Circular No. 07/2016/TT-BXD dated March 10, 2016 of the Ministry of Construction guiding the adjustment of construction contract prices

THE MINISTRY OF CONSTRUCTION

Circular No. 07/2016/TT-BXD datedMarch 10, 2016 of the Ministry of Construction guidingthe adjustment of construction contract prices

Pursuant to June 18, 2014 Construction Law No.50/2014/QH13;

Pursuant to the Government s Decree No. 62/2013/ND-CP of June 25, 2013, defining the functions, tasks, powers and organization structure of the Ministry of Construction;

Pursuant to the Government’s Decree No. 37/2015/ND-CP of April 22, 2015, providing in detail construction contracts;

At the proposal of the Director of the Department of Construction Economics;

The Minister of Construction promulgates the Circular guiding the adjustment of construction contract prices.

Article 1.Scope of regulation and subjects of application

1. This Circular guides the adjustment of construction contract prices, covering: principles of price adjustment, cases eligible for price adjustment, order and procedures for, and contents and methods of, adjusting construction contract prices.

2. This Circular applies to organizations and individuals involved in the establishment and management of the performance of construction contracts under the following construction investment projects (including also construction contracts between investors implementing BOT, BTO, BT or PPP projects and contractors performing bidding packages under these projects):

a/ Construction investment projects of state agencies, political organizations, socio-political organizations, socio-political-professional organizations, socio-professional organizations, social organizations, people’s armed forces units and public non-business units;

b/ Construction investment projects of state enterprises;

c/ Construction investment projects not mentioned at Points a and b of this Clause, of which the state capital or state enterprise capital accounts for at least 30%, or less than 30% of the total investment amount of the projects but exceeds VND 500 billion.

Organizations and individuals involved in the establishment and management of construction contracts under construction investment projects funded with other capital sources are encouraged to apply the provisions of this Circular.

3. For construction contracts under projects funded with the official development assistance (ODA), in case relevant treaties to which the Socialist Republic of Vietnam is a contracting party and which contain provisions different from those of this Circular, such treaties shall prevail.

Article 2.Principles of adjustment of construction contract prices

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

2. 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.

3. 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.

4. 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 No. 37/2015/ND-CP) may not be adjusted in price from the time of advance payment.

5. Those of the compensation responsibility of insurers are not subject to contract price adjustment under this Circular.

6. 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.

Article 3.Cases eligible for contract price adjustment

Construction contract price adjustment may only be made in the cases specified in Clauses 2 and 3, Article 143 of Construction Law No. 50/2014/QH13 of June 18, 2014. The specific cases eligible for construction contract price adjustment are as follows:

1. For a package contract: Contract price adjustment may only be made for reasonable additional work volumes, reduced work volumes compared to work to be performed under the signed contract, and force majeure events, specifically as follows:

a/ Reasonable additional work volumes or reduced work volumes:

- For a consultancy contract, they are additional work volumes other than consultancy tasks to be performed, or contractual works which remain unperformed.

- For a construction performance contract, they are additional work volumes other than works to be performed according to the contract’s design; or works, work items and jobs not to be performed under the contract’s design.

- For an equipment provision contract, they are additional equipment outside the list of equipment under the initially signed contract.

b/ Force majeure events specified in Clause 2, Article 51 of Decree No. 37/2015/ND-CP, and other force majeure circumstances (such as karts caves, mud layers, antiques, archaeological relics encountered or found in the construction process) which cannot be anticipated by the parties when entering into the contract and are accepted by investment deciders.

2. For a fixed unit price-based contract:

a/ Reasonable additional work volumes without unit prices in the contract;

b/Forcemajeure events and other force majeure circumstances specified at Point b, Clause 1 of this Article.

3. For a time-based contract

a/ The actual period of performance of works already tested and accepted which is more than 20% longer or shorter than that specified in the signed contract;

b/ Reasonably additional experts without any expert wage level specified in the contract;

c/  Upon a change in the state policies on taxes and wages, resulting in a change in the expert wage levels and directly affecting contract prices as agreed upon by the parties in the contract.

4. For an adjustable unit price-based contract:

a/ The actually completed work volumes already tested and accepted which is more than 20% larger or smaller than those specified in the contract;

b/ Reasonable additional work volumes without any unit prices specified in the contract;

c/ Adjustment of all or several of unit prices for work volumes which, at the time of contract signing, are agreed upon by the principal and the contractor after a specified period following the effective date of the contract;

d/ Force majeure events and other force majeure circumstances specified at Point b, Clause 1 of this Article.

5. For a combined price-based contract:

They are cases eligible for contract price adjustment specified in Clauses 1 thru 4 of this Article (cases eligible for adjustment corresponding to types of the contract price)

Article 4.Procedures and order of contract price adjustment

1. For the cases eligible for contract price adjustment specified in Article 3 (except those specified at Point c, Clause 4, Article 3) of this Circular, the parties shall sign annexes to the contract to have a basis for contract price adjustment.

