Chapter VII
CONTRACTS
Section 1. CONTRACTS USED IN CONTRACTOR SELECTION
Article 64. Types of contract
1. Lump sum contract:
a) Lump sum contracts are used for packages where the scope of tasks, technical requirements and the package execution duration are well defined at the time of contractor selection and changes in quantity or technical requirements or encountering unforeseen conditions is unlikely; or for packages where the quantity and unit price cannot be defined but the contracting parties’ ability to manage risks and substantial variations or the physical and qualitative characteristics of output products are well defined, including EPC contracts and turnkey contracts;
b) In case of a lump sum contract, the package price which is used as the basis for bid evaluation and contract award shall include contingencies determined for risks associated with quantities and price escalation which may occur during the contract execution in proportion to the risk management liability to be undertaken by the contractor. The bid price should include all contingencies determined for risks associated with quantities and price escalation which may occur during the contract execution in proportion to the contractor’s liability for the package;
c) The contract price is unchanged throughout the contract duration in respect of the scope of tasks, technical requirements and terms and conditions specified in the contract, except force majeure events or changes in the scope of tasks resulting in change in the contract price;
d) The payment shall be made according to the percentage of the contract price or the price of works, work item or quantity of tasks in proportion to the agreed-upon payment schedule specified in the contract. The payment is made without requiring certification of completed quantities.
2. Fixed unit price contract:
a) Fixed unit price contracts are used for packages where the physical characteristics are well defined at the time of contractor selection but the exact quantity or volume of tasks to be actually completed by the contractor cannot be determined. The contract price shall initially be determined on the basis of quantity or volume of tasks and fixed unit price specified in the contract and contingencies for additional tasks determined in accordance with regulations of law;
b) Unit prices specified in the fixed unit price contract shall remain unchanged throughout the performance of entire tasks specified in the contract. Payment shall be made according to the quantity or volume of tasks completed and accepted, and the fixed unit prices specified in the contract.
3. Adjustable unit price contract:
a) Adjustable unit price contracts are used for packages with long execution duration where input price fluctuations may occur during the contract execution and the application of fixed unit prices may negatively affect the package execution. Unit prices and the contract price of an adjustable unit price contract may be adjusted according to specified agreements specified in the contract in respect of any tasks of the contract. The contract price shall initially be determined on the basis of quantity or volume of primary tasks and base unit price specified in the contract and contingencies for additional tasks and price escalation. Methods for calculation of price escalation and contingencies for price escalation must be specified in the contract;
b) Payment shall be made according to the quantity or volume of tasks completed and accepted, and the unit prices specified in the contract or adjusted unit prices (if any).
4. Time-based contract:
Time-based contracts may be used for emergency situations; repair or maintenance of works, machinery and equipment; or supply of consulting services when it is difficult to define the scope and length of services. The contract price is based on the unit price per amount of time, agreed hourly, daily, weekly or monthly salary rates specified in the contract and reasonable reimbursable expenses.
5. Cost plus fee contract:
Cost plus fee contracts are used for tasks or services when the scope of tasks or input factors or costs necessary for performing estimated tasks of the contract cannot be properly defined at the time of contractor selection. At the time of signing contract, the parties shall reach specific agreements on administrative and overhead expenses, profits, direct costs-based calculation method; method for determining direct costs, and other contents necessary for executing the contract.
6. Performance-based contract:
Performance-based contracts are used for tasks or services for which the payment is based on the contract execution outcomes with accepted quality and quantity, and other factors. The contract must clearly indicate the quantity and quality of outputs, methods for inspecting, evaluating and measuring the achievement of output quality standards, reduction of payments, price adjustment provisions (if any) and other contents necessary for executing the contract.
7. Percentage-based contract:
Percentage-based contracts are used for construction insurance service packages where the contract price is exactly determined on the basis of the value of works actually accepted.
8. Mixed contract:
A mixed contract means a contract whose scope comprises different types of contract specified in Clauses 1 through 7 of this Article. The mixed contract must clearly define the scope of tasks to be performed under each type of contract and relevant modifications made when different types of contract are applied to the same task or service. Provisions on payment for each type of contract shall apply to payment for the scope of tasks of the mixed contract.
Article 65. Contract documents signed with contractor
1. The contract documents signed with a contractor shall include:
a) Contract agreement;
b) Contract appendices, including the activity schedule, price schedules, and execution schedule (if any);
c) Decision on approval of contractor selection result.
2. Depending on the scale and nature of each package, the contract documents may, in addition to the documents specified in Clause 1 of this Article, include one or some of the following documents:
a) Contract completion record;
b) Contract negotiation record (if any);
c) Written agreement made by the parties on conditions of the contract, including general conditions of contract and special conditions of contract;
d) Bid or proposal of the successful bidder and clarifications thereof;
dd) Bidding documents or RFP and addenda thereto;
e) Other relevant documents.
