Basis for placing orders for public utilities in Vietnam

Basis for placing orders for public utilities in Vietnam (Internet image)

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

1. What is public utility?

According to Clause 4, Article 3 of Decree 32/2019/ND-CP, public utility refers to a commodity or service of which production and supply according to the market mechanism can hardly offset any cost incurred;

Or which is a particular commodity or service that has access to the Government’s subsidy against the spread between the selling price, the market or selling price or value under the Government's regulations;

Or between the sum that a beneficiary of a public utility pays as per the Government's regulations and total reasonable production cost that a producer or supplier thereof incurs to production or supply of any public utility ordered by the Government (or commissioned under regulatory provisions of relevant industry-specific law (if any)).

2. Basis for placing orders for public utilities in Vietnam

Bases for ordering production and supply of public products and services in Vietnam are specified in Article 18 of Decree 32/2019/ND-CP as follows:

(i) Budget permitted by the competent authority for ordering public utilities.

(ii) Targets pertaining to production and supply of public utilities; estimate of reasonable costs of production and supply of public utilities.

(iii) Unit price, cost or value of, or subsidy on the public utility on order that is determined according to economic – technical norms or cost norms adopted for use by the Government and are subject to the decisions issued by competent authorities in accordance with price and other relevant law. Fees and charges for paid public utilities shall be subject to the Government’s regulations.

(iv) Selling price; unit price, market price or value of the public utility that is subject to the Government's regulations or the sum that the beneficiary of the public utility pays in accordance with the Government’s regulations.

* Based on the permitted budget, unit price, quoted price, reasonable cost, selling price, market price or value of the public utility, subsidy and other order factors prescribed in other relevant law (if any):

The order-placing agency shall determine the amount and quantity of public utilities qualified for the subsidy to enter into a purchase agreement.

If the selling price; unit price or market or selling price or value of the public utility regulated by the Government or the sum that the beneficiary of the public utility pays in accordance with the Government’s regulations as stated in (in Vietnam) is lower than total reasonable cost of production and supply of the public utility, the producer or supplier can be given subsidies varying according to the amount or quantity of public utilities on order.

3. Details or terms and conditions of the purchase agreement of public utilities in Vietnam

Details or terms and conditions of the purchase agreement of public utilities in Vietnam include:

- Name of the ordered public utility: Amount and quantity of the public utility on order;

- Quality of the public utility on order (according to the criteria and standards set by competent state agencies);

- Price, unit price, subsidy;

- Amount and quantity of the subsidized public utility;

- Contract value;

- Start date and completion deadline;

- Sales and expenses arising from production and supply of the public utility (where necessary);

- Selling price of the public utility;

- Reasonable costs of production and supply of the public utility;

- Delivery time, location, method;

- Payment and accounting method;

- Contract acceptance testing and discharge method;

- Rights and obligations of the purchaser and the producer or supplier of the ordered public utility;

- Responsibilities of the contracting parties in case of breach of the agreement and settlement mechanism.

- Contracting parties may add several details or terms and conditions to the agreement on condition that they neither violate law and cause any change in the price of the public utility on order.

Apart from the order information specified in clause 1 of Article 19 of Decree 32/2019/ND-CP, Ministries, central and local authorities may add several other information to purchase agreements in order to ensure conformity to managerial requirements in specific sectors or consistency with details given in the sample agreement prescribed in specialized law (if any).

Each purchase agreement used for ordering a public utility is made by adopting the sample Agreement (Form No. 03) shown in Decree 32/2019/ND-CP.

(Article 19 of Decree 32/2019/ND-CP)

Nguyen Thi Hoai Thuong

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