside positions, non-paid outside positions, gifts and previous employments.

Source: (OECD, 2014[21])

Public officials in Nuevo León working in different government and parastatal organisations should make a declaration of their assets, per Article 50, Fraction XVIII; Article 112, Article 116 and Article 121, Fractions I, II and III of the LRSPEMNL. As such, the following officials working within the public sector administration should disclose their assets: high-ranked officials (from governor, ministers, heads of agencies, deputy ministries, presidents of corporation, directors, deputy directors, heads of administrative units, co-ordinators, and chiefs of departments). Per the law, these officials and officials who handle, collect, manage and safeguard funds and assets should disclose their assets at three different times.

First, public officials should submit a declaration of assets 30 working days after occupying their position of office. Second, on an annual basis, these officials should declare their assets in October (as long as the official started his or her position one year before the date of this declaration and continued to work in the same office the following year and subsequent ones). Third, officials should submit a declaration of assets 15 working days after they leave their positions. The annual declaration should also contain a disclosure of authorised gifts received.

Compliance with these obligations is the responsibility of the Legal Affairs Directorate of the Office of the Comptroller for Government Transparency. This directorate publishes the list of those who have complied with this obligation in the Official Journal of the State (Periódico Oficial del Estado). It should be mentioned that one of the main challenges this directorate is currently facing is that it does not have enough personnel to guarantee effective compliance with this obligation. Because of this, the directorate does not know the total number of public officials who should submit this declaration.

The content of the asset declaration includes references to information on family members, but does not make reference to disclosures of business associates, former employers, acquaintances or friends. This is a problem, as disclosures of these contacts could also be useful to implementing the appropriate measures to prevent conflicts of interest from arising. Furthermore, such disclosures could help effectively manage conflicts of interest that arise in the day-to-day activities of public servants working in sensitive areas, such as procurement. This information would be part of the declaration of interests that will become mandatory once Nuevo León’s General Law of Administrative Responsibilities is implemented as a part of its local anti-corruption system.

The asset declaration is submitted through a digital platform named Declaranet. The information disclosed by public officials is contained in a registry that is not available to the public unless the public official has given his or her authorisation. This information can also be released to the public per a judiciary resolution. Currently, Nuevo León does not publicly disclose these forms, and it is not possible to consult the contents of these disclosures. Therefore their main purpose, which is to properly manage conflicts of interests and ensure accountability of public officials, cannot be accomplished.

While there is no certainty of the total number of public officials in compliance with this disclosure obligation, the main challenge the legal affairs directorate faces is to ensure the compliance of those public officials working in the procurement sector (and in sensitive areas like the public safety sector, which procures goods and services directly). Because of this, Nuevo León should view reforms to its disclosure rules as an opportunity. The state could consider adopting a strategy to ensure that the 140 public officials who compose the public procurement workforce comply with disclosure obligations. To achieve this objective, the legal affairs directorate could sign a memorandum of understanding with the Secretariat of Administration in order to obtain the names and positions of those public officials working in the public procurement area who have not yet submit their declarations. By doing this, the legal affairs directorate could ensure their compliance with their obligations, and accountability for their actions when participating in public procurement activities.

Nuevo León needs to continue working to ensure that public officials understand that assets and interest declarations are tools that, used correctly, can prevent and manage conflicts of interest that arise. The prevention function of these tools needs to be reinforced by additional mechanisms. One technique could be raising awareness among public servants so that they understand 1) what constitutes a conflict of interest; and 2) how to manage conflicts of interest when they arise.

6.2.4. Enhancing the whistle-blower programme to strengthen Nuevo León’s integrity system and get value for money from procurement activities

Nuevo León should improve its internal reporting and whistle-blowing system in order to safeguard the public interest and ensure efficiency in public procurement activities by reinforcing the mechanisms that protect anonymity and prevent reprisals

Protecting whistle-blowers is an effective way to help governments detect misuse of public funds, and discover waste, fraud and other forms of corruption. Protecting whistle-blowers is also key to fostering integrity in the public sector and promoting a culture of public accountability and integrity in government activities like public procurement. Whistle-blower protections enable the determent and detection of wrongdoing, as public officials have access to up-to-date information concerning practices in their workplaces, and are usually the first to recognise wrongdoings (UNODC, 2015[22]). In addition, these protections can also support an open organisational culture. In such a culture, employees are aware of how to report corruption, and they have confidence that when they report problems, they will be afforded effective protection against retaliation.

To facilitate whistle-blowing in the public sector, some countries have adopted incentive measures, including monetary rewards or compensation, and follow-up mechanisms. While some countries also have penalties for retaliation against whistle-blowers, there are others that provide legal protection to whistle-blowers through provisions found in one or more laws. Laws providing these protections include anti-corruption, competition, public service and employment laws, as well as criminal codes. Regardless of whether a state regulates these protections via one or more laws, an effective whistle-blower protection system depends on clear and effective communication. Indeed, informing both employers and employees about their rights, responsibilities and the resources available to them is crucial to creating an environment of trust, professionalism and collegiality that supports the principles of integrity in both the workplace and society.

Unlike the legislative framework at the federal level (where whistle-blower protections are set out in several laws), Nuevo León has a distinct whistle-blower protection law. This law, the Law to Promote Report of Corrupt Conducts of Public Officials of Nuevo León (Ley para Incentivar la Denuncia de Actos de Corrupción de Servidores Públicos del Estado de Nuevo León, LIDACSP), was enacted 29 June 2013. According to this law and the Agreement under which the Anti-Corruption Unit of the Executive Power was created (Acuerdo por el que se crea la Unidad Anticorrupción del Poder Ejecutivo del Estado de Nuevo León, AUAPENL), the Anti-Corruption Unit that depends on the Office of the Comptroller for Government Transparency is responsible for the law’s implementation. This means that the Anti-Corruption Unit determines the terms and references of the protection programme, receiving and following up on the disclosure of corrupt conduct. It also grants economic rewards if conditions are met and received, and handles complaints of reprisals. Finally, the unit determines if reports are based on accurate, true and legally obtained information.

Nuevo León’s Strategic Plan 2015-2030 mandates that all ministries and parastatal entities establish appropriate procedures to raise awareness among public officials and citizens about the mechanisms contained in this law. However, interviews with public officials showed that there are currently no internal processes within institutions to promote disclosures. Interviews also revealed that the state does not conduct awareness-raising campaigns (such as trainings, newsletters or information sessions) regarding the existing reporting channels and procedures for disclosures. Nuevo León could, therefore, consider using internal processes and the other methods listed above to raise awareness among public officials, potential providers and citizens. Finally, the state could make good use of electronic platforms and websites to promote disclosures.

