December 4, 2019

Mexico's Electricity Commission Modifies Provisions for Procurement, Leases and Contractors

Holland & Knight Alert
Carlos Ochoa

Mexico's Comisión Federal de Electricidad (CFE) has amended its general provisions (GP) for procurements, leases and contractors of services and works for the CFE and its productive subsidiaries.

The main amendments, released on Nov. 29, 2019, to the GPs are below.

  • CFE may terminate the contracts, at any time, without the need of a court resolution, when the contractor falls in default of its obligations. However, CFE may decide not to terminate if damage of termination is higher. In that case, an agreement would be executed to grant a cure period.
  • CFE, under the strict responsibility of the contracting department (Contracting Department), may amend the contract with the justified reasons. Such amendments will be recorded at the Electronic System of Contractors.
  • Contracting Department has management authority on carrying out framework agreements and communications with contractors.
  • The Annual Contracting Program (ACP) will be mandatory.
  • A specialized intelligence unit was created to integrate with the ACP, as well as to prepare the studies for needs, investigations of market conditions and technical requirements.
  • The methodology to prepare investigations of market conditions is redesigned.
  • Contracting proceedings could be national, international under treaties and open international.
  • Removes the mandatory character of the models of technical requirements and contracts approved by the Technical Consulting Council for Supply and Contracting.
  • Requirements for subcontracting will have higher requirements, for the use of contracts on-demand and the increasing of the contracts.
  • The minimum amount for mandatory framework agreement is deleted.

Contractors to CFE will need to revisit their contracts to assess their obligations under the new landscape of energy regulation. Also, companies in pursue of obtaining a contract with CFE will need to evaluate the risks of entering such legal framework. In both cases, financial institutions or partners to contractors that have a stake in contracts should reassess their business relations with contractors.

Holland & Knight's energy law attorneys have extensive experience on advising government contractors in a variety of projects in the electricity sector. For more information, contact Holland & Knight's Mexico City office.  

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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