Conditions for ordering the public utilities in Vietnam

Conditions for ordering the 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. Conditions for ordering the public utilities in Vietnam

Pursuant to Clause 1, Article 17 of Decree 32/2019/ND-CP, ordering the public utilities in Vietnam indicated in the Appendix II attached to Decree 32/2019/ND-CP shall be permitted when all of the following conditions are satisfied:

(i) The producer or supplier of public utility has obtained registration for business activities relevant to the sectors or industries involving the public utility on order;

Has full financial capacity and ensure that their infrastructure, equipment, machinery, engineering, production technology level, management and personnel qualification conform to requirements concerning production and supply of public utilities that are set forth in a purchase agreement.

In addition, the public utility producer or supplier that is entitled to receive any order in the sectors eligible for licenses or permits granted by the Government must be subject to another condition whereunder they must successfully obtain the permit or license from the agency having jurisdiction to grant licenses or permits according to specialized law;

(ii) The public utility on order is on the list of particular public utilities because it is related to intellectual property, or is tendered for by only one supplier.

(iii) Selling price, market price or value of and subsidy on the public utility on order are subject to the competent authority’s decision issued according to price and other relevant law.

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

Details of the purchase agreement 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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