Principles of adjustment of construction contract prices in Vietnam

Principles of adjustment of construction contract prices in Vietnam (Internet image)

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

1. What is a construction contract?

According to Clause 1, Article 138 of the Law on Construction 2014 (amended in 2020), construction contracts are civil contracts established in writing between principals and contractors to perform in part or wholly the work in construction investment activities.

2. Principles of adjustment of construction contract prices in Vietnam

Specifically, in Article 2 of Circular 07/2016/TT-BXD, the principles of adjustment of construction contract prices are as follows:

- Construction contract price adjustment shall only be made during the period of contract performance, including also extended periods as agreed upon in the contract.

- In case a post-adjustment contract price (covering also additional work volumes reasonably arising outside the signed contract) does not exceed the approved bidding package price (including also the contingency of such bidding package), the project owner may decide on the adjustment.

In case it exceeds the approved bidding package price, the adjustment shall be approved by a person competent to decide on the investment.

- When signing the contract’s annexes, the parties should clearly identify additional work volumes and applicable unit prices. The additional work volumes shall be agreed upon by the parties before performing the contract.

- For additional work volumes arising due to the contractor’s subjective fault, the contract value corresponding to the advance payment level exceeding the minimum advance level (specified in Clause 5, Article 18 of Decree 37/2015/ND-CP) may not be adjusted in price from the time of advance payment.

- Those of the compensation responsibility of insurers are not subject to contract price adjustment under Circular 07/2016/TT-BXD.

- The contract price adjustment shall be agreed upon by the parties and specified in the contract regarding cases eligible for price adjustment; adjustment procedures, order, time, scope and conditions; and methods and grounds for contract price adjustment.

The methods for contract price adjustment must conform to contract price types and characteristics of contractual works.

Other adjustments (if any) agreed upon by the parties in the contract must not contravene the provisions of this Circular and other relevant legal documents on construction contracts.

3. Adjustment of prices of adjustable unit price-based contracts in Vietnam

The adjustment of prices of adjustable unit price-based contracts is as follows:

- When actually completed work volumes tested and accepted are more than 20% larger or smaller than those specified in the contract, or when there arise reasonable additional work volumes without unit prices in the contract, the parties shall agree on the determination of new unit prices on the principle agreed upon in the contract.

The determination of new unit prices must comply with the Ministry of Construction’s Circular guiding the estimation and management of work construction investment costs and agreements in the contract.

- In case the contractual parties agree on unit price adjustment (all or several of unit prices) for works eligible for price adjustment due to inflation after a specified period following the effective date of the contract, the unit price adjustment shall be made by the methods guided in the Appendix to Circular 07/2016/TT-BXD.

- For force majeure events and other force majeure circumstances: The determination of unit prices for works performed to remedy consequences of force majeure events or circumstances must conform to practical conditions and comply with the Ministry of Construction’s Circular guiding the estimation and management of work construction investment costs or agreements on unit prices specified in the signed contract, including also unit prices already adjusted under agreements of the contract (if any).

(Article 8 of Circular 07/2016/TT-BXD)

Tran Thanh Rin

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