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Analysis

Pemex Procurement Services: A Guide to Selling to Pemex

Tue, 01/22/2013 - 13:26

The participation of private companies in the Mexican oil and gas industry is directly constrained by contractual relationships with Pemex. According to law, all government purchases - including those of Pemex - must be conducted through public tender processes. “The Law of Acquisitions and the Law of Public Works apply to all government agencies including Pemex, and the Pemex Law establishes the guidelines that companies need to follow in order to bid for a Pemex contract,” explains Arturo Henríquez Autrey, President and CEO of Integrated Trade Systems (ITS). As a result, contractors are facing are longer reaction times, while Pemex might end up paying higher prices.”

Although the Pemex Board is the governing authority that issues the general guidelines for the procurement process, purchasing committee within each of the Pemex’s subsidiaries are in charge of its execution. The first requirement that each purchasing committee has to fulfill is the disclosure of the original purchasing plan for the following year in the O·cial Gazette of the Federation (DOF) before the year’s end. All the details for each planned tender throughout the year have to be mentioned in the document, including the scope of the project, technical specifications, a description of the terms and conditions for the contract, and timelines to achieve specific milestones. This plan is not set in stone, since contracts might undergo alterations; however, companies should be notified of any changes to the original document before the tendering process begins. If a pre-qualification round is required, only companies meeting the set criteria will be allowed to present their proposals. Once a tendering process is under way, Q&A sessions will be held. When the main issues have been addressed, each bidder can proceed with a bid that consists of both a technical and economical proposal. The technical proposal demonstrates the company’s capabilities and experience, validating its capacity to fulfill the contract, while the economical proposal presents the price at which the supplier or service company is willing to provide the goods or services. The bids have to go through several evaluations within Pemex before a final decision is reached.

“Bigger acquisitions by amount or significance have to go through six di†erent committees and boards all the way up the ladder,” Henríquez Autrey explains. “Pemex is very slow in reacting to its own needs because bureaucracy from within restricts its operations. We have to find ways to simplify the process.” Once the relevant committees and boards within Pemex have reviewed the bids, the winner is announced and given a specific time to sign the contract.

Transparency is a vital component in the execution of the bidding rounds. “As any government agency, Pemex has the obligation to be transparent in its processes,” Henríquez Autrey states. “However, when transparency gets taken out of context it can excessively restrain the pace at which Pemex is able to carry out its mandate.” Pemex is obliged to publish all tender documents in the DOF, on the webpage of the subsidiary issuing the tender, as well as at www.compranet.gob.mx, the government’s procurement website.

Although contracting processes are usually executed through public tenders, the Pemex Law allows certain exceptions in specific cases. “While the concept of a public tender is good and promotes transparency, the result is not always optimal for Pemex,” Henríquez Autrey states. “ITS fills the gap where the Pemex Law allows exceptions to a public tender, using direct assignment or restricted bid invitations to three or more participants. In order to justify avoiding a public tender, the subsidiary committees need to explain their motivation through an o·cial opinion. The direct purchasing method is usually used in case of emergencies, such as the need for immediate containment or remediation. Restricted invitations can be applied when technological innovation and training is required to fulfill the conditions of the tender. In this case, at least three candidates must be nominated. Purchases that are linked to Pemex’s core activities – or substantive productive activities – have a specific set of guidelines under the Administrative Dispositions for Contracting (DACs). To protect the Mexico’s national interest during tenders the Pemex law requires a set percentage of national content as mandatory. Under DACs for the contracting of substantive productive activities, Pemex may seek compensation from suppliers that do not meet the agreed-upon contractual obligations.

The procedure that companies have to follow in contracting with Pemex might be considered laborious, but once companies have qualified to participate in a bidding round they can sign a framework agreement that enables them in some cases to contract directly with the Pemex subsidiaries in the future.