Vietnam: What are the regulations on the adjustment of construction contract prices? What are the principles for execution of construction contracts?
What are the regulations on the adjustment of construction contract prices in Vietnam?
Facing obstacles in the application of legal provisions on price adjustment of construction contracts, the Ministry of Construction of Vietnam issued Official Dispatch 4387/BXD-KTXD in 2022 guiding the price adjustment of contracts according to adjusted unit prices as follows:
Firstly, the construction contract prices are adjusted 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, document and order of priority of documents enclosed in a construction contract
Content, documents and order of priority of documents enclosed in a construction contract are instructed in Points 141, 142 of the Law on Construction No. 50/2014/QH13:
Secondly, apart from the principles stated in Section 1 of Decree 37/2015/ND-CP, the payment and adjustment of contract quantity based on adjusted unit prices shall be implemented according to the following regulations:
- For work quantities with unit prices already stated in the contract, payment is made based on the actual completed quantities certified at each payment period (according to the increase/decrease in quantities compared to those in the signed contract) as stipulated in Clause 6, Article 19 of Decree 37/2015/ND-CP.
Construction contract payment
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6. Contracts of fixed unit price and adjustable unit price: Payment shall be made on the basis of actual completed quantity (including increasing or decreasing quantity if any) inspected and accepted for each payment, and unit price in the contract or adjustable unit price as agreed in the contract.
- For reasonably arising work quantities (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 quantities and work items to the construction contract must comply with the bidding law, ensuring competition and investment efficiency.
Adjustments in quantity of work to construction contract
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2. Adjustments in quantity of work to construction contract are prescribed as follows:
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b) As for a fixed unit price contract and an adjustable unit price contract: if the addition of appropriate quantity of work (without unit price in the contract) to the contract does not make the price exceed the bid package’s price, both the investor and contractor shall carry out calculations, negotiations and signing an appendix to the contract; if such addition of quantity of work makes its price exceed the bid package's price, it must be examined and decided by the competent person; any quantity of work (with unit price in the contract) shall be determined on the basis of actual completed quantity of work (increasing or decreasing versus the quantity of work set out in the contract.
- 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 Law on Amendments to Construction Law 2020) as a basis for managing construction investment costs.
Appraisal and approval of construction designs following fundamental design
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2. Project owners shall appraise the contents prescribed in Article 83 hereof of the following design steps:
a) FEED design in case of Engineering - Procurement - Construction contract (hereinafter referred to as “EPC contract”);
b) Technical design in case of three-step design;
c) Construction drawing design in case of two-step design;
d) Other design steps following the fundamental design in case of multiple-step design as prescribed by international practices.
3. Construction designs of construction works prescribed in Clause 1 Article 83a hereof must be also appraised by specialized construction agencies in terms of the contents prescribed in Clause 2 Article 83a hereof. Appraising agencies may invite qualified and experienced organizations and/or individuals to participate in construction design appraisal.
4. Construction works with requirements on fire and explosion prevention and fighting, environmental protection, and national defense and security must be also commented or appraised and approved by competent authorities in accordance with relevant laws.
5. For construction works prescribed in Clause 3 and Clause 4 of this Article, project owners are entitled to send required documents to specialized construction agencies and competent authorities at the same time. Appraisal results or opinions about the fulfillment of requirements on fire and explosion prevention and fighting, and environmental protection prescribed in Clause 4 of this Article shall be sent to specialized construction agencies as the basis for appraisal conclusions.
6. Contents concerning the safety of construction works, and compliance with standards and technical regulations of construction designs of construction works significantly affecting the community safety and interests must be verified by organizations or individuals fully capable of performing construction activities as the basis for appraisal.
7. Project owners shall consolidate documents provided by specialized construction agencies and relevant agencies and organizations, respond to requests (if any), and approve construction designs as prescribed in Clause 8 of this Article.
8. Project owners shall approve construction design steps following the fundamental design prescribed in Clause 2 of this Article. Project owners may decide the approval of other design steps.
9. The Minister of National Defense and Minister of Public Security shall elaborate the power and procedures for appraisal and approval of construction designs of construction works serving national defense and security purposes in conformity with particular management requirements
What are the types of construction contracts in Vietnam?
Depending on different criteria, construction contracts are classified according to the provisions of Article 3 of Decree 37/2015/ND-CP as follows:
1. Depending on nature, types of construction contracts are as follows:
- Construction consultant contract (or contract for consultancy) is a type of contract for performance of part or whole of the consulting task in activities of investment and construction;
- Work construction contract (or construction contract) is a type of contract for the performance of construction of the works, work items or part of construction work by design; General construction contract is a type of contract for the performance of all of the works of an investment project;
- Technological equipment procurement contract (or procurement contract) is a type of contract for the procurement of technological equipment to be installed to the construction works under technological design; General procurement contract is a type of contract for the procurement of equipment to all of the works of an investment project;
- Engineering and Construction contract (or EC contract) is a type of contract for the engineering and construction of the works, work items; General EC contract is a type of contract for the engineering and construction of all of the works of an investment project;
- Engineering and Procurement contract (or EP contract) is a type of contract for the engineering and procurement of equipment for the installation of the construction works as designed; General EP contract is a type of contract for the engineering and procurement of equipment to all of the works of an investment project;
- Procurement and Construction contract (or PC contract) is a type of contract for the procurement and construction of the works, work items; General PC contract is a type of contract for the procurement and construction of all of the works of an investment project;
- Engineering, Procurement and Construction contract (or EPC contract) is a type of contract for the engineering, procurement and construction of the works, work items; General EPC contract is a type of contract for the engineering, procurement and construction of all of the works of an investment project;
- Turnkey contract is a type of contract for the performance of all the tasks from project establishment, engineering, procurement and construction of the works of an investment project;
- Contract for supply of human force, working machinery and equipment is a type of contract for the supply of human force, working machinery, equipment and other necessary vehicles for serving the construction of the works, work items, packages or construction work as designed;
- Other types of construction contract
Besides, construction contracts are classified depending on the contractual price manner and relationship of the parties involved.
What are the principles for execution of construction contracts in Vietnam?
According to the provisions of Article 5 of Decree 37/2015/ND-CP:
When executing the construction contract, the parties must meet the principles for execution of construction contract as prescribed in Clause 3, Article 138 of Clause 3, Article 138 of the Construction Law 2014.
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