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How to win and lose a $3.7 billion deal in five days

Thursday, November 20, 2014


On October 20, the Mexican government cancelled a contract for a high-speed train, which it had awarded five days earlier.

The process should be transparent, while giving potential bidders time to present offers, said the government, which did not explain why the original process failed to conform to its own standards.

In the end, several factors coincided, in causing the cancellation of a $3.7-billion bullet train between Mexico City and Querétaro high-speed train, which was to be built by a consortium led by China Railway Construction Corporation, and which includes local firms Prodemex (only in Spanish), Grupo GIA (only in Spanish), Constructora Teya, and GHP Infraestructura Mexicana.

The government had to move quickly on the project, because an efficient rail corridor is a priority, said Transport Minister Gerardo Ruiz Esparza.

But major local companies with operations in the rail sector, including Alstom, Bombardier and Siemens, refused to bid, unless the government allowed them what they considered a reasonable time - an additional 120 to 180 days – to prepare offers.

The transport ministry (only in Spanish) for announced the tender on July 30, allowing only 45 days for companies to present bids.

In addition, the announcement of the winner came at a time of widespread unrest, following the disappearance of 43 students in the sate of Guerrero a month earlier.

Then there was the revelation that President Enrique Peña’s $7 million home had been built by a company, which was part of the bid presented by the winning conglomerate.

The home is still registered in the name of Grupo Higa (only in Spanish), which in addition has been linked to Peña’s Institutional Revolutionary Party, according to local media.

A new tender will be announced at the end of November, the Transport Ministry announced last week.

Interested companies will have six months to present their bids.

The 210-kilometer rail line is expected to connect Mexico City with the industrial hub of Querétaro at speeds of close to 200 kilometers per hour, unprecedented in Latin America.

The train will transport some 23,000 passengers per day, and will create 60,000 jobs during the construction phase, the Ministry said.