What are the regulations on contractual price and conditions? In Vietnam, how many different types of construction contracts are there?
What are the regulations on contractual price and conditions in Vietnam?
Pursuant to Clause 1, Article 15 of Decree 37/2015/ND-CP stipulates 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.
Thus, 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.
What are the regulations on contractual price and conditions? In Vietnam, how many different types of construction contracts are there?
In Vietnam, how many different types of construction contracts are there?
Pursuant to Clause 3, Article 15 of Decree 37/2015/ND-CP, supplemented by Point a, Clause 5, Article 1 of Decree 50/2021/ND-CP, stipulates as follows:
Construction contract price includes the following types:
- Lump sum contract price is the contractual price that is unchanged throughout the implementation period 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.
- 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 implementation period except force majeure events.
- 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;
- 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.
+ Expenses for experts’works are determined by multiplying their pay rate and other related expenses by the actual work time (on a monthly, weekly, daily and hourly basis).
+ Other expenses apart from the expenses for experts’ work include travel expenses, working offices and other expenses.
- Cost-plus fee contract price is the contract price whose value has yet to be determined at the time of signing the contract, and the parties only agree upon the administrative costs, general costs and profits since there are insufficient grounds for determining the scope of work and direct costs to carry out the work specified in the contract.
The parties shall agree upon the level of administrative costs, general costs and profits to be expressed as a ratio (%) or as a specific value on the basis of the actual, reasonable and valid costs to carry out the work specified in the contract;
The level of the administrative costs, general costs and profits may be fixed or variable (increased or decreased within a range or without limits) depending on the actual level of direct costs agreed upon by the parties in the contract in order to protect their interests.
- Contractual price of combined price is the contractual price used in combination with other contractual prices as prescribed in Points a – d of this Clause in accordance with each type of work mentioned in the contract.
At the same time, the construction contract price is determined on the basis of bid price or result of negotiation on the construction contract between the parties
What are the conditions for applying construction contractual prices in Vietnam?
Pursuant to Clause 5, Article 15 of Decree 37/2015/ND-CP (added by Point b, Clause 5, Article 1 of Decree 50/2021/ND-CP) stipulates as follows:
Contractual price and conditions
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Conditions for applying construction contract types are prescribed as follows:
a) Lump sum contract:
Lump sum contract price applied to bid 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 bid package price or contractual price such as risks to quantity and slippage in prices must be taken into account during the contract implementation period and each party must be responsible for its own risks.
b) Contractual price of fixed unit price:
Contractual price of fixed unit price applied to bid packages at the date of contractor selection and contract negotiation has met conditions for determination of unit price for the implementation of the works under the construction contract but quantity of work is not yet determined. Then, risky elements of unit price such as slippage in prices must be taken into account during the contract implementation period and each party must be responsible for its own risks as well as anticipating provisional budget for risky elements of bid price and contractual price such as slippage in prices and quantity.
c) Adjustable unit price contract applied to bid packages at the date of contractor selection and contract negotiation has not yet met conditions for determination of quantity, unit price and elements of contractual price such as slippage in prices during the contract implementation period and the parties must be responsible for anticipating provisional budget for risky elements of bid price and contractual price such as slippage in prices and quantity.
d) Time-based contract price is usually applied to a number of construction contracts covering consulting work in activities of investment and construction. Contract for consultancy is applied to all contractual prices as prescribed hereof.
d1) Regarding a cost-plus fee contract
Price of a cost-plus fee contract price only applies to the contract packages at the time of signing the contract when the parties have insufficient grounds for determining the scope of work and necessity of using materials, labor, construction machinery and equipment to carry out the intended work specified in the contract.”
Thus, the application of construction contract prices shall comply with the above conditions.
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