The LIDACSP contains clear definitions. It streamlines and sets out procedures and mechanisms to: 1) facilitate and promote the reporting of corrupt conduct by public officials from the central and parastatal public administration of the state of Nuevo León (which can be investigated and sanctioned administratively or criminally); and 2) protect public officials or persons who witness or report this misconduct – as well as any person related to them – from retaliation and any other intimidation. As delineated by the LIDACSP, the Protection Programme and other mechanisms and exceptional measures ensure the personal integrity and anonymity of those who report misconduct. These mechanisms also protect wrongly accused individuals from administrative and criminal sanctions in cases of false and vexatious testimonies. This law imposes on managers of whistle-blowers to provide a report on the alleged reprisal actions within a deadline of 5 days after which the alleged facts will be presumed true. However, the law does not contain specific provisions referring to corrupt behaviours related to public procurement processes.

Corruption as an act is defined in a very broad manner under this law. The definition includes actions or omissions contravening Article 50 of the LRSPEMNL and giving a personal, unfair advantage to a public official or a third party. It also includes conduct that promises to provide these unfair advantages. Thus, the definition covers not only fraud, bribery or any other corruption acts, but also breaches of the ethics framework and conflict of interest rules. Technically, the law also opens the door to providing a protective mechanism to legal persons who report a corrupt act. The reason for this is that the law mentions that “any person” can be subject to the provisions. This statement refers to then, natural or legal persons.

The scope of the law covers all conduct of those who carry out functions in the public administration of Nuevo León, including those from municipalities and trusts established by the state. Moreover, per this law, through the legislative and judiciary, the autonomous bodies and municipalities can also determine that their public officials be subject to this law. Non-compliance with the provisions of the law is sanctioned under the LRSPEMNL.

The law sets out three different channels to ensure effective reporting of misconduct and corrupt acts by public officials. Reports and complaints can be made anonymously or officially through Corruptel, a telephone line (070), and Corrupnet, a website to which anyone can log on to and report misconduct by filling out a form. Reports and complaints can also be made in person. As mentioned during OECD interviews with public officials, all of these three channels generate a tracking number per complaint. This allows whistle-blowers to follow up on their reports in person or by phone. This tracking number also serves to protect their identities, and to ensure anonymity.

One of the major challenges Nuevo León is currently facing as it tries to guarantee anonymity and protection of whistle-blower information is that the Corruptel service is not under the jurisdiction of the Anti-Corruption Unit. In addition, while phone operators are trained, they do not sign a confidentiality agreement. Therefore, Nuevo León should consider reorganising the service. The state could assign some personnel to the Anti-Corruption Unit who will be exclusively dedicated to receiving and acting on these kinds of calls.

In addition to the three channels mentioned above, suppliers can also submit complaints using a link on the public procurement for public works portal. Unfortunately, interviews conducted during the OECD fact-finding mission revealed that the link does not seem to have been well disseminated among public officials and bidders.

When reports of misconduct are submitted directly to the Anti-Corruption Unit, whistle-blowers or witnesses can still refuse to reveal their identities. In this case, the Anti-Corruption Unit will assess the information it receives and determine the appropriate actions for the reported case. Misconduct or corrupt acts can also be reported to the Anti-Corruption Unit by internal control units in the context of verifications. Corruption can also be reported by the organisation in which it has taken place, as long as the report is submitted directly to the superior of a public official. In this case, if the whistle-blower is a public official, he or she can report any wrongdoing or misbehaviour to his or her superior without fear of retaliation. The reason for this is that the law imposes criminal and administrative sanctions on the superior if he or she retaliates. If the whistle-blower is a citizen, he or she will receive legal assistance to protect his or her rights. In addition, precautionary measures can be adopted to protect the whistle-blower further.

Public officials, citizens and private firms can also report misconduct directly to the Public Prosecutor, who will transfer the case to the Anti-Corruption Unit for its determination. The Public Prosecutor can also apply, if necessary, administrative sanctions, per the LRSPEMNL. According to information obtained in interviews, it appears that only two hundred misconduct reports were submitted to the Public Prosecutor and then redirected to the Anti-Corruption Unit.

The personal information of whistle-blowers is considered confidential per the Transparency and Access to Public Information Law of the State of Nuevo León (Ley de Transparencia y Acceso a la Información Pública del Estado de Nuevo León, CTAINL). Personal information cannot be disclosed in any subsequent administrative or judicial procedure unless a legal provision expressly mentions it, or an order to unseal this information is issued by the concerned judicial authority. Despite these safeguards, very few whistle-blower complaints have been received by the state – compared to the high level of perceived corruption in Nuevo León. Indeed, as detailed in Table ‎6.6, the Anti-Corruption Unit received a total of 2 759 complaints related to corruptions acts between October 2011 to June 2017.

Table ‎6.6. Volume of complaints received annually since 2011

Year

Complaints received

Result in administrative sanctions

Result in criminal complaint

2011

649

0

0

2012

678

38

18

2013

373

64

3

2014

361

42

4

2015

269

23

13

2016

342

44

83

2017

87

0

15

Source: Information provided by the Anti-corruption Unit, 6 June 2017.

According to the Anti-Corruption Unit, the volume of complaints related to public procurement activities represents only 5% of the complaints received that then result in administrative sanctions or criminal procedures. This total is very low compared to the volume of complaints received on a yearly basis that result in an administrative sanction or a criminal procedure.

During interviews, former providers and potential bidders mentioned that they felt that there were two reasons why public procurement complaints did not result in sanctions. The first was that most shareholders have a lack of knowledge of the existing procedures to report misconduct. The second reason was that providers and bidders felt there were potential costs to reporting irregularities. Providers mentioned that they felt there was a high risk of not being invited to participate in a procurement process again if they reported corruption. Given these issues, Nuevo León should establish effective mechanisms to reiterate and assure providers that their anonymity will be protected if they decide to report any irregularities during the procurement process. Indeed, whistle-blowers need to be informed that the law provides some mechanisms to guarantee them effective protection in terms of their identities and other factors. Whistle-blowers need to know that the Anti-Corruption Unit holds a registry of those who are authorised to consult the file containing all information related to reported misconduct. They also need to know that, as a current practise, only few employees of the Anti-Corruption Unit have access to their information. Finally, if anyone contravenes the procedures in place to protect whistle-blowers, those individuals could be considered administratively, civilly and criminally liable.

The Protection Programme of whistle-blowers and witnesses of corrupt acts operates in cases of administrative misconduct. The programme works to avoid reprisal actions and to protect whistle-blower and witness identities, assets and labour rights. It also works to protect the personal integrity of whistle-blowers, as well as those of their spouses, common law ascendants or descendants until the first degree, relatives. Whistle-blowers receive this protection for a minimum of three months and it can be challenged through an administrative and contentious trial. The protection can also be renewed or modified after a review of the facts of the case. In addition, it is subject to compliance oversight, with specific requirements. If no longer required, a decision for removing this protective measure must be issued. The law provides administrative, civil and criminal sanctions in cases of breaches of the obligations imposed in relation to protective measures. However, the law also provides that these measures should be determined by both the Anti-Corruption Unit and the applicable heads of ministries or bodies within the government. Therefore, there is a high risk of anonymity being breached. This risk in turn affects future reports.

