Decree No. 50/2021/ND-CP amending the Decree No. 37/2015/ND-CP prescribing in detail construction contracts

DECREE

Amending and supplementing a number of articles of the Government’s Decree No. 37/2015/ND-CP of April 22, 2015, prescribing in detail construction contracts^[1]

Pursuant to the June 19, 2015 Law on Organization of the Government;

Pursuant to the June 19, 2015 Law on Organization of Local Administration;

Pursuant to the November 22, 2019 Law Amending and Supplementing a Number of Articles of the Law on Organization of the Government and the Law on Organization of Local Administration;

Pursuant to the June 18, 2014 Law on Construction; and the June 17, 2020 Law Amending and Supplementing a Number of Articles of the Law on Construction;

Pursuant to the June 13, 2019 Law on Public Investment;

Pursuant to the June 18, 2020 Law on Investment in the Form of Public-Private Partnership;

Pursuant to the November 26, 2013 Bidding Law;

Pursuant to the November 26, 2014 Law on Management and Use of State Capital Invested in Production and Business at Enterprises;

At the proposal of the Minister of Construction;

The Government promulgates the Decree amending and supplementing a number of articles of the Government’s Decree No. 37/2015/ND-CP of April 22, 2015, prescribing in detail construction contracts.

Article 1. To amend and supplement a number of articles of the Government’s Decree No. 37/2015/ND-CP of April 22, 2015, prescribing in detail construction contracts, as follows:

1. To amend and supplement Clause 2, Article 1 as follows:

“2. This Decree applies to organizations and individuals involved in the establishment and performance management of construction contracts of construction investment projects using public investment funds or state capital other than public investment funds and construction contracts between public-private partnership (PPP) project enterprises and construction contractors executing bidding packages of PPP projects.

Organizations and individuals may refer to this Decree to establish and manage construction contracts for projects using other funding sources.”

2. To amend and supplement a number of points of Clauses 1 and 2, Article 3 as follows:

a/ To amend and supplement Point c, Clause 1 as follows:

“c/ Procurement contract, which is a contract for procurement of supplies and equipment to be installed in a construction work according to technological design; general procurement contract, which is a contract for procurement of supplies and equipment for all works of a construction investment project.”

b/ To amend and supplement Point dd, Clause 1 as follows:

“dd/ Engineering-procurement (EP) contract, which is a contract for engineering and procurement of supplies and equipment to be installed in a construction work according to technological design; general EP contract, which is a contract for engineering and procurement of supplies and equipment for all works of a construction investment project.”

c/ To amend and supplement Point e, Clause 1 as follows:

“e/ Procurement-construction (PC) contract, which is a contract for procurement of supplies and equipment and construction of works or work items; general PC contract, which is a contract for procurement of supplies and equipment and construction of all works of a construction investment project.”

d/ To amend and supplement Point g, Clause 1 as follows:

“g/ Engineering-procurement-construction (EPC) contract, which is a contract for engineering, procurement of supplies and equipment, construction of works or work items, and trial operation, pre-acceptance test and handover thereof to the principal; general EPC contract, which is a contract for engineering, procurement of supplies and equipment, and construction of all works of a construction investment project.

EPC contracts shall be applied to complicated projects which are subject to high technical and technological requirements and must comply with regulations on synchrony and uniformity from the stage of engineering to the stages of equipment supply, construction, and training and technology transfer. Before deciding on application of EPC contracts, investment deciders shall organize assessment of technical and technological requirements, shortening of implementation durations of projects, synchrony from the stages of engineering, equipment supply and construction to the stages of training in operation and handover of works, in order to meet the objectives and requirements of approved projects and ensure the feasibility of EPC contracts as compared to contracts of other types.”

dd/ To add Point i1 below Point i, Clause 1 as follows:

“i1/ Simple, small-sized construction contract, which is a construction contract for execution of bidding packages and has a value not exceeding the limit of a small-sized bidding package specified in the bidding law, and covers the jobs with simple and easy-to-perform technical requirements.”

e/ To add Points d1 and d2 below Point d, Clause 2 as follows:

“d1/ Cost-plus-fee contract;

d2/ Other construction contracts.”

g/ To amend and supplement Point dd, Clause 2 as follows:

“dd/ Combined price-based contract, which is a construction contract applying the combination of the contract price types specified at Points a thru d2 of this Clause.”

