What is a fixed-price contract under Mexican law?

A fixed-price contract, known in Mexico as contrato a precio alzado, is one in which the contractor commits to completing the works for a single, invariable lump sum. That price does not change even if material costs rise, labor becomes more expensive, or the project takes longer than anticipated. The economic risk of any deviation falls, in principle, on the contractor.

For foreign companies operating in Mexico, this structure may look familiar. The legal mechanics, however, are specific to Mexican law and carry obligations and limitations that differ from common-law or FIDIC frameworks you may be used to.

Public works contracts in Mexico are governed by the Ley de Obras Públicas y Servicios Relacionados con las Mismas (LOPSRM), last amended on November 14, 2025. Article 45, Section II, defines the fixed-price contract as one in which “the total fixed remuneration or payment to be made to the contractor shall cover works fully completed and executed within the established term.”

The same article, as amended on April 16, 2025, requires that both the technical and economic proposals be broken down into at least five main activities, which remain fixed for the duration of the contract.

Three rules define how the contract operates in practice:

Fixed total payment. The contractor is paid a single agreed amount for fully completed works delivered within the agreed term (Art. 45, Section II, LOPSRM).

Price and schedule cannot be changed. The main contracted activities are locked in for the life of the contract. This is developed further in Articles 229 and 231 of the LOPSRM Regulations (RLOPSRM).

No cost escalation. Article 56, paragraph four, of the LOPSRM expressly excludes fixed-price contracts from cost adjustment mechanisms. Those apply only to unit-price contracts or the unit-price portion of mixed contracts. There is no equivalent of a price-escalation clause as understood in international practice, the exclusion is statutory, not just contractual.

Private construction contracts are governed by the Civil Code of the state where the works are executed, or by the Federal Civil Code where the parties so agree. The LOPSRM does not apply to private contracts.

How risk is allocated

Risk allocation in a Mexican fixed-price contract depends heavily on who prepared the executive project:

If the contracting authority designed the project, risk is shared: the contractor is responsible for construction defects, but not for defects attributable to the design.

If the contractor is responsible for both design and construction (design-build or turnkey), the contractor assumes the full project risk and its consequences.

On top of that, in a fixed-price contract the contractor also absorbs the risk of inaccuracies in its own budget. Once the price is agreed, the estimated quantities are not reopened for ordinary review. A contractor that underestimates volumes or unit costs cannot recover the difference by claiming that the project was unclear, unless the contracting authority issued changes that altered the original scope.

For foreign contractors accustomed to FIDIC Yellow or Silver Book structures, this is familiar ground. The key difference is that Mexican public law imposes stricter limits on the exceptions than most international contracts.

Key contractual documents

Control, progress tracking, and payment in a Mexican public fixed-price contract depend on a coordinated set of documents. These are not optional; they must be internally consistent throughout the project:

  • Critical path network and schedule
  • General expenditure program
  • Labor expenditure program
  • Machinery and equipment expenditure program
  • Administrative personnel expenditure program
  • Input list (materials, labor, machinery, and equipment)
  • Progress and payment schedule (cédula de avances y pagos)
  • Progress valuations (estimaciones), measured by completed activity, not by unit concept as in unit-price contracts
  • Electronic construction log (Bitácora Electrónica de Obra Pública, BEOP)

Payment is made by completed activity against the cédula de avances y pagos. This is a critical difference from unit-price contracts: there are no partial payments by concept of work. A contractor that is not familiar with this structure will experience cash-flow problems from the first billing cycle.

Exceptions to the fixed-price rule

The price lock is not absolute. The LOPSRM Regulations recognize two narrow exceptions. Foreign contractors should understand exactly how narrow they are.

Works not covered by the original scope (Art. 229 RLOPSRM)

The contracting authority may recognize extraordinary works when all of the following conditions are met:

  • The works were caused by factors outside the contractor’s control
  • They result from changes driven by technological advances
  • They do not remedy the contractor’s own errors or non-compliance
  • It is possible to determine volumes, quantities, costs, and scope

This is not a general change-order mechanism. It does not cover scope gaps that a careful contractor should have identified before pricing.

Reprogramming by activity reassignment (Art. 231 RLOPSRM)

When originally contracted activities are reduced or eliminated, the economic resources assigned to them may be reassigned to new works or additional volumes, provided the total contract amount and the schedule are not modified. A formal agreement (convenio) must be executed, stating the reasons for the change and confirming that the adjustment does not cover the contractor’s own non-compliance.

Both exceptions confirm the rule, they do not replace it.

Fixed-price vs. unit-price: the distinction that matters in disputes

Mexico’s federal courts have addressed this distinction directly. A 2009 isolated ruling by the Third Collegiate Civil Court of the First Circuit (Tesis I.3o.C.719 C, digital register 167953) established the legal differences between the two contract types. The core distinction: in a unit-price contract, payment is based on quantities actually executed, multiplied by agreed unit prices. In a fixed-price contract, the total is paid against completed works, quantity variations do not generate price adjustments.