Finally, the law states that whistle-blowers may receive economic compensation, provided they comply with a few requisites. First, they must provide truthful, sufficient and relevant information that proves corrupt misconduct was committed by a public official. Second, whistle-blowers must disclose their identities if they are contacted by the authorities investigating the accusations. The monetary compensation ranges from MEX 5 000 to MEX 20 000, and is subject to budgetary availability. It is also subject to the terms and conditions of the agreement issued by the comptroller, which are published in the Official State Journal. As structured, the monetary compensation is not an effective tool to protect integrity, as the amount does not guarantee financial support for whistle-blowers. For instance, these funds may not be sufficient to cover the legal expenses a whistle-blower could incur, and the funds are subject to a waiver of the whistle-blower’s anonymity right. Moreover, Nuevo León’s whistle-blower protection mechanisms require that no breaches of the measures protecting whistle-blower identities occur. This means that the personnel overseeing the process must be well-trained. In addition, strong mechanisms must be in place to control any leak of information.

6.2.5. Ensuring integrity of public procurement officials and of the whole public procurement process through awareness-raising activities and trainings

Nuevo León should make efforts to provide trainings specifically on public procurement integrity in order to enhance the integrity of the whole public procurement process and the workforce

Ethical training provides practical guidance on ethical behaviour in situations where official rules contradict practises or do not provide clear answers on how to behave in sensitive situations. Ethical training is especially important in contexts with high levels of corruption, where many ill-defined situations have not yet been addressed by formal rules. While lectures appear appropriate for training on integrity rules, interactive and tailor-made practical methods may be more useful for trainings on values and ethical conduct in risk situations. Public procurement officials can also receive specialised training in order to make them accountable for their behaviour.

Public procurement is recognised as an important government activity in Nuevo León. That said, in interviews with the OECD, public officials in the state mentioned that the state’s procurement workforce is composed of a very low number of public officials with a deep knowledge of public procurement methods. Furthermore, many public procurement officials need to learn more or receive updated training on public procurement procedures. In the case of newly recruited personnel, these officials need enhanced training because they have very little experience in the field. Many also do not have in-depth knowledge of how government institutions and regulations work.

Nuevo León has developed a training programme called the Culture of Legality and the Fight against Corruption. The programme is mandatory for all public officials, and is offered on an annual basis. This programme covers the following topics: rule of law, a culture of legality, introduction to the National Anti-Corruption System (Sistema Nacional Anticorrupción, SNA), the legal framework, principles and the structural framework of the SNA, sanctions for serious offenses and administrative faults, procedural processes, the national digital platform and system of assets evolution, Section 50 of the LRSPEMNL, new powers of the Superior Audit Office of the State of Nuevo León, the LIDACSP, and the ethics code.

The heads of Nuevo León’s public-sector entities designate which public officials attend this training. In order to attend, officials need to: 1) pass examinations; 2) develop projects identifying corruption risk areas, transparency issues and more; and 3) provide an action plan based on quantitative and qualitative analyses that identify responsible persons, deadlines, expected results and recommendations. Assistance to all training classes is monitored, and memorandums are sent to all heads of public entities confirming the participation of public officials. The reason for this is that public entities have ethics training objectives, and need to provide a statistical report on the progress they have made towards their objectives. When entities reach 100% of their training objectives, certificates attesting to the participation of their public officials are issued. Subsequently, these officials are certified as Agents of Change (Agentes de Cambio).

Currently, Nuevo León disseminates integrity rules among public officials working in various public entities. These entities include the Office of the Comptroller General, where public officials certified as Agents of Change are training. They also include the Directorate of Control and Audits of the Parastatal Sector (Dirección de Control y Auditoria del Sector Paraestatal), and the Directorate of Internal and Monitoring Control Bodies (Dirección de Órganos de Control y Vigilancia). However, these training sessions do not focus on how to solve ethical dilemmas or properly manage conflicts of interest in daily work, or, more precisely, in the context of public procurement activities. Nuevo León could consider looking at trainings in France and Germany, if it decides to update its integrity trainings. In these countries, the objectives of trainings are to raise awareness, to develop knowledge and to increase the commitment of public officials to integrity. In so doing, both France and Germany aim to foster a culture of integrity in public organisations (see Box ‎6.9).

Box ‎6.9. Specialised training for public procurement in France

The Central Service of Corruption Prevention, an inter-ministerial body attached to the French Ministry of Justice, has developed training materials for public procurement to help officials identify irregularities and corruption in procurement. Below is a case study from these training materials that illustrates the challenges faced by various actors at different steps of the procedure. The example also highlights the difficulty of gathering evidence on irregularities and corruption.

Issue at stake

Following an open invitation to bid, an unsuccessful bidder complains to the mayor of a commune accusing the bidding panel of irregularities because his bid was lower than that submitted by the winning bidder. How should the mayor deal with the problem?

Stage one: Checking compliance with public procurement procedures

The firm making the complaint is well known and is not considered “litigious”. The mayor therefore gives the claim his attention, and requests that the internal audit service check the conditions of the award of contract. In particular, the mayor asks that the audit service check whether the procedure complied with the regulations, as the lowest bidder is not necessarily the best bidder. The mayor also asks the internal audit service to make sure that tender notices were published in the official journal. The mayor learns from the report prepared by the bidding committee that although the procedure followed regulations, the bid by the firm in question had been revised upwards by the technical services responsible for comparing the offers. Apparently, the firm lodging the complaint had omitted certain cost headings which were added on to its initial bid.

Stage two: Replying to the losing bidder

The mayor lets the losing bidder know exactly why its bid was unsuccessful. However, by return post, he receives a letter pointing out that no one had informed the company of the change made to its bid. In fact, the change to the bid was unjustified, given that the expenditure that had purportedly been omitted had been included in the bid under another heading.

Stage three: Suspicions

The internal audit service confirms the unsuccessful bidder’s claim and points out that nothing in the report helps to establish any grounds for the change made by the technical service. It also points out that it would be difficult for an official with any experience, however little, not to see that the expenses had been accounted for under another heading. The mayor now requests that the audit service find out whether the technical services were in the habit of making such changes, whether they have already processed bids from the winning bidder and if contracts have been awarded frequently to the winning bidder in this case. He also requests that the audit service check the background of the technical service officials involved in the case. Do they have experience? Have they been trained? Do they have links with the successful contractor? Could they have had links with the contractor in their previous posts? What do their partners and children do? Examination of the personnel files of the officials, and the shares of the company which won the contract fail to yield anything conclusive. The only links between the officials or their families and the successful bidder are indirect.

Stage four: Handing the case over to authorities of the Ministry of Justice

Having suspicions, but no proof, the mayor hands over information so that investigations can begin. The investigators now have to find proof that a criminal offence (favouritism, corruption, undue advantage, etc.) has been committed. These investigators will exercise their powers to examine bank accounts, conduct hearings and surveillance, etc. The case has now moved out of the domain of public procurement regulations and into the domain of criminal proceedings.

Conclusion

Unable to gather any evidence, and with no authority to conduct an in-depth investigation or question the parties concerned, the mayor makes the only decision that is within his power – he decides to reorganise internally and change the duties of the two members of staff who are involved in the case. However, he must proceed cautiously when giving the reasons for his decision so as to avoid exposing innocent people to public condemnation or himself to accusations of defamation while the criminal investigation is in progress.