2. A project owner shall approve or submit for approval the additional cost estimation (except the case specified at Point c, Clause 4, Article 3) made by the contractor to serve as the basis for signing annexes to the contract. The contractor shall make an additional cost estimation based on the additional work volumes as agreed upon by the parties, regulations on management of construction investment costs and agreements in the contract.

3. Upon approval of contract price adjustment, a contractor shall adjust sub-contract prices forsub-contractorsunder the signed contracts between them.

Article 5.Adjustment of prices of package contracts

1. When there are reasonable additional work volumes outside the signed contract or reasonable additional work volumes without unit prices specified in the signed contract, the contract parties shall agree on unit prices for performance of these work volumes before performing them. A new unit price shall be determined on the principle agreed upon in the contract regarding unit prices of additional work volumes arising outside the signed contract, or work volumes without any unit prices specified in the contract. A new unit price shall be determined under the Ministry of Construction’s Circular guiding the estimation and management of work construction investment costs and agreements in the contract.

2. Lower contract prices for works, work items or jobs not to be performed according to the design dossier attached to the signed contract shall be based on the contract’s unit prices. When signing a package contract, the parties shall attach a table of unit prices to the contract to facilitate the adjustment of contract prices for work volumes not to be performed under the contract.

3. For force majeure events or other force majeure circumstances: The determination of unit prices for works performed to remedy consequences of force majeure events or circumstances must be based on practical conditions and comply with the Ministry of Construction’s Circular guiding the estimation and management of work construction investment costs; the signed contract’s unit prices; or the units prices determined on the principle agreed upon in the signed contract regarding new unit prices for additional work volumes outside the signed contract may be applied.

Article 6.Adjustment of prices of fixed unit price-based contracts

1. For additional work volumes without unit prices specified in the contract, the contract parties shall agree on the unit prices for these works before performing them. The determination of unit prices must comply with the Ministry of Construction’s Circular guiding the estimation and management of work construction investment costs and agreements in thecontract.

2. Adjustments required due to force majeure events and other force majeure circumstances must comply with Clause 3, Article 5 of this Circular.

Article 7.Adjustment of prices of time-based contracts

1. When the actual period of completion of work volumes which have been tested and accepted is more than 20% longer or shorter than that specified in the contract, or when additional experts are employed without any expert wage levels specified in the contract, the parties shall agree on the new expert wage levels on the principle agreed upon in the contract. The new expert wage levels shall be determined under the provisions applicable to the contract and agreements of the contract.

2. Upon a change in the state policies on taxes and wages, resulting in a change in the expert wage level and directly affecting contract prices, if the parties have agreements in the contract, they shall adjust the expert wage level on the principle agreed upon in the contract and relevant provisions.

Article 8.Adjustment of prices of adjustable unit price-based contracts

1. 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.

2. 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 this Circular.

3. 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 9.Adjustment of prices of combined price-based contracts

Based on the contract’s tasks corresponding to each type of contract price specified in the contract, the parties shall make contract price adjustment under Articles 5 thru 8 of this Circular.

Article 10.Methods of contract price adjustment

Depending on characteristics of the contract and type of contract prices, the parties shall agree on contract price adjustment by the method using a price adjustment coefficient or direct clearing.

Detailed contents of contract price adjustment methods are guided in the Appendix to this Circular.

Article 11.Organization of implementation

1. Contract price adjustments in construction contracts performed before the effective date of this Circular shall be made as follows:

a/ For contracts performed before June 15, 2015 (the effective date of Decree No. 37/2015/ND-CP), price adjustment must comply with agreements in the signed contracts and regulations on construction contracts effective before June 16, 2015;

b/ For contracts performed from June 15, 2015, to the effective date of this Circular, price adjustment must comply with agreements of the signed contracts and provisions of Decree No. 37/2015/ND-CP on construction contracts.

2. For construction contracts in the process of negotiation and not yet entered into, investment deciders shall consider and decide on the application of this Circular to adjusting contract prices.

3. Contract price adjustments in other cases not mentioned in Clauses 1 and 2 of this Circular must comply with Decree No. 37/2015/ND-CP and this Circular.

4. Ministers, heads of ministerial-level agencies, chairpersons of provincial-level People’s Committees, heads of political organizations, socio-political organizations and socio-political- professional organizations, chairpersons of management boards of state corporations and economic groups and related organizations and individuals shall implement this Circular.

Article 12.Effect

This Circular takes effect on May 01, 2016, and replaces the Ministry of Construction’s Circular No. 08/2010/TT-BXD of July 29, 2010, guiding methods for adjustment of contract prices.

For the Minister

The Deputy Minister

Bui Pham Khanh

* All appendices are not translated herein.