Directive No. 734/CT-TTg 2011 on rectification of the management of EPC bid packages

THE PRIME MINISTER

Directive No. 734/CT-TTg of May 17, 2011, on rectification of the management of EPC bid packages

Over the past years, the application of a bidding mechanism, which allows bid packages of state-funded projects to be put for bidding in the form of EPC bid packages, has contributed to accelerating construction investment activities, shortening the implementation duration of a number of projects, enhancing their uniformity and synchronism and improving management effectiveness. However, the performance of EPC bid packages in the recent period has revealed some problems: the quality of bidding dossiers is poor; prices of bid packages are not close to market prices; the capability and experience of a number of EPC contractors remain limited whilst truly capable contractors have not been selected; domestic contractors have limited opportunities to participate in bidding; the management of foreign laborers has not yet received due attention; the surveillance by investors has not been serious; the performance of many EPC bid packages has been prolonged, etc. These caused delayed implementation and unsatisfactory quality of construction projects and works, especially delayed construction of thermal power plants, thus exacerbating the power shortage, and of a number of traffic, water drainage and environmental sanitation works in big cities, causing public concern and adverse impacts on socio-economic development plans.

In order to raise investment effectiveness of infrastructure projects and works, assure energy security, bring into full play the internal resources and improve the competitiveness of domestic contractors, the Prime Minister instructs as follows:

I. Regarding the performance of EPC bid packages

Ministers, heads of ministerial-level agencies, chairpersons of provincial-level People's Committees and chairmen of boards of directors of state economic groups and corporations shall, within their functions and tasks and scope of management, review and direct the performance of EPC bid packages as follows:

1. For contracts being performed:

a/ Enhancing supervision to assure the performance of contracts according to construction plans and schedules committed by contractors in their bid dossiers and executed contracts;

b/ Seriously handling contract breaches including delay of construction progress and failure to assure the quality of materials and equipment according to terms of contracts and provisions of bidding, construction and other relevant laws;

c/ Strictly implementing regulations on public disclosure of information on handling of violations;

d/ Reporting to the Ministry of Planning and Investment on specific reasons for and economic losses caused by the delayed performance of contracts of group-A projects for 6 or more months behind schedule and for which no final settlement has been made, for summing up and evaluation.

2. For contracts to be executed:

a/ Reviewing the terms of draft contracts and refraining from executing them in case their feasibility and effectiveness are nor .secured;

b/ Incorporating in contracts penalties which are severe enough to force contractor to assure work progress and quality and control expenses in total investment amounts (fines, suspension or termination of contracts).

3.  For projects and bid packages to be performed in the coming time:

a/ In making feasibility study reports (work construction investment projects investors should comply with the requirement on advanced and modern technological equipment and accurately reflect and forecast fluctuations in domestic and world market-prices of equipment, materials and commodities

b/ In making bidding plans, investors and bid plans, investors and bid solicitors shall carefully consider EPC bid packages and may further divide them into separate bid packages for engineering (E), provision of equipment and materials (P) and construction (C) or engineering (E), provision (EP) bid packages and construction (C) ones in order to create conditions for domestic enterprises to participate in bidding and perform bid packages. Bid packages should not take the EPC form unless it is extremely necessary. In case it is required to satisfy the requirement of synchronism in the project implementation in the EPC form, bidding dossiers must set the minimum technical requirement to be not lower than 90% of total points (in case of evaluation by the marking method) or to satisfy all major criteria (in case of evaluation by the pass/failure method);

c/ For EPC bid packages of which over 50% of the work volume can be performed by domestic contractors, it is prohibited to organize international bidding and a domestic public bidding shall be organized instead; for domestically unavailable equipment and technologies, either of the following options can be implemented:

- Converting the technological equipment component into a separate bid package for international bidding. In this case, the bidding dossier roust express the binding commitment and close cooperation between the foreign manufacturer and domestic contractor in order to successfully implement the project and assure its synchronism;

- Empowering the bid-winning domestic contractor's) to select special sub-contractor(s) to provide advanced and modern technological equipment as required. The selection of sub­contractors) must be approved by investors.

d/ For EPC bid packages which are of large value and size, requiring diversified and sophisticated technologies, and belong to sectoral or national important projects, line ministries Shall set up econo-technical councils to study and propose methods of evaluating the quality (capacity, performance, operation and maintenance expenses) and use life of equipment throughout the projects' lifetime, which ensure the comparison of the effectiveness of different types of technological equipment offered by different contractors in case of international bidding for procurement of foreign equipment and technologies;

e/ Strictly complying with regulations on employment and management of foreign laborers under bidding and labor laws.

4. To review the staffs of project management units as well as investors, intensify training in bidding and project management capabilities, ensuring that investors, bid solicitors, members of bidding expert teams and related individuals satisfy professional requirements under current regulations and have good professional ethics and a better sense of personal responsibility. To promote the use of professional bidding organizations with a view to raising bidding quality and assuring the selection of capable, experienced and prestigious contractors to perform bid packages.

II. Responsibilities of ministries and sectors

1. The Ministry of Science and Technology shall assume the prime responsibility for, and coordinate with the Ministry of Industry and Trade, the Ministry of Natural Resources and Environment, the Ministry of Construction, the Ministry of Transport, the Ministry of Agriculture and Rural Development and the Ministry of Information and Communications in, revising sectoral technology standards to avoid the import of obsolete technologies and accept only advanced and environmentally safe technologies, and introducing measures to select technologies in compliance with the WTO accession commitments.

2. The Ministry of Industry and Trade shall assume the prime responsibility for reviewing and assessing the implementation of special mechanisms and policies applicable to electricity works under the Prime Minister's Decision No. 1195/QD-TTg of November 9, 2005, and propose appropriate adjustments in case of necessity.

3. The Ministry of Construction shall assume the prime responsibility for, and coordinate with the line ministries in, reviewing and proposing amendments to relevant regulations on penalties against contract breaches in the direction of increasing the maximum penalty and strictly handling intentional breaches.

4. The Ministry of Labor, War Invalids and Social Affairs shall study and propose the replacement of the provision that foreigners working in Vietnam-based enterprises, agencies and organizations for full 3 months or more must have work permits with the provision that foreigners working in Vietnam-based enterprises, agencies and organizations must have work permits, and assign provincial-level Labor, War Invalids and Social Affairs Departments to coordinate with local police in intensifying inspection and supervision of the employment of foreign laborers at construction sites.

5. The Ministry of Public Security shall coordinate with the Ministry of Foreign Affairs in directing the Immigration Department and diplomatic missions in foreign countries to closely control the grant of visas to foreigners. Before the grant of visas to 10 or more persons to work in Vietnam in any form, opinions of investment-managing agencies or investors must be obtained.

6. The Ministry of Planning and Investment shall review and propose amendments to the bidding law under the Prime Minister's direction in Document No. 38/TTg-KTN of September 30, 2010.

III. Organization of implementation

1. The Ministry of Planning and Investment shall assume the prime responsibility for, and coordinate with other ministries and sectors in, monitoring, urging, examining and inspecting investors and bid solicitors in properly implementing this Directive; and propose the Prime Minister to strictly handle cases of improper implementation of this Directive.

2. Ministers, heads of ministerial-level agencies, chairpersons of provincial-level People's Committees and presidents of members' councils of state economic groups and corporations shall, within their scope of management, direct investors and bid solicitors in seriously and thoroughly grasping the spirit of this Directive in order to effectively implement sectoral and national important projects and works.-

PRIME MINISTER

NGUYEN TAN DUNG