The mayor also decides that, going forward, the reports made to the bidding committee by technical services should give fuller explanations of calculations and any changes technical services make to the bids. The mayor also mandates that technical services inform bidders systematically of any changes.

Source: (OECD, 2007[6])

As confirmed during interviews with public officials in Nuevo León, there is no specialised training for public procurement officials in the state. This is not the case in Canada, where employees who work in public procurement or material management can obtain a professional designation through a government-wide certification programme (see Box ‎6.10). Nuevo León should consider establishing a professional training programme for public procurement officials. This programme should be part of a broader effort to recognise public procurement as a strategic profession, rather than an administrative one. This is vital, as public procurement can play a key role in preventing mismanagement of resources, waste of public funds and potential corruption (as detailed in Chapter 4).

Box ‎6.10. Certification programme for federal government procurement and managerial communities in Canada

In today's rapidly changing environment, the Government of Canada’s Procurement and Materiel Management Communities has evolved. Officials working for the organisation need to possess specific knowledge and skills that align with the office’s strategic advisory role. In an environment where accountability is foremost, it is essential that practitioners demonstrate that they possess the advanced skills and knowledge required to function effectively and efficiently.

The Procurement Materiel Management and Real Property (PMMRP) Communities Management Office (CMO) provides strategic direction and central leadership for the collaborative development and implementation of strategies, programmes and initiatives to support capacity building, community development and the professional recognition of the federal government’s Procurement, Materiel Management and Real Property Communities.

One of the most notable achievements to date is the national and international recognition of the federal government’s first ever Certification Programme for Procurement and Materiel Management specialists. Through this programme, practitioners in procurement and materiel management can acquire a professional designation through their own certification programme.

Certification provides professional recognition for the community, and offers a professional designation to formally acknowledge a practitioner's level of achievement. A procurement specialist can acquire certification as a Certified Federal Specialist in Procurement (CFSP), Level I and II. Those in materiel management can acquire certification as a Certified Federal Specialists in Materiel Management (CFSMM), Level I. Both designations are based on the Federal Government Procurement and Materiel Management Communities Competency Suite. A competency describes an employee’s proficiency in a particular job function in terms of knowledge, skills and abilities. Each competency has a definition, a proficiency level and behavioural indicator statements.

Level II (Procurement only) requirements are similar to those of Level I in terms of experience and training. For the knowledge requirement, candidates must pass a case study exam.

Source: (Public Service and Procurement Canada,(n.d.)[23])

In order to build a professional team of public procurement officials, Nuevo León could use the information contained in the Registry of Public Officials who Intervene in Contracts to be Executed with Federal Funds (Registro de Servidores Públicos que Intervienen en Procedimientos de Contrataciones Públicas, Licencias y Permisos con Recursos Federales, RUSPEF). This registry currently administered by the Office of the Comptroller, could be used by the state for the purposes of identifying officials who could benefit from further training and knowledge. Nuevo León has begun uploading a list of the names of officials from 16 of the 33 ministries and entities who intervene in contracts using federal funds. The state began uploading the list onto a registry available on the Office of the Comptroller’s website, but, now, officials plan to upload the list to the RUSPEF portal. The Office of the Comptroller General has already published two lists since the beginning of this year. These lists could be very useful as to ensuring in the future that these public officials are duly trained and receive opportunities to update their knowledge in the future.

Nuevo León could consider developing specific training programmes on integrity in public procurement. The content of these programmes must be regularly revised and updated, due to the relatively weak internal controls in Nuevo León’s public procurement process, and the gaps observed in the capacities and knowledge of the public procurement workforce. To disseminate its content and ensure that all public officials meet high professional standards of knowledge, practical implementation and integrity, Nuevo León could consider implementing these trainings using e-learning mechanisms. Doing so will make this information accessible to all public officials who participate in the public procurement process.

Public officials could also be asked, after completing these trainings to fill out a survey. The survey could ask officials what they learned, what was missing in the training sessions and whether some improvements are required. Internal control public officials and auditors could also be included in these learning programmes, so as to ensure consistency in the implementation of integrity policies and rules in public procurement activities. Nuevo León faces the challenge of having sufficient financial resources to provide appropriate training to its public officials and to newly recruited public procurement personnel. Thus, e-learning is good choice, as it is less costly than in-person trainings. Nuevo León could implement e-learning programmes for its public procurement officials by signing agreements with some of the universities in the state. Procurement officials have co-operated on trainings with universities in the past. And, OECD interviews showed that there was no resistance from the personnel working on public procurement to this arrangement.

Nuevo León could benefit from implementing anti-corruption programmes for suppliers as an additional mechanism to enhance integrity of public procurement activities

Private sector engagement is critical to effectively countering corruption. Corruption in public procurement consists of more than bribing public officials. Public procurement contracts should contain "no-corruption" warranties, and should be implemented to verify the truthfulness of suppliers’ warranties that they have not and will not engage in corruption in connection with contracts. Such programmes should also require appropriate supply-chain transparency to fight corruption in subcontracts, and integrity training requirements for supplier personnel.

Implementing an anti-corruption programme is not a one-time event; it needs to be followed up on through regular periodic evaluation (monitoring). This monitoring ensures that strengths and weaknesses are properly identified, and that the programme is improved. The result of this is that the programme remains effective and up-to-date.

In Nuevo León, suppliers should declare a statement made under oath indicating that they are not do not have any of the conflicts set out in Section 37 of the LAACS. Suppliers should make these statements at the time of submitting their proposals, either through the SECOP or in person. Furthermore, bidders are obliged to submit an integrity statement declaring their commitment to conducting themselves honestly in the various stages of the procurement process. This integrity statement should also state suppliers will refrain from engaging in behaviours that violate the laws directly, or through a third party. Similar to the legal framework for acquisitions and contracts of providers and contractors, the LOPNL also has a provision requiring participants in the call for tenders of public works or services to submit a written declaration under oath. This declaration states that participants in calls for tender are not in violation of the provisions of Article 44 of this law.

Public procurement contracts contain "no-corruption" warranties according to LAACS. That said, during interviews with the OECD, public officials mentioned concerns about the truthfulness of suppliers’ warranties. These warranties are supposed to guarantee that suppliers have not and will not engage in corrupt activities in connection with the contract. But the warranties are not verified. In addition, the process is seen as administrative and conducted as such, rather than implemented with a strategic vision.

To be effective, anti-corruption programmes for suppliers require that participants in public procurement processes implement internal procedures. These procedures ensure that corruption and integrity breaches are well understood by employees. They also guarantee that sanctions are properly imposed and communicated to any potential contractors or subcontractors the supplier works with. The requirements are meant to ensure that suppliers for future works comply with current rules, and that they avoid conflicts of interest situation and any irregularities that could result in corrupt acts. These requirements call for a strong collaboration between the private sector and the public sector. Therefore, the public sector should also provide integrity training to the private sector. In so doing, officials can ensure the engagement of private sector actors in efforts to maintain the integrity of the whole public procurement cycle.