Article 66. Conditions for signing of contract
1. The bid or proposal of the successful bidder must still remain valid at the time of signing the contract. In case of centralized procurement with use of the framework agreement, the framework agreement must still remain valid at the time of signing the contract.
2. At the time of signing the contract, the successful bidder must meet all technical and financial requirements for executing the package in accordance with the requirements laid down in the bidding documents or RFP.
3. The employer is requested to provide funding for making advances and payments, premises and other conditions necessary for ensuring the package execution schedule.
Article 67. Signing of contract with successful bidder
The signing of contract between the employer and the successful bidder shall be subject to the following provisions:
1. Only a single contract will be signed for executing a package. A contract may be prepared applying one or some types of contract prescribed in Article 64 of this Law. A centralized procurement package or a package which is divided into smaller parts may be executed under several contracts. Each contract shall cover one or some parts of the package. If different types of contract are employed, the type of contract for each task must be specified;
2. Contents of the contract signed by and between the parties must be conformable with contents of the bidding documents, RFP, bids or proposals, contract negotiation results (if any), decision on approval of contractor selection result. The contract should clearly indicate the scope of tasks to be undertaken by specialist subcontractors (if any) and maximum value of tasks to be subcontracted. The maximum value of tasks to be subcontracted shall not include the value of tasks to be undertaken by specialist subcontractors;
3. In case of a consortium bidder, the contract agreement must bear signatures and seals (if any) of all members of the consortium. In case of centralized procurement with use of framework agreement, all members of the consortium shall directly append their signatures and seals (if any) to the contract agreement with the entity in need of goods or services or a member of the consortium shall be authorized to do so under terms and conditions of the consortium agreement;
4. The Government shall elaborate this Article.
Article 68. Performance security
1. The successful bidder shall be required to choose one of the following options for ensuring their execution of the contract, including:
a) Pay a deposit;
b) Submit a letter of guarantee issued by a domestic credit institution or foreign bank branch lawfully established under the law of Vietnam; or
c) Submit a certificate of surety bond insurance issued by a domestic non-life insurer or branch of a foreign non-life insurer duly established under the law of Vietnam.
2. The performance security must be furnished by the successful bidder, except:
a) Consulting service supplier;
b) The contractor that is selected adopting the self-execution or community participation method;
c) The bidder to be contracted for executing a package whose price does not exceed the price limit prescribed in Point m Clause 1 Article 23 of this Law.
3. The successful bidder shall furnish the required performance security before or when the contract becomes effective.
4. Depending on the scale and nature of each package, the value of the performance security equaling 2% - 10% of the contract price shall be specified in the bidding documents or RFP.
5. The validity period of the performance security begins on the effective date of the contract until all contractual obligations are fulfilled by the parties or warranty obligations, if specified in the contract, are taken on. If the duration of the contract needs to be extended for a specified period, the contractor shall be requested to extend the validity of their furnished performance security for a corresponding additional period before the contract is granted extension.
6. The performance security shall be forfeited if the successful bidder:
a) refuses to perform the contract that is still effective;
b) violates terms and conditions of the contract; or
c) refuses to extend the validity period of the performance security, in case failure to meet the contract execution schedule is at their fault.
Article 69. Contract execution rules
1. Parties to a contract are responsible to comply with terms and conditions of their signed contract.
2. Honesty, cooperation and lawfulness.
3. No infringement upon the interests of the State and community as well as legitimate interests of other organizations and individuals.
Article 70. Modification of contract
1. A contract may be modified:
a) in cases agreed upon by the parties and specified in the signed contract in conformity with regulations of law;
b) when circumstances for executing the contract fundamentally change as prescribed by the Civil Code; or
c) at the request of a competent authority that affects the execution of contract with no fault of the employer’s fault.
2. The following contents of the contract may be modified, including: quantities, execution schedule, prices, additional purchase option, and other contents as agreed upon by the parties in the signed contract, except the case specified in Clause 5 of this Article. Quantities, execution schedule and prices may only be modified during the package execution duration specified in the signed contract, except cases where the additional purchase option is applied.
3. During the contract execution, the parties are allowed to modify the intended completion dates of tasks specified in the contract in the following circumstances:
a) A force majeure event or unexpected situation arises and hinders the contractor from executing the contract without fault or negligence of any party to the contract;
b) There are changes in the project, scope of tasks, scope of supply, primary construction solutions, designs or supply methods due to objective reasons resulting in changes in the contract execution schedule;
c) One or both parties to the contract propose initiatives for executing the contract which require changes in the contract execution schedule with the aim of generating considerable interests to the employer;
d) The contract execution schedule is affected due to the employer's failure to provide the site as agreed upon in the contract or suspension of the contract through no fault of the contractor;
dd) The performance of tasks is suspended at the request of a competent authority due to the fault of neither of the employer and the contractor.
4. Any modification to the contract resulting in changes in the contract execution schedule or an increase in the approved package price (including contingencies) shall require an approval from the competent person. However, any increase in price shall not make the contract price exceed the total investment or total funding in the procurement cost estimate. In case a project or procurement cost estimate comprises multiple packages, any increase in price shall not make the sum of contract prices exceed the total investment or total funding in the procurement cost estimate.