3. To add Clause 5 below Clause 4, Article 4 as follows:

“5. Before signing an EPC contract, the parties shall reach agreement on the following principal contents:

a/ Scope of jobs to be performed under the contract;

b/ Location of construction, line directions of the work, type or grade of the work; scale, capacity and product options to be selected, and operation or use capacity;

c/ Documents and data on natural conditions, engineering geology, hydrogeology, and hydrology of the area where the work will be built;

d/ Requirements on construction engineering and some initial engineering parameters;

dd/ Technological, technical, equipment and commercial options; origin of equipment and products; connection technology solutions in adaptation to existing technical systems (if any);

e/ Options on connection of technical infrastructure facilities inside and outside the work; fire and explosion prevention and fighting solutions within the scope of the EPC bidding package;

g/ Solutions on construction and main materials to be used;

h/ Requirements on quality management of the work, testing, trial operation, warranty for and maintenance of the work;

i/ Solutions on architecture, plan, sections and elevations of the work, and main dimensions and structures of the work covered by the EPC bidding package;

k/ List and application of technical regulations and standards to be used in engineering, equipment supply and construction;

l/ Technical instructions for supplies, equipment and technical services; processes for operation of part and the whole of the work within the scope of the EPC bidding package;

m/ Requirements on environmental protection, assurance of fire and explosion prevention and fighting safety, and other matters;

n/ Requirements concerning approval procedures; quantities of dossiers and documents and deadlines for their submission to the principal;

o/ Implementation schedule and time landmarks for completion of main jobs and work items and the whole work for putting them into operation or use;

p/ Clarification of responsibilities of the principal and contractor regarding electricity and water supply, communication, internal roads and other services existing on the construction site, and handling of interface between biding packages within the same construction project.”

4. To add Clause 7 below Clause 6, Article 7 as follows:

“7. For EPC contracts:

a/ Before proceeding with procurement of supplies and equipment for an EPC contract, the contractor shall set requirements on technical parameters, technology and origin for submission to the principal for approval if such is agreed upon by the parties in the contract. The principal’s approval does not reduce the contractor’s responsibility for procurement of supplies and equipment for the contract. If the parties do not reach such an agreement in the contract, the contractor shall comply with the approved engineering dossier as well as requirements on technical parameters, technology and origin of supplies and technological equipment in the contract.

b/ The contractor may directly procure or hire a subcontractor to procure supplies and equipment for the EPC contract.”

5. To add a number of points to Clauses 3 and 5, Article 15 as follows:

a/ To add Point d1 below Point d, Clause 3 as follows:

“d1/ Cost-plus-fee contract price, which is the price of a contract whose value cannot be determined at the time of contract signing when the parties just reach agreement on management expense, general cost and profit as they do not have sufficient grounds to determine the scope of and direct costs for performance of contractual jobs.

The rate of management expense, general cost and profit shall be agreed upon by the parties in percentage (%) or in a specific value on the basis of reasonable and valid actual direct costs necessary for performance of contractual jobs as certified by the parties;

The rate of management expense, general cost and profit may be fixed or changed (increased or decreased within a limit or without any limit), depending on actual direct costs agreed upon by the parties in the contract in order to guarantee interests of the parties.”

b/ To add Point d1 below Point d, Clause 5 as follows:

“d1/ For cost-plus-fee contracts

The price of a cost-plus-fee contract shall only apply to bidding packages for which, at the time of contract signing, the parties do not have sufficient grounds for determining the scope of, and the need for use of materials, labor, and construction machinery and equipment for performance of, projected contractual jobs.”

6. To add one point to Clause 4 and one clause below Clause 5, Article 18 as follows:

a/ To add Point a1 below Point a, Clause 4 as follows:

“a1/ Particularly for a simple or small-sized contract, the project owner shall consider and decide on guarantee for advance payment for the contract as conformable with characteristics of contractual jobs while ensuring reduction of unnecessary procedures.”

b/ To add Clause 5a below Clause 5 as follows:

“5a. Particularly for a simple or small-sized contract, the principal and the contractor shall consider and reach agreement whether or not to make advance payment at the latter’s proposal in conformity with requirements of the bidding package while ensuring reduction of unnecessary procedures.”

