What is rescission of a public works contract?

Rescission of a public works contract is the termination of the contractual relationship due to a breach by one of the parties. Under Mexican law there are two forms: administrative rescission, initiated by the contracting authority under Article 61 of the LOPSRM, and judicial rescission, initiated by the contractor before the federal courts.

The law treats rescission as a last resort. The LOPSRM Regulations explicitly state that rescission should be the final mechanism for resolving disputes between the parties, not the first response to a problem.

For foreign contractors, the administrative rescission procedure is particularly important to understand. It moves quickly, it carries serious economic and reputational consequences, and the contractor’s rights within the procedure are time-limited and strictly construed.

Rescission of federal public works contracts is governed by the Ley de Obras Públicas y Servicios Relacionados con las Mismas (LOPSRM, last amended November 14, 2025) and its Regulations (RLOPSRM, Articles 154 to 163).

The April 16, 2025 reform modified Article 61 in two relevant ways: it reduced the authority’s deadline to issue its resolution from 15 to 10 business days, and it repealed Section III of the article. The RLOPSRM was not amended and remains in force in its procedural articles.

What triggers rescission

Rescission may be initiated when either party fails to comply with its contractual obligations. The most common causes in practice are:

On the contractor’s side: delay in execution relative to the agreed work program, failure to meet completion deadlines or critical milestones, failure to amortize the advance payment during the contract term, poor quality of executed works, and any other breach of the contract, annexes, or tender documents.

On the authority’s side: failure to pay progress valuations, failure to deliver the site or materials the authority was obligated to provide, and deficient or erroneous executive projects that prevent execution.

All breaches must be documented. The electronic construction log (BEOP) is the primary evidentiary instrument. An event not recorded in the BEOP is extremely difficult to prove in any subsequent proceeding.

The administrative rescission procedure

When the contracting authority initiates rescission, it notifies the contractor of the alleged breach. From that moment, a strict procedural sequence begins.

The current text of Article 61 of the LOPSRM reads:

“The contracting authorities may administratively rescind contracts in case of non-compliance with the contractor’s obligations. The rescission procedure shall be carried out as follows:

I. It shall be initiated from the moment the contractor is notified of the breach, so that within a term of fifteen business days the contractor may present its arguments and, where applicable, the evidence it deems relevant.

II. Once the term referred to in the preceding section has elapsed, the contracting authority shall have ten business days to resolve, considering the arguments and evidence submitted by the contractor. The determination to rescind or not rescind the contract must be duly founded, motivated, and communicated to the contractor within that term.

III. Repealed.

The contracting authorities may, under their own responsibility, suspend the rescission procedure when a conciliation procedure has been initiated regarding the contract subject to rescission.“

Contractor’s rights within the procedure

The procedure is not automatic. Rescission is initiated, not concluded, by the notification. The contractor has specific rights that must be exercised within the deadlines:

Personal notification. The procedure must be notified personally at the contractor’s registered address, to a person with authority to receive it, following the Federal Administrative Procedure Law and, subsidiarily, the Federal Code of Civil Procedure.

Fifteen business days to respond. The contractor has 15 business days from notification to present arguments, evidence, and any documentation that supports its defense.

Right to submit all relevant evidence. The authority must receive all evidence offered within the deadline. Evidence submitted after the deadline may be rejected.

Reasoned resolution. The authority’s determination, whether to rescind or not, must be duly founded in the applicable law and communicated to the contractor within 10 business days of the expiry of the contractor’s response period.

Right to challenge the determination. The rescission determination may be challenged before the Tribunal Federal de Justicia Administrativa. This is not an inconformidad, that remedy applies only to procurement procedures, not to contract execution disputes.

Conciliation as a suspension mechanism. If a conciliation procedure is initiated before the Secretaría Anticorrupción y Buen Gobierno, the authority may suspend the rescission procedure. This can be a strategic tool to gain time and open a negotiated resolution.

What the 2025 reform changed

The April 16, 2025 reform has one critical practical consequence: the authority now has only 10 business days, down from 15, to issue its resolution after the contractor’s response period expires. This compression means the contractor must have its defense fully prepared and submitted before the period closes. There is no time for the authority to request clarifications or for the contractor to supplement its submission after the fact.

Other relevant contextual changes from the 2025 reform: supervisory, conciliation, and fiscal functions migrated from the Secretaría de la Función Pública to the new Secretaría Anticorrupción y Buen Gobierno. The RLOPSRM was not reformed and its procedural articles (154 to 163) remain fully applicable.

What happens when rescission is determined

When the authority determines that rescission is warranted due to causes attributable to the contractor, it must pay for progress valuations pending, works executed, and materials delivered to site. Claims for extraordinary works, unrecovered expenses, or other concepts not formally presented to the authority before the rescission determination are generally not payable and cannot be recovered later.

The authority may then call on the performance bond (fianza de cumplimiento). Bond companies will conduct their own investigation before paying, and the contractor has the right to oppose the call. Legal advice at this stage is critical, the window to act is short.

When the contractor initiates judicial rescission due to causes attributable to the authority, the Tribunal Federal de Justicia Administrativa determines what is owed to the contractor based on the claims proven in the lawsuit.

How contracts end under Mexican law

Mexican public works contracts do not expire, get cancelled, or lapse. The LOPSRM provides four specific forms of termination:

Completion of the contract, the works are finished and the final settlement (finiquito) is executed.

Early termination (terminación anticipada), initiated by the authority for reasons of public interest, not due to breach.

