Decree No. 50/2021/ND-CP dated April 01, 2021 on amendments to the Government’s Decree No. 37/2015/ND-CP on elaboration of construction contracts

DECREE

AMENDMENTS TO THE GOVERNMENT’S DECREE NO. 37/2015/ND-CP DATED APRIL 22, 2015 ON ELABORATION OF CONSTRUCTION CONTRACTS

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

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

Pursuant to the Law on Amendments to the Law on Government Organization and Law on Local Government Organization dated November 22, 2019;

Pursuant to the Law on Construction dated June 18, 2014; Law on Amendments to the Law on Construction dated June 17, 2020;

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

Pursuant to the Law on Public-Private Partnership Investment dated June 18, 2020;

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

At the request of the Minister of Construction;

The Government hereby promulgates a Decree on amendments to the Government’s Decree No. 37/2015/ND-CP dated April 22, 2015 on elaboration of construction contracts.

Article 1. Amendments to the Government’s Decree No. 37/2015/ND-CP dated April 22, 2015 on elaboration of construction contracts:

1. Clause 2 of Article 1 is amended as follows:

“2. This Decree applies to organizations and individuals (hereinafter referred to as “entities”) involved in formulation and management of the performance of construction contracts belonging to construction projects funded by public investment capital, state capital other than state investment capital, and construction contracts between PPP project enterprises and construction contractors performing contract packages belonging to investment projects in the public-private partnership form (hereinafter referred to as “PPP projects”).

Regarding projects funded by other capital, entities shall refer to the regulations laid down in this Decree to formulate and manage construction contracts.”

2. Some Points of Clauses 1 and 2 of Article 3 are amended as follows:

a) Point c of Clause 1 is amended as follows:

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b) Point dd of Clause 1 is amended as follows:

“dd) Contract for engineering and procurement of materials and equipment (Engineering – Procurement abbreviated as EP in English) that is a contract for engineering and for procurement of materials and equipment to be installed in construction works according to the technological design; general contract for engineering and for procurement of materials and equipment that is a contract for engineering and for procurement of materials and equipment for all works of a construction project.”

c) Point e of Clause 1 is amended as follows:

“e) Contract for procurement of materials and equipment and construction of works (Procurement - Construction abbreviated as PC in English) that is a contract for procurement of materials and equipment and construction of works and work items; general contract for procurement of materials and equipment and construction of works and work items that is a contract for procurement of materials and equipment and construction of all works of a construction project.”

d) Point g of Clause 1 is amended as follows:

“e) Contract for engineering - procurement of materials and equipment - construction of works (Engineering - Procurement - Construction abbreviated as EPC in English) that is a contract for implementation of all work ranging from engineering and procurement of materials and equipment to construction of works and work items and test run, commissioning and transfer to the awarding party; EPC general contract that is a contract for engineering - procurement of materials and equipment - construction of all works of a construction project.

An EPC contract is prioritized for a project that is complex, requires high technology and strictly complies with the uniformity and consistency between the phases ranging from the design to supply of equipment phase, execution of construction of works and training in technology transfer. Before making a decision to apply an EPC contract, the investment decision maker shall assess the requirements concerning technology, shortening of the duration of the project, the uniformity between the phases of design and supply of equipment, execution of construction of works and training in operation and transfer of the works with a view to satisfying the project's approved objectives and requirements and ensuring the feasibility of applying the EPC contract type as compared to other contract types.”

dd) Point i1 is added after Point i of Clause 1 as follows:

“i1) Simple and small-scale construction contract that is a construction contract for the performance of a contract package with a value not exceeding the limit on a small-scale contract package in accordance with regulations of law on bidding. The contents of the contractual work are of a simple technical nature and easy to be conducted.”

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“d1) Cost-plus fee contract;

d2) Other construction contracts.”

g) Point dd of Clause 2 is amended as follows:

“dd) Combined price contract that is a construction contract using a combination of the contract prices prescribed in Points a through d2 of this Clause.”

