Vietnam: 07 types of PPP project contract

Vietnam: 07 types of PPP project contract

1. What is a PPP project contract?

According to Clause 16, Article 3 of the Law on Public – Private Partnership Investment 2020, a 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 the Law on Public – Private Partnership Investment 2020.

2. 07 types of PPP project contracts

PPP project contracts include the following types of contracts:

(1) BOT contract means the contract under which a PPP project investor or enterprise is assigned the right to build and operate infrastructure works and systems within a predetermined term; upon expiry of such term, the PPP project investor or enterprise transfers these works or systems to the State of Vietnam;

(2) BTO contract means the contract under which a PPP project investor or enterprise is assigned the right to build infrastructure works and systems; after the construction is complete, the PPP project investor or enterprise transfers these works or systems to the State of Vietnam, and is accorded the right to operate these works or systems within a specified period of time;

(3) BOO contract means the contract under which a PPP project investor or enterprise is assigned the right to build, own and operate infrastructure works and systems within a predetermined term; upon expiry of such term, the PPP project investor or enterprise terminates the contract;

(4) O&M contract means the contract under which a PPP project investor or enterprise is assigned the right to operate and manage part or the whole of existing infrastructure works and systems within a predetermined term; upon expiry of such term, the PPP project investor or enterprise terminates the contract.

(5) BTL contract means the contract under which a PPP project investor or enterprise is assigned the right to build infrastructure works or systems, and transfer them after completion; is accorded the right to supply public products and services on the basis of operating and exploiting these works or systems within a predetermined term; the transferee signs a service lease and pays the PPP project investor or enterprise;

(6) BLT contract means the contract under which a PPP project investor or enterprise is assigned the right to build infrastructure works or systems, and supply public products and services on the basis of operating and exploiting these works or systems within a specified period of time; the transferee-to-be signs a service lease and pays the PPP project investor or enterprise; upon expiry of such term, the PPP project investor or enterprise transfers these works or systems to the State of Vietnam.

(7) Mixed contract means a combination contract between the types of contracts specified above.

(Article 45 of Law on Public – Private Partnership Investment 2020)

3. Basics of project execution contracts

Specifically, in Article 47 of the Law on Public – Private Partnership Investment 2020, a PPP project contract has the following basic contents:

- Objectives, scale, location and schedule of implementation of a project; time and duration of a infrastructure work or system; the effective date of the contract; contract term;

- Scope of and requirements concerning engineering, technology and quality of the infrastructure work or system, supplied public products or services;

- 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);

- 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;

- 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;

- 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;

- 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;

- 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;

- 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;

- 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;

- Investment incentives, guarantees, plans to share the revenue increase and decrease, assurance of balancing of foreign currencies, types of insurance (if any);

- Laws governing the contract and dispute resolution mechanism.

Thanh Rin

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