As mentioned during interviews, Nuevo León has not yet implemented specific integrity trainings for supplier personnel. This is important, if the state wishes to foster supplier commitment to fighting corruption in contracts and subcontracts. Therefore, a first initiative Nuevo León could consider in its integrity work in this area could be introducing participants to the applicable legal framework and the potential sanctions in cases of breach. This introduction should also include an explanation on the rationale behind decisions taken in the past against corrupt acts, including the actions taken by the Legal Affairs Directorate and the internal control units.

Moreover, mechanisms should be implemented in the context of an anti-corruption programme to detect bid-rigging. If the state has already undertaken such measures, the state should also implement an assessment of whether their design effectively reduces the risk of bid-rigging in the procurement process. In addition to these mechanisms, initiatives seeking to ensure civil society and private sector engagement in preventing integrity breaches and corruption acts should be implemented. Integrity pacts, as described later in the chapter, could be useful tools.

6.3. Reviewing and adopting policies and tools for conducting an evaluation of suppliers so as to reduce public procurement’s vulnerability to corruption

6.3.1. Nuevo León should consider strengthening the public procurement mechanisms it has in place so as to ensure that decisions are made based on what is most beneficial to the public interest

Efficiency in public procurement processes could enhance integrity frameworks and reduce vulnerability to corruption. When funds are better accounted for and used for the intended purposes, the risk of corruption is diminished. The main purpose of bid evaluation is to determine the best bid according to evaluation and selection methodology specified in the solicitation document. The best bid is chosen from among all bids submitted before the bid closing time on a specified date. Therefore, bid evaluation is a sensitive step in the whole public procurement cycle. Of particular concern is whether the economic, social and environmental criteria (e.g. favouring bidders from economically disadvantaged areas, using environmental-friendly materials, etc.) are applied.

To ensure the satisfaction of the requirements of contracting authorities, procurement decisions should be made based on up-to-date information. This information should include potential and actual performance and bidders or contractors, as well as information on their integrity. Contracting authorities also need information on bidders and contractors regarding their past procurement performance (in terms of the delivery of goods and services and the execution of contracts). Finally, contracting authorities need information on the recent performance of current bidders. In a few countries, this information is also filtered and integrated at the government-wide level. These countries use statistical report analysing tools to detect patterns in procurement. The results of these analyses are made available to policy makers and the public at large to ensure best value for money.

As detailed in Chapter 2, Nuevo León needs to rethink its procurement process. The state’s current process for procurement is based on paperwork, and not all procurement activities are done using information and communication technologies. Indeed, public officials in Nuevo León state that information accessible through the SECOP, for instance, is documented on paper and then uploaded to the platform as a PDF. The current process for reviewing technical and financial requirements, compliance with current legislation, contracts, inspection and payment are not exchanged online.

Moreover, while e- procurement activities could be accessible online, it is important that purchases are adequately planned to ensure the best value for money, and that budgets are properly allocated to each entity. The state is currently centralising its procurement activities into under the Secretariat of Administration, which does the majority of purchases for public sector entities and ministries of the central administration. Exceptions to this are the Secretariat of Public Security, the Attorney General’s Office and parastatal entities with no agreement with the SA. While this centralisation appears to be a good option for increasing the efficiency of public procurement in the state, there are still high risks of integrity breaches and corruption. Indeed, not all entities and parastatals entities have integrated their procurement into the centralised system. It is currently used only to buy goods such as paper, toilet paper and ink for printers, and to contract services such as cleaning services.

Information gathered during the OECD’s two fact-finding missions showed that there is no real purchase planning or effective monitoring of public sector entities’ expenditures in Nuevo León. This opens the door to different integrity breaches. It also prevents the state from achieving better value for money. In addition, purchases are not made based on market analyses, even though that is a requirement under Nuevo León’s procurement legal framework (with the exception of direct awards).

As confirmed during the OECD’s fact-findings missions, at present, the evaluation criteria used to procure goods in Nuevo León is not based on market analyses but on a binary methodology, as detailed in Chapter 2. This methodology is not adequate for all kinds of purchases. Without market analyses, public procurement officials cannot really understand how the supply market works. They also cannot have an idea of the direction the market is going in, or of competition and the key suppliers in the market. Without some analysis of the marketplace, the state will not be able to adequately plan its future purchases. Accordingly, this feature needs to be included in the state’s public procurement strategy.

An additional consideration to effectively evaluate providers is to have them properly registered in the registry of suppliers, and to ensure the information in this registry is duly uploaded to the SECOP or the interactive platform for public works. As previously detailed, this registration is still paper-based. This process can have an impact on the accuracy of information, as it is not systematically uploaded and updated. Procurement is carried out electronically only when purchases are made with federal funds. In these cases, providers only interact with public officials. However, their registration in the providers list is still done in person.

As not all purchase orders or requests are made throughout the Secretariat of Administration, they are not negotiated by experts working in this secretariat, but rather directly by requesting units. These units do not necessarily have the strongest expertise and knowledge of the market. This in turn may impact government capacity to negotiate the best price for goods and services. To adequately evaluate suppliers and achieve greater value for money, Nuevo León must rethink its annual purchasing programme for the central government and parastatal entities. The purchasing programme should be strategically planned and make available for consultation. The government should also utilise a more user-friendly format, and synchronise and standardise the use of technologies for all stages of public procurement. It can do this by using an electronic platform with various applications that allows citizens, participants and public officials to have access to complete information. It may also make sense for the state to sign framework agreements where appropriate and feasible.

Certain other measures could also increase efficiency. E-catalogues to list available products and services that can be viewed and bought in an electronic format, dynamic purchasing, e-auctions, joint procurements and contracts with options that guarantee supplier performance are some examples. Nuevo León needs to view the whole procurement process as a strategic exercise, not a check in the box. The state needs to completely move from a paperwork registration to an e-procurement method. As stated above, it should also adopt enhanced electronic tools, such as electronic catalogues, which are strong tools for avoiding corruption and mismanagement and waste of public funds.

Finally, in order to accurately determine the best value of bids, a logical systematic evaluation procedure covering all aspects of the evaluation process should be followed. To accomplish this, Nuevo León should mandate that procurement public officials create and use a checklist of requirements. Officials can then consult the checklist throughout the evaluation of each bid.

6.4. Ensuring accountability and monitoring with regards to sanctions imposed on suppliers in cases of integrity breach

6.4.1. Nuevo León should consider improving the functionalities of its current webpage for blacklisted suppliers, and ensuring that this information is published in a timely fashion through the SECOP. Nuevo León can also make this information accessible through different links so that different actors can access it

In Nuevo León, private sector procurement participants can be sanctioned with fines and disqualifications if they contravene the provisions of the LAACS and the LOPNL. These contraventions can be linked to non-compliance with the regulatory framework, as well as integrity breaches. According to Article 92 of the LAACS, sanctions are imposed by the Office of the Comptroller and Governmental Transparency or by the internal control unit, depending on the individual and entity involved. These sanctions may be imposed for a period of three months to five years. Sanctions can range from a warning to disqualification to a fine, depending on the seriousness of the misconduct and the existence of fraud. In other situations, disqualification can be accompanied by a sanctions agreement in the contract, or reparatory measures for damages caused to public institutions. In the case of public works, which are regulated by the LOPNL, sanctions are established by the Office of the Comptroller, but imposed by the secretariat or contracting authority. Suppliers and participants can solicit their re-integration to the list of suppliers.

