Vietnam: How to settle the lump-sum contract when reducing the workload?

During the construction process, a number of workloads are generated or reduced. But because it is well aware that this is a package contract, Hong Ha Construction Investment and Design Consultancy Joint Stock Company has completed the project according to the design, not asking the investor to generate or reduce. The two sides have carried out the acceptance test and settlement of the project. After that, the Trading Corporation hired the ASEAN Auditing Company to audit the work.

During the audit, the audit unit recalculated the contract volume and unit price and requested the investor to reduce the final settlement of the work. Hong Ha Construction Investment and Design Consulting Joint Stock Company did not agree with the results of the audit unit and pointed out legal documents on construction contracts that the audit unit did not properly implement such as: Points a, d and dd Clause 1 Article 62 of the Law on Bidding of Vietnam, Clause 2 Article 92 of the Decree No. 63/2014/NĐ-CP of Vietnam’s Government detailing the implementation of several provisions of the law on bidding regarding the selection of contractors; Decree No. 37/2015/NĐ-CP of Vietnam’s Government detailing construction contract.

On the other hand, Point b Clause 3 Article 15 of Circular No. 09/2016/TT-BTC on finalization of completed projects funded with State capital also does not require to recalculate the volume and unit price; or according to Point b Clause 3.2.2 Article 18 of Decision No. 02/2017/QĐ-KTNN of State Audit on promulgation of the process for auditing state-funded investment and construction projects, it is also clearly stated that no re-calculation of the volume as well as the detailed unit price has been approved by the competent authority under the winning decision.

Hong Ha Construction Investment and Design Consulting Joint Stock Company believes that the actions of the above audit unit have violated Point c Clause 3 Article 6 of Decree No. 37/2015/NĐ-CP of Vietnam’s Government detailing construction contract, infringing upon the legitimate rights and interests of the Company. The company has repeatedly requested the investor to properly perform the signed contract, but the investor is confused with the report of the audit unit's results.

Through the system of receiving and responding to business proposals, Hong Ha Construction Investment and Design Consultant Joint Stock Company proposed to answer, is the re-calculation of volume, unit price and request of the investor to reduce the missing volume but not add the arising volume of the ASEAN Auditing Company in accordance with regulations?

The Ministry of Finance of Vietnam would like to answer this question as follows:

Hong Ha Construction Investment and Design Consultancy Joint Stock Company does not provide sufficient information about the power supply item of the urban project (Project investment decision and other relevant information such as contractor selection form, the decision to win the tender, the time of signing the contract, content agreed in the contract, capital source for project implementation, etc.); thus, the Ministry of Finance does not have enough information to give a specific answer.

According to the Circular No. 09/2016/TT-BTC of the Ministry of Finance of Vietnam, the scope of regulation applies to investment projects funded by the State capital and applies to agencies, organizations and individuals involved in the finalization of completed projects funded by the State capital.

Therefore, based on the provisions of current law, the Ministry of Finance has replied to agencies, organizations and individuals related to the finalization of completed projects funded by the State as follows:

Regulations on lump-sum contract

According to Points a, d Clause 1 Article 62 of the Law on Procurement 2013 of Vietnam, lump-sum contract is specified as follows:

“1. Lump-sum contract:

a) Lump-sum contract means contract with fixed price during performance for all work contents in contract. Payment for lump-sum contract shall be performed many times during implementation or once upon finishing contract. Total amounts paid to contractor until finishing obligations under contract shall be equal to the price stated in contract;

…

d) For packages of works, during the course of negotiating and finalizing contract, the relevant parties need review the table of work volume under the approved design; if the bidder or the Procuring Entity detects that the tables of work quantity and volume are not exact in comparison with design, the Procuring Entity shall report to the investor for consideration to decide on adjustment of the work volume in order to ensure the conformity with design;”

According to Clause 4 Article 144 of the Construction Law No. 50/2014/QH13 of Vietnam: “For package contracts, payment shall be made according to a percentage of the contract price or the price of the work, work items or volume of work corresponding to the payment period agreed upon by the parties in the contract.”

According to the Decree No. 37/2015/NĐ-CP of Vietnam’s Government detailing construction contract:

- Point a Clause 3 Article 6: “A construction contract that has become effective shall be the highest legal foundation that the employer, contractor and other related parties have the obligations to perform”.

- Point a Clause 3 Article 15: “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”.

- Clause 4 Article 19: “If the two parties are not eligible to carry out the payment under the contract during the payment period (no data to adjust price, insufficient time to determine product quality...), temporary payment can be made. When the two parties are eligible to carry out the payment, the employer must make the payment to the contract as prescribed in Clause 3 of this Article”.

Payment of investment capital with funding from state budget

Regulations on payment for completed projects funded by the State budget in the form of a package contract are specified in Circular No. 08/2016/TT-BTC dated January 18, 2016 and Circular No. 108/2016/TT-BTC dated June 30, 2016 of the Ministry of Finance of Vietnam:

- Point a Clause 1 Article 9: “The payment shall be made on percentage of the contract price or the construction works price, work items or workload in proportion to payment periods which have been agreed by the parties and specified in the relevant contract. The certification of finished workload is not required when the payment is made.”

- Clause 3 Article 16: 

“2. Carry out the acceptance of finished workload, prepare payment documents and request for payment for contractors in conformity with payment period stated in the contract.

3. Bear responsibility before the law and the competent individual for the selection of contractors as regulated by the Law on bidding and relevant guidance documents; bear responsibility for the accuracy of the finished workload, unit price and value requested for payment; ensure the legality of figures and documents submitted to the State Treasury and competent state agencies.”

According to the Government Portal

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