3. Clause 5 is added after Clause 4 of Article 4 as follows:

“5. Before concluding an EPC contract, the parties must agree upon the following main contents:

a) The scope of work expected to be performed under the EPC contract;

b) The construction location, the direction and route of the construction works, their type and grade; the scale and capacity of and plan for the products to be selected, and the capacity for exploitation and use of the works;

c) Information concerning documents, data and figures on natural conditions, engineering geology, hydro-geology and hydrology of the area where the works are expected to be built;

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dd)Plans for technology, engineering, equipment and commerce; origin of equipment and products; solutions for connecting technology to current technical systems (if any);

e) Plan to connect technical infrastructure both inside and outside of the works; fire safety solutions within the scope of the EPC contract package;

g) Construction-related solutions and primary materials to be used;

h) Requirements concerning quality of quality of the construction works, and testing, commissioning, warranty and maintenance thereof;

i) Solutions to architecture, construction site, cross sections and vertical sections of the works, dimensions and main structure of the construction works within the scope of the EPC contract package;

k) Lists and levels of application of technical regulations and standards to be used during design, supply of equipment and execution of construction of works;

l) Technical instructions on supplies, equipment and technical services; processes for operating part or whole of the works within the scope of the EPC contract package;

m) Environmental protection and fire safety requirements, and other issues;

n) Requirements relating to procedures for approval; the number of documents and deadlines for submission thereof to the awarding party;

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p) Responsibilities delegated to the awarding party and receiving party for electricity and water supply, information and communications, internal roads and other services available on site, and for processing of interfaces between contract packages in the same construction project.”

4. Clause 7 is added after Clause 6 of Article 7 as follows:

“7. Regarding an EPC contract:

a) Before procuring materials and equipment for the EPC contract, the receiving party shall lay down requirements pertaining to technical specifications, technology and origin and submit them to the awarding party for approval prior to the procurement if agreed upon by the parties in the contract. The approval by the awarding party does not reduce the receiving party’s responsibility for procuring materials and equipment for the EPC contract. If the parties do not specify any agreement in the EPC contract, the receiving party shall comply with the approved design documentation and technical specifications, technology and origin coming with the materials and technological equipment in the EPC contract.

b) The receiving party may directly procure or hire a sub-contractor to procure materials and equipment for the EPC contract.”

5. Some Points are added to Clauses 3 and 5 of Article 15 as follows:

a) Point d1 is added after Point d of Clause 3 as follows:

“d1) Cost-plus fee contract price is the contract price whose value has yet to be determined at the time of signing the contract, and the parties only agree upon the administrative costs, general costs and profits since there are insufficient grounds for determining the scope of work and direct costs to carry out the work specified in the contract.

The parties shall agree upon the level of administrative costs, general costs and profits to be expressed as a ratio (%) or as a specific value on the basis of the actual, reasonable and valid costs to carry out the work specified in the contract;

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b) Point d1 is added after Point d of Clause 5 as follows:

“d1) Regarding a cost-plus fee contract

Price of a cost-plus fee contract price only applies to the contract packages at the time of signing the contract when the parties have insufficient grounds for determining the scope of work and necessity of using materials, labor, construction machinery and equipment to carry out the intended work specified in the contract.”

6. A Point is added to Clause 4 and a Point is added after 5 of Article 18 as follows:

a) Point a1 is added after Point a of Clause 4 as follows:

“a1) Regarding a simple and small-scale construction contract, the investor shall consider and decide to provide a contract advance payment security which is suitable for the nature of the contractual work and reduces unnecessary procedures.”

b) Clause 5a is added after Clause 5 as follows:

 “5a. Regarding a simple and small-scale construction contract, the awarding party and receiving party shall consider and agree upon whether to make an advance payment as requested by the awarding party in a manner that satisfies the requirements of the contract package and reduces unnecessary procedures.”

7. Clause 3 of Article 22 is amended as follows:

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8. Article 23 is amended as follows:

“Article 23. Liquidation of construction contracts

The liquidation of construction contracts shall comply with Clause 3 Article 147 of the Law on Construction No. 50/2014/QH13 and Clause 4 Article 147 of the Law on Construction No. 50/2014/QH13 amended by Point c Clause 64 Article 1 of the Law No. 62/2020/QH14 on amendments to the Law on Construction.”

9. Point d Clause 2 of Article 31 is amended as follows:

“d) For an EPC contract established by selecting an EPC contractor immediately after the fundamental design is approved: carry out commissioning, appraisal and approval or request a competent authority to promptly appraise and approve the designs implemented after the fundamental design has been approved by the investment decision maker in accordance with regulations of law, excluding the estimated costs of constructing works or work items covered by the EPC contract.

If the EPC contract is established by selecting an EPC contractor immediately after the FEED is approved: carry out commissioning, appraisal and approval or request a competent authority to promptly appraise and approve the designs implemented after the FEED has been approved by the investment decision maker in accordance with regulations of law, excluding the estimated costs of constructing works or work items covered by the EPC contract.”

