New | Mexico will pay Chinese firm compensation for cancelled high-speed rail bid

Mexican officials say they will have to pay a Chinese-led consortium for costs incurred in filing the winning bid on a rail contract that the government later cancelled.

Mexico awarded the US$3.7 billion contract to China Railway Construction and partners on November 3. All the other potential bidders had bowed out, arguing that the two-month bidding process on the high-speed rail link between Mexico City and the city of Queretaro didn’t give them enough time to prepare bids.

The government cancelled the contract on November 6, just two days before Mexican media reported the president’s wife was occupying a US$7 million mansion registered in the name of a Mexican firm that formed part of the winning consortium.

Officials have said the decision was not related to concerns about the mansion, but was prompted by the need “to strengthen the absolute clarity, legitimacy and transparency” of the bidding process. The government said it would open a new round of bidding.

Communications and Transport Secretary Gerardo Ruiz Esparza said late on Wednesday that Mexico “will only have to pay the winning bidder’s non-recoverable costs,” but gave no estimate of how much that would be. Ruiz Esparza met with China Railway officials in China, as part of President Enrique Pena Nieto’s visit there, to explain the decision.

According to a statement From Ruiz Esparza’s office, “it was the legal moment to cancel the [contract] award with the fewest costs and risks,” though critics said it would have been cheaper to re-think the bidding process earlier, when a total of 13 companies asked for – but were denied – more time to prepare bids.