Vietnam: What does a BOO contract stand for? When must a PPP project enterprise provide a BOO contract performance security?
What does a BOO contract stand for?
Under Clause 16, Article 3 of the 2020 Law on Public – Private Partnership Investment, there are the following provisions:
16. PPP project contract means a written agreement between a contracting authority and a PPP project investor or enterprise on the State's concession to that investor or PPP project enterprise to execute a PPP project according to provisions of this Law, including the following types of contracts:
a) Build – Operate – Transfer contract (hereinafter referred to as BOT contract);
b) Build - Transfer - Operate contract (hereinafter referred to as BTO contract);
c) Build - Own - Operate contract (hereinafter referred to as BOO contract);
d) Operate - Manage contract (hereinafter referred to as O&M contract);
dd) Build - Transfer - Lease contract (hereinafter referred to as BTL contract);
e) Build - Lease - Transfer contract (hereinafter referred to as BLT contract);
g) Mixed contract prescribed in Clause 3 of Article 45 of this Law.
Thus, according to the above regulations, BOO contract stands for Build - Own - Operate Contract.
Is a BOO contract in Vietnam required to specify the rights and obligations of the contract signatory, investor, and enterprise?
Under Article 47 of the 2020 Law on Public – Private Partnership Investment, there are the following provisions:
Basics of project execution contracts
1. A PPP contract shall contain the following information:
a) Objectives, scale, location and schedule of implementation of a project; time and duration of an infrastructure work or system; the effective date of the contract; contract term;
b) Scope of and requirements concerning engineering, technology and quality of the infrastructure work or system, supplied public products or services;
c) Total investment; capital structure; financial plan, including the financial arrangement plan; public product and service prices and charges, including methods and formulas for setting or adjusting them; state capital invested in a PPP project and the corresponding form of management and use (if any);
d) Conditions for use of land and other natural resources; plans to organize the construction of auxiliary works; requirements for compensation, support and resettlement; assurance of safety and environmental protection; force majeure cases and plans for response to force majeure events;
dd) Responsibilities for carrying out licensing procedures according to regulations of relevant laws; design; organization of construction; quality inspection, supervision and management at the construction phase; acceptance testing, settlement of investment capital and confirmation of the completion of infrastructure works and systems; provision of main input materials used for production and business activities of the project;
e) Responsibilities for the operation and commercial use of infrastructure works and systems so that public products and services are provided in a continuous and stable manner; conditions, order and procedures for transfer of infrastructure works and systems;
g) Performance security; rights of ownership, management, and exploitation of assets related to the project; rights and obligations of the PPP project investor or enterprise; the agreement on use of a third-party guarantee service with respect to the obligations of the contract signatory;
h) Plans for response to the circumstances substantially changing in accordance with civil law to continue to perform the contract; response, compensation and punitive measures in case one of the contracting parties breaches the contract;
i) Responsibilities of parties related to information security; reporting regime; provision of information, related documents and explanation about the contract performance at the request of competent authorities, inspection, examination, auditing, and supervising authorities;
k) Principles and conditions for amendment, supplementation and termination of the contract before its expiry; assignment of rights and obligations of the parties; the lender's rights; procedures, rights and obligations of the parties upon contract discharge;
l) Investment incentives, guarantees, plans to share the revenue increase and decrease, assurance of balancing of foreign currencies, types of insurance (if any);
m) Laws governing the contract and dispute resolution mechanism.
2. PPP contract must specify rights and obligations of the contracting authority, the investor and the PPP project enterprise.
3. The Government shall regulate sample contracts applicable to types of contracts specified in Article 45 of this Law.
Thus, a BOO contract in Vietnam must specify the rights and obligations of the contract signatory, investor, and PPP project enterprise.
When must a PPP project enterprise in Vietnam provide a BOO contract performance security?
Under Clause 1, Article 48 of the 2020 Law on Public – Private Partnership Investment, there are the following provisions:
PPP contract performance security
1. The PPP project enterprise must provide a contract performance security before the effective date of the contract.
2. Based on the scale and nature of each project, the value of a contract performance security shall be specified in the invitation for bid at a determined rate of between 01% and 03% of total investment in the project.
3. The validity period of the contract performance security shall start on the effective date of the contract and end on the date on which the PPP project enterprise completes its contractual obligations during the stage of construction of infrastructure work or system under the contract; In cases where it is necessary to prolong the construction period, the investor must extend the validity period of the contract performance security accordingly.
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Thus, a PPP project enterprise must provide a BOO contract performance security before the effective date of the contract.
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