Vietnam: What are the PC package and PC contract? Will the lump sum contract price be applied to PC contracts?
What are the PC package and PC contract in Vietnam?
According to Clause 16 Article 4 of the Law on Bidding 2023, the procurement and construction package is defined as follows:
“mixed package” means one of the following packages: engineering and procurement (EP); engineering and construction (EC); procurement and construction (PC); engineering, procurement and construction (EPC); project preparation, engineering, procurement and construction (turnkey project).
Referring to Point e, Clause 1, Article 3 of Decree 37/2015/ND-CP amended by Point c, Clause 2, Article 1 of Decree 50/2021/ND-CP, there is an explanation of PC Contract as follows:
Contract for procurement of materials and equipment and construction of works (Procurement - Construction abbreviated as PC in English) that is a contract for procurement of materials and equipment and construction of works and work items; general contract for procurement of materials and equipment and construction of works and work items that is a contract for procurement of materials and equipment and construction of all works of a construction project.
Thus:
(i) PC package - procurement and construction package is one of the packages under a mixed package.
(ii) PC contract or contract for procurement of materials and equipment and construction of works (Procurement - Construction abbreviated as PC in English) that is a contract for procurement of materials and equipment and construction of works and work items; general contract for procurement of materials and equipment and construction of works and work items that is a contract for procurement of materials and equipment and construction of all works of a construction project.
Will the lump sum contract price be applied to PC contracts in Vietnam?
The contractual price and conditions for application are specified in Article 15 of Decree 37/2015/ND-CP as follows:
Contractual price and conditions for application
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5. Conditions for applying construction contract types are prescribed as follows:
a) Lump sum contract:
Lump sum contract price applied to packages at the date of contractor selection and contract negotiation has met conditions for determination of quantity and unit price for the implementation of the works under the construction contract or in some cases, quantity and unit price are not yet determined but the parties are qualified to calculate and determine the lump sum contract price.
When the lump sum contract price is applied, elements related to package price or contractual price such as risks to quantity and slippage in prices must be taken into account during the contract performance and each party must be responsible for its own risks.
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Thus, the lump sum contract price may be applied to PC Contracts if they fall into one of the following cases:
Case 01: Packages, at the date of contractor selection and contract negotiation, have met conditions for the determination of quantity and unit price for the implementation of the works under the construction contract;
Case 02: Packages, at the date of contractor selection and contract negotiation, have quantity and unit price that have not yet been determined but the parties are qualified to calculate and determine the lump sum contract price.
Note: When the lump sum contract price is applied, elements related to package price or contractual price such as risks to quantity and slippage in prices must be taken into account during the contract performance and each party must be responsible for its own risks.
Is the lump sum contract price changed during contract performance?
The contractual price and conditions for application are specified in Article 15 of Decree 37/2015/ND-CP as follows:
Contractual price and conditions
1. Contractual price is an amount of money that the employer undertakes to pay to the contractor for the implementation of the works under the requirements for quantity, quality, progress, payment terms, advances and others as agreed in the contract.
2. Expenses, taxes and other charges (if any) included or not included in contractual price must be specified in the construction contract; contractual price to be revised must conform to contract type, contractual price manner and must be agreed by the parties in the contract. As for a construction contract under which payment in multiple currencies is agreed by the parties, contractual price in proportion to each currency must be specified.
3. Construction contract price includes the following types:
a) Lump sum contract price is the contractual price that is unchanged throughout the contract performance for the quantity of work within the scope of work under the signed contract except force majeure events or compulsory changes to scope of work.
b) Contractual price of fixed unit price is determined by multiplying fixed unit price of each work by respective quantity of work. Fixed unit price is the unit price that is unchanged throughout the contract performance except force majeure events.
c) Contractual price of adjustable unit price is determined by multiplying the unit price subject to adjustment due to slippage in prices as agreed in the contract by respective quantity of work (with the price adjustable). Adjustment to unit price due to slippage in prices are prescribed in Clauses 3, 4, Article 38 hereof;
d) Time-based contract price is determined on the basis of expenses for experts’ work, other expenses and work time (quantity) by month, week, day and hour.
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Thus, the lump sum contract price is the contractual price that is unchanged throughout the contract performance for the quantity of work within the scope of work under the signed contract, except for force majeure events or compulsory changes to the scope of work.
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