The Legal Counsel of the Office of the Comptroller (Director Jurídico) needs to be informed of these proceedings, as it is responsible for the registry of suppliers sanctioned and disqualified. Sanctions are published through the SECOP, and by the Central Purchasing Body on the website of the corresponding secretariat, entity or administrative unit.

Article 98 of the LAACS refer to minor offences, which are sanctioned with fines from 50-500 times the daily general minimum wage in place in the metropolitan economic municipality of Monterrey at the time of the contravention. For serious offences, Article 97 of the LAACS establishes sanctions that can reach 100-1000 the daily general minimum wage in the area standing in force daily in Monterrey. As well, serious offences are sanctioned with a fine and disqualification of the supplier. Sanctions imposed on providers and published on the SECOP mention the sanction imposed, but users cannot access information on the resolution issued by the Office of the Comptroller General. This is too bad, as this information could help future providers know and understand the rationale behind the decision to impose sanctions. In the case of sanctions applicable to breaches of the LOPNL, sanctions are imposed by the contracting ministries or entities. These sanctions can range from 50-100 times the daily general minimal wage to a maximum of 200-500 times the daily general minimal wage. Currently, there is no local registry that makes information on these sanctions publicly available.

The list of blacklisted suppliers is accessible through the website of the government of Nuevo León where information on tenders is published. For each supplier, the following information is mentioned: name, company registration number, type of breach or infringement, duration of the sanction, date of the publication of the blacklisting, which government organisation imposed the sanction and the reason for the sanction. The information disclosed should be complete, and is expected to allow officials to identify potential areas of risks and organisations that may need to adopt corrective measures.

While the list of blacklisted suppliers is very accessible, the list of suppliers sanctioned is very short due to incomplete information. This constitutes a real challenge for public officials selecting the bidders and those monitoring the public procurement process. In the case of public works, there is no possibility of consulting which private firm has been sanctioned, as there is no public registry available for consultation.

To facilitate the access to the list of sanctioned suppliers, Nuevo León could consider adding a search engine to the page. If the state does this, it can also add filters in the future as to facilitate access to information. Nuevo León could also consider adding the ability to download documents containing resolutions sanctioning private firms. This type of functionality would help public officials working at the internal control units, as well as those at the Directorate of the Office of the Comptroller, to more easily determine the fines to be imposed and the length of disqualification.

Because public procurement is subject to different rules depending on the source of funds allocated, public officials need to consult CompraNet in order to confirm whether providers have been blacklisted. This represents an additional task that public officials need to execute to ensure the integrity of the public procurement process. Public officials need to verify providers on two lists before awarding a contract – the one published on CompraNet and the one published on the SECOP. This can be challenging for officials, as the SECOP registry is not updated systematically. Nuevo León should resolve these issues, but continue to require that officials check blacklisting registries before awarding contracts. Moreover, Nuevo León should consider implementing a similar initiative for public works activities as well as make efforts to forward system interconnection between CompraNet and SECOP.

6.5. Actively engaging the private sector and civil society to enhance transparency and ensure accountability of all actors in the public procurement cycle

Public procurement depends on the partnership that must exist between the government and the private sector to create the public procurement marketplace. In this marketplace, the government is the buyer and the private sector is the supplier of needed goods, works or services. Accordingly, transparency is required to allow governments and citizens to engage in a mutually responsive way, thus rendering the public procurement system more accountable. In this sense, low levels of transparency and accountability in the public procurement system can compromise the effective use of public resources and funds. Integrity breaches, on the other hand, require active engagement and efforts from the government, the private sector and civil society, due to their complexity.

Civil society and citizens can play an oversight and monitoring role in public procurement. By serving as a kind of direct social control on government activities, civil society and citizen can further increase transparency in government activities and restore public trust in the system.

Ensuring transparency requires that public procurement entities provide adequate and timely access to relevant information in each phase of the public procurement cycle. In doing so, these entities must disclose information in a way that promotes competition. Public procurement entities must have clear policies, requirements and justifications for determining what information should be made publicly available or considered confidential. This information should be accessible for free throughout the centralised online portal; the information webpage should also operate under open data standards. Suppliers should provide appropriate transparency in subcontracting relationships and make this information publicly available. The OECD recommends that information be freely accessible to all stakeholders, including potential domestic and foreign suppliers, civil society and the general public. By doing this, officials can ensure open access to public procurement information and the visibility of the flow of public funds from the beginning of the budgeting process to the end of the public procurement cycle (OECD, 2015[2]).

6.5.1. Promoting transparency of public procurement activities throughout the use of IT technologies

Nuevo León should consider enhancing the functionalities of its different digital platforms in order to make procurement information more accessible and useable by all stakeholders, and to ensure accountability

The Directorate of Government Transparency and Quality of the Office of the Comptroller General (Dirección de Transparencia Gubernamental y Calidad) is the main body in charge of designing transparency and integrity policies. One of its main functions is to formulate, co-ordinate, supervise and assess policies regarding access to information and transparency. It is also tasked with ensuring accountability and integrity of governmental decisions. Other functions of this directorate involve coordination with all ministries and entities of the public administration to modernise monitoring and follow-up systems so that they verify and audit processes within the public service. As such, the directorate works to: strengthen prevention and accountable programmes; design programmes and actions to promote legality and transparency in public management; enhance accountability; promote access to all information generated by the government; guarantee access to public information to anybody; and issue and supervise the implementation of policies and guidelines by ministries, entities and tribunals in order to ensure their compliance with the transparency law. This directorate is also responsible for reviewing and jointly coordinating with ministries that receive requests, claims, reports, suggestions and recommendations submitted by citizens. The directorate helps these ministries do follow up and establish programmes to comply with the commitments set out in the Code of Ethics. These commitments include promoting ethical values that should be observed in the service of citizens. Finally, the directorate promotes policies and programmes on e-governance that allow strong transparency of the public function, and facilitate relationships with citizens (Article 33 of the Organisational Law).

As seen in previous chapters of this review, public procurement processes are mainly administered by the SA. It carries out procurement processes of goods and services for the 21 entities of the central administration and 24 parastatal entities with which it has signed co-operation agreements. Public works procurement is made through the Ministry of Infrastructure (Secretaría de Infraestructura) or by the procurement division of specific parastatals organisations, like Water and Drainage, the Institute for Education and Sports, and the State Highway Network (Agua y Drenaje, ICIFED and the Red Estatal de Autopistas, REA). The Directorate of Government Transparency and Quality of the Office of the Comptroller General should coordinate with these entities in order to ensure that information uploaded onto the different platforms is recorded systematically and using the appropriate format. The Office of the Deputy Ministry of Technologies administers a database. As such, it facilitates the publication of information and the creation of users accounts for suppliers and negotiators on the public procurement portals.

