OECD - Reforming ISSSTESON’s Public Procurement for Sustainability

Health systems are under increasing stress in OECD countries. Aging populations and the high incidence of chronic diseases, which require long and costly treatments, call for health systems to implement strategies that will maximise efficiency and minimise waste in order to preserve and, where possible, improve the availability and quality of health care services. This is all the more necessary in countries where access to basic public services such as health care are unequally distributed. With a Gini coefficient of 0.46, Mexico has the highest inequality rate among OECD countries. Already, Mexico has the lowest per capita spending on health care (USD 1 034) among OECD countries. In order to improve access to health care services, Mexico needs to spend more and spend better.

Health services in Mexico are decentralised and the autonomous Mexican States play an important role not only in investing resources transferred from the federal government, but also in managing health and pension institutions under their jurisdictions. This is the case of the Institute of Security and Social Services for the Workers of the State of Sonora (ISSSTESON), the second largest state in territory, with a population of three million people.

With close to 180 000 affiliates, ISSSTESON provides health care and pensions to employees of the State Government of Sonora. In view of the increasing disparity between income and expenditure, ISSSTESON and the State Government of Sonora are engaged in ongoing reforms to ensure the sustainability of the system, including the crucial area of public procurement.

As a key actor in Sonoras health care system, ISSSTESON invited the OECD to assess its procurement policies and practices against the 2015 OECD Recommendation of the Council on Public Procurement , in particular as they relate to efficiency, accessibility, integrity, transparency, professionalisation, use of e-procurement tools, risk management, and evaluation. The review Reforming ISSSTESONs Public Procurement for Sustainability is the result of this OECD peer review on public governance. These reviews help governments at all levels to design and implement strategic, evidence-based and innovative policies to strengthen their governance, to respond effectively to diverse and disruptive economic, social and environmental challenges, and to deliver on their commitments to citizens.

While the OECD has worked with various national social security institutions of Mexico in the past, such as the Mexican Institute for Social Security ( Instituto Mexicano del Seguro Social , IMSS) and the States Employees Social Security and Social Services Institute ( Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado , ISSSTE), ISSSTESON is the first social security institution at the state level reviewed by the OECD.

The report finds that ISSSTESON, with the support of the State Government of Sonora, is determined to overcome its present difficult financial situation. For example, it has begun to reform the governance of its procurement function in order to improve co-ordination and internal control, and to realise the potential for efficiencies from aggregating demand. Likewise, it reached an agreement with the State Ministry of Finance and the State University to settle their debts with the Institute.

However, this report also concludes that much still needs to be done to ensure the sustainability of the institution, and all political actors should come together to advance the necessary reforms. First, efficiencies could be realised by improving its public procurement governance and functioning. The Institute and the Sonora state government should also review the regulatory framework for public procurement to allow for greater flexibility in the strategies, tools, and features of the system. Finally, as this review documents, the pension benefits offered by ISSSTESON are generous when compared to other states in Mexico and OECD countries. The agreements to settle past debts are a step in the right direction, but if the pension scheme is not reformed, pressure will continue to increase, which may jeopardise the schemes long-term sustainability.

The OECD remains ready to support ISSSTESON and the government of Sonora as it implements the necessary reforms to improve the Institutes overall situation and its capacity to procure better. If reforms are advanced in a timely manner, Sonora could become the benchmark for other federal states in Mexico beset with similar challenges in their health care and pension systems for public employees.