7. To amend and supplement Clause 3, Article 22 as follows:

“3. The time limit for account-finalization of construction contracts must comply with Clause 2, Article 147 of Law No. 50/2014/QH13 on Construction, which was amended and supplemented under Point c, Clause 64, Article 1 of Law No. 62/2020/QH14 Amending and Supplementing a Number of Articles of the Law on Construction.”

8. To amend and supplement Article 23 as follows:

“Article 23. Liquidation of construction contracts

The liquidation of construction contracts must comply with Clause 3, Article 147 of Law No. 50/2014/QH13 on Construction, and Clause 4, Article 147 of Law No. 50/2014/QH13 on Construction, which was amended and supplemented under Point c, Clause 64, Article 1 of Law No. 62/2020/QH14 Amending and Supplementing a Number of Articles of the Law on Construction.”

9. To amend and supplement Point d, Clause 2, Article 31 as follows:

“d/ For EPC contracts established through selection of EPC contractors right after approval of basic designs: To conduct pre-acceptance test of, appraise, and approve or submit to competent agencies for appraisal and approval, the designs to be implemented after basic designs which have been decided by investment deciders upon approving projects in accordance with law, excluding cost estimates for construction of works and work items covered by EPC contracts.

For EPC contracts established through selection of EPC contractors right after approval of front-end engineering designs (FEEDs): To conduct pre-acceptance test of, appraise, and approve or submit to competent agencies for appraisal and approval, the designs to be implemented after FEEDs which have been decided by investment deciders upon approving projects in accordance with law, excluding cost estimates for construction of works and work items covered by EPC contracts.”

10. To amend and supplement Point e, Clause 2, Article 32 as follows:

“e/ For EPC contracts established through selection of EPC contractors right after approval of basic designs: To draw up designs to be implemented after basic designs which have been decided by investment deciders upon approving projects in conformity with the approved basic designs, excluding cost estimates for construction of works and work items covered by EPC contracts.

For EPC contracts established through selection of EPC contractors right after approval of FEEDs: To draw up designs to be implemented after FEEDs which have been decided by investment deciders upon approving projects in conformity with the approved FEEDs, excluding cost estimates for construction of works and work items covered by EPC contracts.”

11. To amend and supplement Clause 2, Article 35 as follows:

“2. A construction contract may be adjusted only in the cases specified in Clause 2, Article 143 of Law No. 50/2014/QH13 on Construction, and Clause 3, Article 143 of Law No. 50/2014/QH13 on Construction, which was amended and supplemented under Point c, Clause 64, Article 1 of Law No. 62/2020/QH14 Amending and Supplementing a Number of Articles of the Law on Construction. In case the State revises a policy, thus directly affecting the performance of a construction contract, the adjustment of such contract may only be made for the jobs affected by such revision and must comply with regulations of the agency that has issued and guided such policy.”

12. To amend and supplement Article 36 as follows:

“Article 36. Principles of adjustment of construction contracts

1. A construction contract may only be adjusted during the contract performance period, including the extended period of contract performance as provided by law.

2. For a fixed unit price-based contract, its unit price may only be adjusted in the cases specified at Points b, c and d, Clause 2, Article 143 of Law No. 50/2014/QH13 on Construction.

3. A package contract may only be adjusted for the job volumes in addition to the job volume stated in the signed contract (or for the job volumes in addition to the job volume to be performed according to designs and requirements of the bidding dossier or dossier of requirements, for a construction contract or equipment supply contract; or for the job volumes in addition to the consultancy tasks to be performed, for a consultancy contract), and in the cases specified at Points b, c and d, Clause 2, Article 143 of Law No. 50/2014/QH13 on Construction.