As mentioned in Chapter 2, Nuevo León can use four available procurement methods as set out in its current legislative framework, but it mainly practises direct awards. If the state continues this practice, it will need as much up-to-date information as possible to be effective. As observed in previous sections, public procurement officials are in need of further specialization, and could benefit from having access to detailed guidelines and manuals. These resources should be available for their consultation. In addition, citizens and participants should have access to this information, so they can observe the whole process. This information is available online but it is not easily accessible, as it does not have a user-friendly search engine.

The SGNL is attempting to centralise the process for carrying out public procurement. A large portion of public procurement still occurs in a decentralised manner, through the two non-integrated digital platforms, the SIREGOB and SECOP. The scope and content of procurement processes vary on these platforms, and different actors intervene depending on the method used for public procurement. As mentioned in Chapter 5, while the platforms synchronise automatically, there is no validation of this synchronisation. This points to an additional weakness of the procurement process.

When bids are opened in a hearing they are also transmitted via Facebook (bidders with incomplete information are disqualified immediately). Subsequently, contracting authorities answer technical questions and give a technical assessment. This assessment is then evaluated by the Acquisitions Committee which has the power of approval. None of this information is accessible on the government webpage or the SECOP – which is supposed to gather all information related to public procurement.

The registry of suppliers and list of blacklisted suppliers are also available in an electronic format on the central government’s general website. The Directorate of Government Transparency and Quality of the Office of the Comptroller is responsible for the registry and list. In the case of the list of blacklisted suppliers, users are re-directed to SECOP. As information is mainly entered manually in these various electronic databases, there is a high risk of errors and delays in accessing information. Nuevo León should, therefore, urgently consider enhancing its current platforms so as to give to all actors access to the information they need. Information available on these electronic databases should encompass all categories of goods, services and public works, though this is not currently the case. As it overhauls its electronic databases, Nuevo León could also improve the second version of the SECOP. If it does so, it should ensure that existing functionalities are upgraded so as to allow the entry of relevant data that could help not only public officials, but also providers. If both officials and providers gain access to these data, they will be better positioned to make informed decisions. Officials will then be able better able to participate in the public procurement process and choose the best offer for the state.

Nuevo León could also consider, for instance, developing a series of additional resources that describe how state procurement processes work. The resources could be made available on the central government website or the SECOP, and could be targeted at citizens and suppliers. This information could also be useful to ensuring a common understanding of the whole integrity process among newly recruited personnel. This tool could take on the form of a question and answer document (Q&A), which would help suppliers in the procurement process. It could also support business associations and their advisors to understand public procurement regulations and processes. Currently, the only opportunity suppliers have to raise questions and ask for clarification is during clarification meetings. This Q&A could be put together and uploaded to the SECOP. It could be accompanied by guides and manuals on specific topics, so as to enable suppliers and authorities to do the best job possible (especially those external and international suppliers who may not be familiar with local practices or law). This online information should be free and accessible with no registration requirements. Colombia uses a system like this; even videos on Colombia’s electronic procurement system have been developed to show providers how the system works.

6.5.2. Increasing civil society participation in public procurement activities

Nuevo León should consider enhancing transparency mechanisms so as to ensure civil society participation in public procurement processes and engagement in fighting corruption

Citizen and civil society oversight of public procurement is essential. First, these two groups can play a role in terms of scrutiny and monitoring. Second, their involvement can further increase transparency of government activities, and, as such, restore public trust in government, to some extent. Indeed, legal and regulatory frameworks in Nuevo León could be used to establish the obligation or opportunity for the government to consult with the public during the procurement planning process (e.g. prior to large-scale or environmentally or socially sensitive procurements). In some countries, citizens are –under clearly specified conditions and subject to signing a statement of confidentiality – permitted or encouraged to act as observers in procurement proceedings. Nuevo León could consider permitting citizens to be officially involved in the monitoring of procurement performance and contract completion (e.g. through the application of innovative techniques, such as geo-tagging, or in the context of social audits) (OECD, 2016[24]).

Nuevo León has launched various initiatives to ensure transparency and civil society participation in public procurement processes. Its legal framework is composed of two different regimes and contains some rules allowing citizen participation during the procurement process. Indeed, the LAACS contains a provision that is similar to one at the federal level that allows citizens to participate in all stages of public tendering above a certain threshold as a way to promote public scrutiny. Citizens may also participate in cases determined by the Acquisitions Committee (Comité de Adquisiciones), due to the impact of the contract on the ministerial, entity or administrative unit’s programmes. Unlikely the LAACS, the LOPNL does not contain any reference to social witnesses.

Information provided during the OECD fact-finding missions showed that there are currently only 13 social witnesses of the public procurement process registered with the state (out of the 21 who received training). Their names are currently available on line through the website promoted by the Directorate of Transparency of the Office of the Comptroller General. According to public officials, the low number of citizens interested in acting as social witnesses is due to the lack of information available to the public about this programme. In addition, the public has little information about the monitoring of the programme’s results or the fact that social witness’ reports are made public. Another problem is that social witnesses work as volunteers. Their work also requires a sound understanding of the whole public procurement process, which can deter citizens from volunteering. While testimonies of social witnesses are published online within 10 days of their participation in a procurement process, the number of irregularities detected and the corrective measures implemented is not made available to the public. This has an impact on the perception of the actual contribution these witnesses make to improving public procurement processes. Therefore, Nuevo León could consider setting a strategy to engage more citizens to enrol as social witnesses. One component of the strategy could be, for instance, issuing a certificate to social witnesses. Another could be giving them compensation for their service, such as transportation cards.

In addition to regulated initiatives to ensure civil society’s participation in public procurement, Nuevo León is currently implementing a transparency portal. Via this portal, citizens can consult all public work contracts from 1999 to present – including information on awarded companies, but not catalogues of unit prices. The state is implementing this portal through the Commission of Transparency and Access to Information of the State of Nuevo León (Comisión de Transparencia y Acceso a la Información del Estado de Nuevo León, CTAINL), the National Institute for Transparency, Access to Information and Protection of Data (Instituto Nacional de Transparencia, Acceso a la Información y Protección de Datos, INAI) and three other non-governmental organisations. This website will allow citizens and firms to have access to information on awards. That said, as currently structured the portal does not provide information on offers submitted during tendering processes of previous years. An additional problem is that this information is not linked to the SIREGOB or SECOP. If citizens want to monitor the whole public procurement cycle, they need to consult each database independently. This poses a problem, as they use different formats and citizens will need to download information in order to have a full view of the public procurement process.