This distinction becomes critical when a dispute arises. A contract titled “fixed-price” but whose clauses regulate payment by concept, allow volume increases, or contemplate cost adjustments will be interpreted by Mexican courts based on its actual content, not its title. Foreign contractors who adapt templates from other jurisdictions without reviewing the clause structure are particularly exposed to this risk.

What foreign contractors commonly get wrong

Underestimating the executive project review. Foreign contractors sometimes rely on the contracting authority’s project without independently verifying quantities, geotechnical conditions, or supply chain constraints. In a fixed-price contract, that review is the contractor’s primary defense against budget overruns.

Misunderstanding the payment structure. Payment by completed activity, not by percentage of time elapsed or by concept of work, requires a billing strategy aligned to the cédula de avances y pagos from day one. Delays in submitting estimaciones directly reduce available working capital.

Assuming FIDIC exception mechanisms apply. Mexico’s fixed-price framework does not include FIDIC-style variation orders, unforeseen conditions clauses, or force majeure cost recovery as standard. These protections may be partially incorporated by contract in private works, but in public works the statutory exclusions override contractual drafting.

Not documenting delay events in the BEOP. The electronic construction log has full evidentiary weight under Mexican law. An event not registered in the BEOP is, for practical purposes, an event that did not happen. Foreign project teams unfamiliar with this instrument tend to treat it as an administrative formality rather than a legal record.

Signing inequitable private contracts. In private construction, the absence of LOPSRM protections means the contracting party can draft highly one-sided clauses. Foreign contractors often sign without negotiating payment terms, change-order procedures, or delay exception provisions.

Dispute resolution

A breach by either party triggers contractual defense mechanisms and, in public works, may lead to administrative rescission under Article 61 of the LOPSRM. The contractor has 15 business days to present evidence and arguments; the authority then has 10 business days to issue a reasoned determination.

That determination may be challenged before the Tribunal Federal de Justicia Administrativa (Federal Administrative Court). For contracts with PEMEX or CFE, jurisdiction falls to commercial courts. Arbitration is available in public works only when expressly agreed by the parties; it is not the default.

In private works, disputes are resolved in civil or commercial courts depending on the legal nature of the parties and the contract.

How Construbufete can assist

Construbufete advises foreign contractors and project owners at every stage of fixed-price contracts in Mexico. Our work includes:

  • Pre-signature review of executive projects and contract documents to identify pricing risks before they become disputes
  • Structuring the cédula de avances y pagos and expenditure programs to support cash flow and billing
  • Documenting extraordinary works and delay events in the BEOP for future claims
  • Advising on change-order strategy within the statutory framework
  • Representing contractors in administrative rescission proceedings and before the TFJA

If you are entering or currently executing a fixed-price contract in Mexico, contact us for a preliminary assessment.

Frequently asked questions

What is a fixed-price contract under Mexican law? A contract in which the contractor is obligated to complete the works for a single invariable amount. The price does not adjust for cost increases, volume changes, or schedule deviations, except in the narrow exceptions recognized by the LOPSRM and its Regulations.

When is a fixed-price contract used in Mexican public works? When the executive project is sufficiently defined, work quantities are clear, and the scope is well delimited. The law requires that the contracting authority have adequate technical information for the contractor to calculate a responsible global price.

What is the difference between a fixed-price and a unit-price contract? In a unit-price contract, payment is based on quantities actually executed multiplied by agreed unit prices. In a fixed-price contract, a single total is agreed for the completed works; quantity or yield variations do not generate price adjustments, except in cases expressly provided for in the law or the contract.

Can cost escalation be claimed in a fixed-price public contract? No. Article 56, paragraph four, of the LOPSRM expressly excludes fixed-price contracts from cost adjustment mechanisms. This exclusion is statutory and cannot be overridden by contractual drafting in public works.

What happens if the contracting authority orders changes to the project? Changes ordered by the authority that fall within the exceptions of Article 229 RLOPSRM may be recognized as extraordinary works with separate compensation. Changes that fall outside those exceptions do not entitle the contractor to additional payment.

Can partial payments be made under a fixed-price contract? Yes. In public works, payment is made by completed activity against the cédula de avances y pagos. Advance payments are permitted under the general rules of the LOPSRM. Indirect costs, profit, and additional charges must be incorporated into the global price offered at the proposal stage.

Does Mexican private law govern fixed-price contracts differently? Yes. Private fixed-price contracts are governed by the applicable Civil Code, not the LOPSRM. In Mexico City this is the Civil Code for the Federal District (Articles 2616 to 2645); in other states, the local civil code applies. There is no statutory ceiling on price adjustments or risk allocation equivalent to the LOPSRM protections.