5. In case of changes in the contract price, quantities and other contents as agreed upon in the contract, the signing of contract appendices shall not be required if the following conditions are met:
a) Any change shall not make the contract price exceed the package price specified in the contractor selection plan; if the package cost estimate is approved after the approval of the contractor selection plan, total funding in the package cost estimate shall not be exceeded;
b) Any change shall not lengthen the package execution duration specified in the contract;
c) Methods, formula, items and other contents necessary for making such changes are available in the contract.
6. The Government shall elaborate this Article.
Section 2. INVESTMENT PROJECT CONTRACTS IN CASE OF INVESTOR SELECTION
Article 71. Signing of contract and rules for executing investment project contracts
1. An investment project contract shall be signed if the following conditions are met:
a) The bid of the selected investor must still remain valid at the time of signing the contract;
b) At the time of signing contract, the selected investor is required to meet technical and financial requirements for executing the investment project as laid down in the bidding documents.
2. Contents of the signed contract must be conformable with contents of the bidding documents, the investor’s bid, decision on approval of investor selection result, and contract negotiation and completion record.
3. The contract shall be signed by and between a competent authority or the procuring entity (if authorized) and the selected investor. In case of a consortium, the contract agreement must bear signatures and seals (if any) of all members of the consortium.
4. The investment project contract shall be executed following the rules set forth in Article 69 of this Law.
Article 72. Investment project contract documents
The documents constituting an investment project contract consist of:
1. Contract agreement;
2. Contract appendices (if any);
3. Contract negotiation and completion record;
4. Decision on approval of investor selection result;
5. The selected investor’s bid and clarifications thereof;
6. Bidding documents and addenda thereto;
7. Other relevant documents.
Article 73. Contents of investment project contract
1. An investment project contract shall, inter alia, have the following primary contents:
a) Particulars of the contracting parties, effective date and duration of the contract;
b) Details of the investment project, including: objectives, location, and execution schedule; scale and total investment; conditions for use of land and other resources (if any); compensation and relocation measures and requirements, and construction of auxiliary works (if any); safety and environmental protection requirements; force majeure events and actions taken;
c) Responsibility to follow compensation and relocation procedures and organize construction of auxiliary works (if any); allocation or lease of land (if any);
d) The investor's obligations to fulfill commitments proposed in their bid; establishment of enterprise in charge of managing the investment project (if any);
dd) Performance security; rules and conditions for modification and termination of contract; transfer of rights and obligations by the parties;
e) Governing law and dispute settlement mechanism.
2. The Government shall elaborate this Article.
Article 74. Duration of investment project contract
1. Duration of an investment project contract means the length of time for executing the contract which is specified in the signed contract.
2. Duration of an investment project contract begins on the effective date of the contract until the investor fulfills their commitments specified in their bid and other obligations as agreed upon by the parties in the contract.
3. When the contract expires, the investor shall execute the investment project in accordance with regulations of the Law on investment and relevant laws.
Article 75. Security for performance of investment project contract
1. The investor is required to adopt one of the following performance security options for ensuring their fulfillment of responsibility to execute the investment project before or when the contract becomes effective:
a) Submit a letter of guarantee issued by a domestic credit institution or foreign bank branch lawfully established under the law of Vietnam; or
b) Submit a certificate of surety bond insurance issued by a domestic non-life insurer or branch of a foreign non-life insurer duly established under the law of Vietnam.
2. Depending on the scale and nature of the investment project, the value of the performance security equaling 1% - 3% of the total investment shall be specified in the bidding documents.
3. The validity period of the performance security begins on the official signing date of the contract until the contract is terminated. If the duration of the contract needs to be extended for a specified period, the investor shall be requested to extend the validity of their furnished performance security for a corresponding additional period.
4. The performance security shall be forfeited if the investor:
a) refuses to perform the contract that is still effective;
b) violates terms and conditions of the contract; or
c) refuses to extend the validity period of the performance security, in case failure to meet the contract execution schedule is at the investor’s fault.
Article 76. Modification of investment project contract
1. An investment project contract may be modified in the following cases:
a) The investment project which is subject to approval of investment guidelines is modified in accordance with regulations of the Law on investment resulting in changes in contents of the project contract.
Modifications to the contract shall only be made after the modified investment guidelines have been approved by a competent authority. The investor must meet technical and financial requirements for executing the modified investment project;
b) The investment project is transferred in accordance with regulations of the Law on investment and relevant laws;
c) In other cases as agreed upon by the parties in the contract in conformity with regulations of law.
2. The transfer of an investment project specified in Point b Clause 1 of this Article must meet the following conditions:
a) The transfer is approved by the competent person;
b) The investor that receives the transfer (transferee) meets technical and financial requirements for executing the investment project;
c) The transferee commits to inherit all rights and obligations of the transferor as defined in the signed investment project contract.
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