4. If the to-be-adjusted contract price does not result in an increase in the bidding package’s approved price or cost estimate (including the contingency amount for such bidding package), the project owner may decide on the adjustment; if the to-be-adjusted contract price results in an increase in the bidding package’s approved price or cost estimate, the adjustment shall be approved by the person competent to decide on investment or by a line minister or provincial-level People’s Committee chairperson as assigned for investment projects in which investment is decided by the Prime Minister, and it is required to make sure that capital is sufficient for payment to the contractor as agreed upon in the contract. The adjustment of construction cost estimates, bidding packages’ cost estimates or bidding packages’ prices must comply with regulations on management of construction investment costs and the bidding law.”

13. To amend and supplement Clause 3, Article 37 as follows:

“3. For job volumes in addition to the job volume stated in the signed contract which does not state the unit price or unit price determination method, the contracting parties shall, before performing such job volumes, agree on the unit price or unit price determination method and method for performance of such volumes.”

14. To amend and supplement a number of points of Clauses 2 and 3, Article 38 as follows:

a/ To amend and supplement Point b, Clause 2 as follows:

“b/ If the actually completed job volume increases or decreases by more than 20% of the job volume stated in the contract and, at the same time, results in a change of the contractual value by over 0.25% and a change of the unit price of such job by over 1%, or the contract does not state the unit price for the additional job volume, the parties shall agree on a new unit price for this job volume on the principle agreed upon in the contract to serve the payment.

If the actually completed job volume increases by more than 20% of the job volume stated in the contract, the new unit price may only be applied for the completed volume exceeding 120% of the volume stated in the contract.

If the actually completed job volume decreases by more than 20% of the job volume stated in the contract, the new unit price shall be applied for the whole of the actually completed job volume tested before acceptance.”

b/ To amend and supplement Point a, Clause 3 as follows:

“a/ Contract price adjustment methods include a direct clearing method and a method of adjustment by the adjustment formula specified at Point b of this Clause. The application of price adjustment methods must conform to the characteristics of relevant jobs, contractual price type and payment currency and shall be agreed upon by the parties in the contract. Price indexes for adjustment of construction contract prices by the formula specified at Point b, Clause 3 of this Article are construction price indexes.”

15. To amend and supplement Article 42 as follows:

“Article 42. Rewards for contract performance and fines for contract breaches

Rewards for contract performance and fines for contract breaches must comply with Clause 1, Article 146 of Law No. 50/2014/QH13 on Construction, and Clause 2, Article 146 of Law No. 50/2014/QH13 on Construction, which was amended and supplemented under Point c, Clause 64, Article 1 of Law No. 62/2020/QH14 Amending and Supplementing a Number of Articles of the Law on Construction.”

16. To amend and supplement Clause 2, Article 54 as follows:

“2. The Ministry of Construction shall guide and examine the implementation of regulations on construction contracts; guide the adjustment of construction contracts, methods of adjusting construction contract prices, types of construction contracts, and model construction contract; provide guidance on model EPC contract; simple or small-sized construction contracts, and other provisions of this Decree to meet requirements of state management of construction contracts.”

Article 2. Transitional provisions

1. Construction contracts already signed and being performed before the effective date of this Decree must comply with regulations on construction contracts which are effective before the date this Decree takes effect and their contents.

2. Construction contracts undergoing negotiation and not yet signed which have contents incompliant with this Decree shall be reported to persons competent to decide on investment for consideration and decision on the principles of ensuring quality, progress and efficiency of construction investment projects and causing no harm to lawful rights and interests of the contracting parties.

3. Contents on construction contracts in bidding dossiers or dossiers of requirements already approved but not yet issued which are incompliant with this Decree shall be adjusted as appropriate; in case bidding dossiers or dossiers of requirements have been issued but the bid has not yet been closed, if it is needed to make any change in contents on contracts in compliance with this Decree, such change shall be notified to all bidders that have purchased bidding dossiers or dossiers of requirements for adjustment of contents of bid dossiers or dossiers of proposals as appropriate; in case the bid has been closed, Clause 2 of this Article shall apply.

Article 3. Effect and organization of implementation

1. This Decree takes effect on the date of its signing.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, heads of political organizations, socio-political organizations and socio-political-professional organizations, chairpersons of Boards of Directors of economic groups and state corporations, and related organizations and individuals shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN XUAN PHUC