How is the adjustment of construction contract prices regulated? What principles are construction contracts based on?
How is the adjustment of construction contract prices regulated?
Facing obstacles in the application of legal provisions on price adjustment of construction contracts, the Ministry of Construction issued Official Dispatch 4387/BXD-KTXD in 2022 guiding the price adjustment of contracts according to adjusted unit prices as follows:
First, the adjustment of construction contract prices is carried out based on the contents of the contract signed between the parties, in accordance with the bidding documents, the bid documents, and the legal provisions applicable to the contract.
The content of the construction contract is regulated in Article 10 of Decree 37/2015/ND-CP as follows:
Content of construction contracts, construction contract documents, and priority order of accompanying documents
The content of construction contracts, construction contract documents, and priority order of accompanying documents in construction contracts shall follow the provisions of Articles 141 and 142 of the Construction Law No. 50/2014/QH13.
Second, apart from the principles stated in Section 1 of Decree 37/2015/ND-CP, the payment and adjustment of contract volume based on adjusted unit prices shall be implemented according to the following regulations:
- For work volumes with unit prices already stated in the contract, payment is made based on the actual completed volumes certified at each payment period (according to the increase/decrease in volumes compared to those in the signed contract) as stipulated in Clause 6, Article 19 of Decree 37/2015/ND-CP.
Payment of construction contracts
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6. For fixed unit price contracts and adjustable unit price contracts: Payment is based on the actual completed volumes (including any increase or decrease, if any) certified at each payment period and the unit prices in the contract or adjusted unit prices as per the agreements in the contract.
- For reasonably arising work volumes (not included in the contract and bidding documents) without unit prices in the contract but not exceeding the approved bidding package price, the investor and the contractor shall calculate, negotiate, and sign an addendum to the contract; in case of exceeding the approved bidding package price, the competent investment decision-making authority must consider and decide according to point b, clause 2, Article 37 of Decree 37/2015/ND-CP. The addition of volumes and work items to the construction contract must comply with the bidding law, ensuring competition and investment efficiency.
Adjustment of work volumes in construction contracts
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2. Adjustment of work volumes in construction contracts is stipulated as follows:
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b) For fixed unit price contracts and adjustable unit price contracts: Addition of reasonable work volumes not included in the contract but not exceeding the approved bidding package price, the investor and the contractor shall calculate, negotiate, and sign an addendum to the contract; in case of exceeding the approved bidding package price, the competent investment decision-making authority must consider and decide; the work volumes already priced in the contract are determined based on the actual completed volumes (increased or decreased compared to the volumes in the signed contract) certified.
- The approval of the adjusted construction budget is based on the appraisal results as specified in Article 82 of the Construction Law 2014 (amended in clause 24, Article 1 of the revised Construction Law 2020) as a basis for managing construction investment costs.
Appraisal and approval of construction designs following the basic design
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2. The investor appraises the contents specified in Article 83 of this Law for the following design steps:
a) FEED design in the case of implementing contracts in the form of Engineering - Procurement - Construction (EPC);
b) Technical design in the case of three-step design;
c) Construction drawing design in the case of two-step design;
d) Other design steps immediately following the basic design in the case of multi-step design according to international practice.
3. Construction works specified in clause 1, Article 83a of this Law must also be appraised by the specialized construction agency according to the contents specified in clause 2, Article 83a of this Law. The appraisal agency may invite organizations or individuals with relevant experience and capacity to participate in the design appraisal.
4. Construction works requiring fire prevention and fighting, environmental protection, national defense, and security must be approved or appraised by competent state agencies according to relevant laws.
5. For construction works specified in clauses 3 and 4 of this Article, the investor is allowed to submit the documentation simultaneously to the specialized construction agency and the competent state agencies. The results of fire prevention and fighting requirements and environmental protection stipulated in clause 4 of this Article are sent to the specialized construction agency as a basis for appraisal conclusions.
6. Construction works significantly affecting safety and public interests must be appraised for design safety, compliance with standards, and technical regulations by organizations or individuals qualified in construction activities as a basis for appraisal.
7. The investor is responsible for compiling the documents from the specialized construction agency and other related agencies and organizations; fulfilling any requirements (if any); and approving the construction design as stipulated in clause 8 of this Article.
8. The investor approves the construction design step following the basic design as specified in clause 2 of this Article. The investor decides on the approval of the remaining design steps.
9. The Minister of National Defense and the Minister of Public Security determine the authority, appraisal procedures, and approval of construction designs suited to sector-specific management requirements for national defense and security projects.
How is the adjustment of construction contract prices regulated? What principles are construction contracts based on? (Image from the Internet)
What types of construction contracts are there?
Depending on different criteria, construction contracts are classified according to the provisions of Article 3 of Decree 37/2015/ND-CP as follows:
- According to the nature and content of the work, construction contracts include the following types:
+ Construction consulting contracts for consulting work in construction investment activities.
+ Construction works execution contracts for carrying out construction works.
+ Procurement contracts for materials and technological equipment for the procurement of materials and equipment for installation in construction works according to technological designs.
+ Design and supply contracts for technological equipment (EC) for design work and construction of the works or specific components.
+ Design and procurement contracts for materials and equipment (EP) for designing and procuring materials and equipment for installation in construction works according to technological designs.
+ Procurement and construction execution contracts (PC) for procuring materials and equipment and executing construction works or specific components.
+ Design - procurement - construction contracts (EPC) for performing all stages from design, procurement of materials and equipment to executing construction works, specific components, trial operations, and handover to the contractor.
- Additionally, construction contracts may be classified according to the pricing forms and based on the relationships among the participating parties.
What principles are construction contracts based on?
According to the provisions of Article 5 of Decree 37/2015/ND-CP:
When carrying out construction contracts, the contracting parties must ensure the principles implemented in construction contracts according to the provisions of Clause 3, Article 138 of the Construction Law 2014.
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