In 2016, Nuevo León created the State Registry of Contractors (Registro Estatal de Contratistas, REC) with the purpose of making information about construction firms accessible to those participating in the bidding process. The state also worked to classify contractors within the registry in an effort to ensure better proposals for the state in public works processes. This new registry is accessible on line. Users can also access it by consulting the website directly, which provides information on pre-tendering bases, observations made by providers, the request for tenders, the economic and technical requirements and awarded contracts for public works. The online registration facilitates bidder participation in public works, and the state must respond within 30 days, per the current legislation. That said, the information contained under this registry is not currently accessible to the public for consultation. In this regard, Nuevo León should consider making this information accessible to all, as this registry has been used to compile and store legal and financial information on suppliers, the field of activity in terms of categories of goods and services they can supply, their performance in public contracts and sanctions imposed in cases of integrity breaches.

Information available online for procurement in public works is currently accessible for consultation. Suppliers, citizens and civil society organizations consulting the website can also ask to obtain information on the latest publications of public procurement in public works.

Other initiatives have also been implemented to allow citizens to oversee public expenditures in their localities. One example is the programme, Works in Sight of All, which allows citizens to learn in detail about public works projects executed in their communities. Via this programme, citizens can gain access to public transmissions of tenders and decisions through social media platforms, such as Facebook.

In addition to these government initiatives whose purpose is to give citizens, civil society organisations and firms access to data on public procurement processes, citizens and civil society organisations have developed initiatives of their own. These initiatives aim to improve public management, to create a culture of legality, to increase transparency and to fight corruption in Nuevo León. Some examples of these initiatives are: Gober ¿Cómo Vamos?; Alcalde, ¿Cómo Vamos?; Hagámoslo Bien; and Haz Corto con la Corrupción. The purpose of Haz Corto con la Corrupción is to fight corruption and restore trust in public government decisions.

While the government is making efforts to ensure citizens and civil society groups have open access to information and data, there are still some challenges. Because many of the government’s initiatives are recent, citizens have not yet become a true part of the process. It also seems that while these initiatives aim at effectively allowing citizens and civil society organisations to fulfil an oversight role, citizens are not allowed to truly participate in public procurement decision-making or monitoring.

Mechanisms ensuring an open and regular dialogue between the government, suppliers, business associations and citizens are vital. These mechanisms can help reinforce a mutual understanding of the factors influencing the procurement market. They can also help citizens and shareholders to not only monitor the procurement process, but propose ideas for how the government could enhance transparency, impartiality and improve the public procurement cycle. At present, the main problem private firms seem to be facing is that they do not receive information on public tenders and other important decisions related to public procurement in time. This means that, on many occasions, they cannot even be a part of the procurement process.

To ensure dissemination of integrity rules and allow citizens and the private sector to effectively oversee and monitor public procurement activities, Nuevo León could consider using integrity pacts. Integrity pacts extend integrity standards that are applicable to public officials to private sector actors. This occurs in the context of major public procurement projects that require the active involvement of civil society groups. For a reference of existing examples of integrity pacts in countries around the world, see Table ‎6.7.

Table ‎6.7. Examples of the use of integrity pacts in various countries

Countries

Objective of these integrity pacts

Germany

An Integrity Pact has been implemented for the construction of the Schönefeld International Airport in Berlin, a project worth € 2.4 billion

India

Integrity Pacts are an essential part of the Draft National Anti-corruption Strategy. The Central Vigilance Commission (CVC) issued the Directive 008/CRD/013, which refers to the implementation of integrity pacts as "standards operating procedures" in procurement contracts of any major government department.

Indonesia

Integrity Pacts have been adopted and applied to local government contracts in up to 20 districts

Italy

Integrity Pacts have been introduced mainly at municipal level in the Milan City Council.

Korea

The Korean pact model emphasises the protection of whistle-blowers and the creation of an ombudsman system to carry out independent external monitoring

Mexico

Transparencia Mexicana has implemented integrity pacts in over 100 contracts, worth approximately USD $30 billion in total

United Kingdom

Integrity Pacts have been adopted and implemented with particular focus on the defence sector.

Source: (OECD, 2016[9])

6.6. Proposals for action

Nuevo León has made notable efforts to increase the integrity and transparency of its public-sector activities. Despite many efforts directed at providing an institutional, legal and regulatory framework to prevent corruption and properly manage conflicts of interest, citizen trust of government institutions and activities remains low. At the same time, public perception of government corruption is high in the state, as reported by various civil society organisations.

Nuevo León has issued various initiatives to comply with its commitment to fighting corruption and promoting integrity in the public sector. There is still work to be done, however. Nuevo León should enhance the measures it has in place and implement new ones. These efforts could include: dedicated and tailored measures against corruption; similar measures to manage conflicts of interest in public procurement activities, reporting of integrity breaches and corruption behaviours; measures to build a coherent and efficient institutional and normative public procurement framework; and capacity-building and awareness-raising initiatives.

In that regard, in order to enhance integrity in its public procurement system, Nuevo León should undertake the actions below.

Enhancing the policy framework to address integrity issues in public procurement processes and activities in Nuevo León.

  • Nuevo León should consider strengthening its commitment to fighting corruption by developing integrity strategies for public procurement

  • Nuevo León could benefit from enhancing integrity rules in order to set up a coherent legal framework for integrity and corruption prevention.

Establishing effective mechanisms to enhance integrity in the public procurement cycle in Nuevo León through the implementation of a consistent and coherent integrity system and stronger management of the conflict of interest system.

  • Nuevo León should consider developing a code of ethics for public procurement officials to guide their conduct during the whole public procurement cycle, as well as providing practical guidelines to public procurement officials and suppliers.

  • Nuevo León should consider adopting a clear definition of conflict of interest so as to effectively manage conflicts of interest in public procurement and ensure the use of public funds in an efficient manner.

  • Nuevo León should consider using disclosure of assets and interests as a mechanism to prevent conflicts of interest and integrity breaches in the public procurement cycle.

  • Nuevo León should improve its internal reporting and whistle-blowing system in order to safeguard the public interest and ensure efficiency in public procurement activities by reinforcing the mechanisms that protect anonymity and prevent reprisals.

  • Nuevo León should make efforts to provide trainings specifically on public procurement integrity in order to enhance the integrity of the whole public procurement process and the workforce.

  • Nuevo León could benefit from implementing anti-corruption programmes for suppliers as an additional mechanism to enhance integrity of public procurement activities.

Reviewing and adopting policies and tools for conducting an evaluation of suppliers so as to reduce the vulnerability of its public procurement activities to corruption.

  • Nuevo León should consider strengthening the public procurement mechanisms it has in place so as to ensure that decisions are made based on what is most beneficial to the public interest.

Ensuring accountability and monitoring with regards to sanctions imposed on suppliers in cases of integrity breaches.

  • Nuevo León should consider improving the functionalities of its current webpage for blacklisted suppliers, and ensuring that this information is published in a timely fashion through the SECOP. Nuevo León can also make this information accessible through different links so that different actors can access it.

Actively engaging the private sector and civil society so as to enhance transparency and ensure accountability of all actors in the public procurement cycle.

  • Nuevo León should consider enhancing the functionalities of its different digital platforms in order to make procurement information more accessible and useable by all stakeholders, and to ensure accountability.

  • Nuevo León should consider enhancing transparency mechanisms so as to ensure civil society participation in public procurement processes and engagement in fighting corruption.

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