What is subcontractor? Regulations on subcontractor management in Vietnam under Decree 24/2024

What is subcontractor? Regulations on subcontractor management in Vietnam under Decree 24/2024 (Internet image)

Regarding this matter, LawNet would like to answer as follows: 

What is subcontractor?

Pursuant to Clauses 27 and 28, Article 4 of the Law on Bidding 2023, regulations on subcontractors are as follows:

- Subcontractor means an organization or individual that is subcontracted by the contractor to perform construction tasks; provide consulting or non-consulting service; provide any part of the related services of the supply of goods package; or perform tasks of a mixed package.

- Specialist subcontractor means a subcontractor that will perform important tasks of the package as proposed by the contractor in their bid or proposal in accordance with capacity and experience requirements laid down in the bidding documents or RFP.

Regulations on subcontractor management in Vietnam under Decree 24/2024

According to Clause 2 of Article 132 of Decree 24/2024/ND-CP, the regulations on subcontractor management are as follows:

- Contractors are allowed to sign contracts with subcontractors listed in the bid or proposal, or with subcontractors approved by the investor to participate in the implementation of construction work, consulting; non-consulting; and related services of the supply of goods package; or tasks of a mixed package. The use of subcontractors does not change the obligations of the contractor. The subcontractor is responsible for the quantity, quality, progress, and other responsibilities of the work performed by the subcontractor.

- The replacement, supplementation, or change of subcontractors as specified above, or the change of subcontract content stated in the bid or proposal, can only be carried out with the approval of the investor and the supervision consultant, and must not exceed the maximum value of the work assigned to the subcontractor stated in the contract. The use of subcontractors must be in line with the contractor's needs in contract implementation, and the subcontractor must meet the capacity and experience requirements of the contractor.

- The contractor is responsible for selecting and using subcontractors with the capacity and experience to meet the requirements of the assigned tasks. In the case of using specialist subcontractors to perform important tasks of the package as required in the bid, the evaluation of the capacity and experience of the specialist subcontractor is carried out according to the regulations stated in the bidding documents. When using specialist subcontractors, the contractor is not required to meet the capacity and experience requirements for the work assigned to the specialist subcontractor.

- The contractor is responsible for making full and timely payments to the subcontractor according to the agreement between the contractor and the subcontractor.

Regulations on eligibility of contractors or investors

According to Article 5 of the Law on Bidding 2023, the regulations on the eligibility of contractors are as follows:

(1) A contractor or investor that is an organization shall be deemed to be eligible if meeting the following requirements:

- A domestic contractor or investor must be an enterprise, cooperative, cooperative union, artel, public sector entity or foreign-invested business organization that is duly established and operating under the law of Vietnam. A foreign contractor or investor must be duly established and operating under the law of a foreign country;

- It must keep independent accounting records;

- It is not undergoing dissolution process or subject to revocation of enterprise registration certificate, cooperative/cooperative union/ artel registration certificate; is not facing insolvency as prescribed by the law on bankruptcy;

- Its name is registered on VNEPS before the grant of approval for contractor or investor selection result;

- It must ensure competitiveness in bidding as prescribed in Article 6 of the Law on Bidding 2023;

- It is not being prohibited from participating in bidding according to a decision issued by a competent person, Minister, head of ministerial agency, Governmental agency or another central-government agency, or Chairperson of the provincial-level People’s Committee as prescribed in Clause 3 Article 87 of the Law on Bidding 2023;

- It is not liable to criminal prosecution;

- Its name is included in the shortlist in case the shortlist has been made available;

- A foreign contractor is requested to enter into a consortium with a domestic contractor or will subcontract domestic contractors, unless domestic contractors are incapable of performing any tasks of the package.

(2) A contractor that is a household business shall be deemed to be eligible if meeting the following requirements:

- It has a valid certificate of household business registration issued in accordance with regulations of law;

- It is not undergoing the process of operation termination or subject to revocation of certificate of household business registration; the owner of the household business is not liable to criminal prosecution;

- It meets the requirements laid down in Points d, dd, e and h Clause 1 of Article 5 of the Law on Bidding 2023.

(3) A contractor or investor that is an individual shall be deemed to be eligible if meeting the following requirements:

- He/she has full capacity for civil acts in accordance with regulations of the law of the country whose citizenship he/she is holding;

- He/she possesses appropriate professional certificate(s) if required by laws;

- He/she meets the requirements laid down in Points e and g Clause 1 of Article 5 of the Law on Bidding 2023.

(4) A contractor or investor that meets the eligibility requirements laid down in Clause (1), (2) and (3)  may participate in the bidding as an independent contractor or consortium contractor.

Ho Quoc Tuan

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