Centralized procurement: Use of framework agreements in Mexico

Abstract

Abstract In an effort to achieve greater efficiency and reduce corruption in government procurement, in 2009, the Mexican government reformed its public procurement law and introduced framework agreements, a centralized purchasing strategy. This paper finds that the mandatory switch from individual agency purchases to framework agreements generated substantial public savings for the purchase of payroll services to disperse year‐end bonuses. Relative to the pre‐framework agreement period, mandating framework agreements virtually eliminated paying commissions. Further analysis suggests that additional competitors and a shift to digitalized payroll services by agencies, in response to the agreement to be large drivers of the effects.