Administrative rescission, initiated by the authority due to contractor breach.

Judicial rescission, initiated by the contractor due to authority breach before the federal courts.

Any other framing, cancellation, expiry, mutual agreement to end, does not exist as a legal category in federal public works. Contracts that are abandoned or left unresolved without following one of these four paths create legal and financial exposure for both parties.

Jurisdiction and courts

Disputes arising from federal public works contracts are resolved before federal courts. The primary forum is the Tribunal Federal de Justicia Administrativa (TFJA), which handles administrative rescission challenges and most contract disputes. Online proceedings (Juicio en Línea) are available.

For contracts with PEMEX and CFE, jurisdiction falls to commercial courts (juzgados mercantiles), not the TFJA. This is a frequent source of confusion for foreign contractors who assume all public works disputes follow the same jurisdictional path.

The LOPSRM (Art. 103) and the Constitution (Arts. 103 and 104) confirm federal court jurisdiction for disputes arising from federal law contracts. The Supreme Court has confirmed through jurisprudence that administrative rescission challenges must go to the TFJA before any amparo proceeding is attempted.

Defense strategy: time and evidence

The two factors that determine the outcome of a rescission defense are time and evidence.

Time is the most urgent. Once the notification is received, the 15-business-day window begins immediately. A contractor that does not seek legal advice on the day of notification risks losing the ability to mount a meaningful defense. Under the post-2025 framework, the authority’s accelerated resolution timeline makes early preparation even more critical.

Evidence is the foundation of everything. The best legal arguments fail without documentary support. The BEOP is the primary source, but supporting evidence includes: official correspondence with the supervision, work programs and reprogramming agreements, quality test records, photographic and video records of actual progress, amendatory agreements, and any written record of instructions given by the authority that contributed to the delay or breach.

The evidentiary record must be built from the moment a potential problem emerges, not reconstructed after the rescission notice arrives. A contractor that has maintained disciplined BEOP entries and formal correspondence throughout execution will have the materials needed for a credible defense. A contractor that has not will face a log book record entirely written by the supervision.

What foreign contractors commonly get wrong

Not responding to the rescission notice. Some foreign contractors, unfamiliar with the procedure, assume that rescission is a foregone conclusion once initiated, or that silence preserves options. Neither is true. Failure to respond within 15 business days waives the contractor’s right to present evidence and severely limits subsequent legal options.

Treating the BEOP as an administrative formality. By the time the rescission notice arrives, the log book record is fixed. If the contractor has not made contemporaneous entries documenting delays attributable to the authority, project errors, change instructions, and quality test results, that evidence effectively does not exist.

Conflating rescission with inconformidad. The inconformidad is a remedy against acts in the procurement procedure, tender evaluation, award decisions. It has no application to contract execution disputes. Attempting to use it against a rescission determination wastes time and forecloses the correct remedy.

Missing the challenge deadline before the TFJA. The deadline to file a contencioso administrativo lawsuit against a rescission determination is 30 business days from the date the notification takes effect. Missing this deadline makes the rescission final and unchallengeable. Legal advice must begin before, not after, this window closes.

Not addressing the performance bond call separately. When the authority calls on the performance bond after rescission, the bond company initiates a separate process. The contractor has rights in that process that must be exercised independently. Many contractors focus entirely on the rescission challenge and lose the bond defense by default.

How Construbufete can assist

Construbufete represents foreign contractors in administrative rescission proceedings and before the TFJA. Our work in this area includes:

  • Immediate assessment of rescission notices and deadline mapping
  • Preparation of the contractor’s response within the 15-business-day window
  • Evidence review and BEOP analysis to identify the strongest defense arguments
  • Conciliation strategy before the Secretaría Anticorrupción y Buen Gobierno
  • Representation in contencioso administrativo proceedings before the TFJA
  • Defense against performance bond calls following rescission determinations

If your company has received a rescission notice or anticipates one, contact us immediately. The deadlines are short and the consequences of inaction are irreversible.

Frequently asked questions

What is administrative rescission of a public works contract? The termination of the contract by the contracting authority due to the contractor’s breach, following the procedure established in Article 61 of the LOPSRM. It is distinct from judicial rescission, which is initiated by the contractor before the federal courts.

What are the most common causes of rescission? Delay in execution relative to the agreed program, failure to meet completion deadlines, failure to amortize the advance payment, poor quality of works, and erroneous executive projects that prevent execution. On the authority’s side: failure to pay valuations, failure to deliver the site, and deficient project documentation.

How does the administrative rescission procedure work? The authority notifies the contractor of the breach. The contractor has 15 business days to present arguments and evidence. The authority then has 10 business days to issue a reasoned determination. That determination may be challenged before the TFJA.

What changed with the 2025 LOPSRM reform regarding rescission? The authority’s deadline to resolve was reduced from 15 to 10 business days. Section III of Article 61 was repealed. Supervisory and conciliation functions migrated to the Secretaría Anticorrupción y Buen Gobierno. The RLOPSRM procedural articles were not amended.

Where is a rescission determination challenged? Before the Tribunal Federal de Justicia Administrativa in a contencioso administrativo proceeding. For PEMEX and CFE contracts, jurisdiction falls to commercial courts. The inconformidad remedy does not apply to rescission, it is limited to procurement procedure disputes.

What is the deadline to challenge a rescission determination? 30 business days from the date the notification takes legal effect. Missing this deadline makes the rescission final. Legal advice should begin before this window closes, not after.