10. Point e Clause 2 of Article 32 is amended as follows:

“e) For an EPC contract established by selecting an EPC contractor immediately after the fundamental design is approved: produce the designs to be implemented after the fundamental design has been approved by the investment decision maker when approving the project in conformity with the approved fundamental design, excluding the estimated costs of constructing works or work items covered by the EPC contract.

If the EPC contract is established by selecting an EPC contractor immediately after the FEED is approved: produce the designs to be implemented after the FEED has been approved by the investment decision maker when approving the project in conformity with the approved FEED, excluding the estimated costs of constructing works or work items covered by the EPC contract.”

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“2. A construction contract shall be only adjusted in the cases specified in Clause 2 Article 143 of the Law on Construction No. 50/2014/QH13 and Clause 3 Article 143 of the Law on Construction No. 50/2014/QH13 amended by Point c Clause 64 Article 1 of the Law No. 62/2020/QH14 on amendments to the Law on Construction. Where the State changes a policy resulting in a direct effect on performance of the construction contract, the adjustment of the contract shall only apply to part of the work affected by such change and be made under the regulations of the authority promulgating such policy and providing guidelines for implementation thereof.”

12. Article 36 is amended as follows:

“Article 36. Principles of adjusting construction contracts

1. The adjustment of a construction contract shall only apply during the period of contract performance including the extended period in accordance with regulations of law.

2. For contract based on a fixed unit price or a contract unit price, the adjustment shall be only made in the cases specified in Points b, c and d Clause 2 Article 143 of the Law on Construction No. 50/2014/QH13.

3. For a lump sum contract, the contract shall be only adjusted in terms of the volume of additional work outside the scope of work under the signed contract (outside the scope of work to be performed according to the design or requirements in the bidding documents or request for proposals, for an execution contract and contract for equipment supply; outside the consultancy duties to be performed, for a consultancy contract) and in the cases specified in Points b, c and d Clause 2 Article 143 of the Law on Construction No. 50/2014/QH13.

4. If the adjusted contract price does not exceed the approved contract package price or estimated cost (including the cost contingency for such contract package), the investor is entitled to make an adjustment decision; if the approved contract package price or estimated cost is exceeded, the guidelines for adjusting the contract price must be approved by the investment decision maker or the Minister of the line ministry and the Chairman/Chairwoman of the provincial People’s Committee when assigned to execute an investment project in which investment is decided by the Prime Minister before the adjustment is made, and adequate capital must be provided to make payment to the awarding party as agreed upon in the contract. The adjustment of the estimated cost of construction, estimated cost of the contract package or contract package price shall be made in accordance with regulations of law on construction cost management and law on bidding.”

13. Clause 3 of Article 37 is amended as follows:

“3. For the volume of the extra-contractual work for which a unit price or method of determining the unit price has yet to be set out in the contract, the parties to the contract shall agree upon the unit price or principles and method of determining the unit price to perform such work prior to performance.”

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a) Point b of Clause 2 is amended as follows:

“b) If the actual increased or decreased volume of work exceeds 20% of the corresponding volume of work specified in the contract and results in a change of over 0.25% of the contract value and over 1% of the unit price for such work or a unit price for the volume of additional work has yet to be specified in the contract, the parties shall agree to determine a new unit price according to the principles agreed upon in the contract with respect to the unit price for such volume so as to make a payment.

If the actual increased volume of work exceeds 20% of the corresponding volume of work specified in the contract, the new unit price shall only apply to the volume of work actually performed which exceeds 120% of the volume of work specified in the contract.

If the actual decreased volume of work exceeds 20% of the corresponding volume of work specified in the contract, the new unit price shall only apply to the entire volume of work actually completed and commissioned.

b) Point a of Clause 3 is amended as follows:

“a) The methods of adjusting the contract price comprise direct offsetting method and method of applying the formula mentioned in Point b of this Clause. The method of adjusting the price shall be adopted in conformity with the nature of work, type of contract price and payment currency and be agreed upon by the parties in the contract. The price index for adjusting the construction contract price using the formula in Point b Clause 3 of this Article is the construction price index.”

15. Article 42 is amended as follows:

“Article 42. Contractual bonuses and penalties for contractual breaches

Contractual bonuses and penalties for contractual breaches shall comply with Clause 1 Article 146 of the Law on Construction No. 50/2014/QH13 and Clause 2 Article 146 of the Law on Construction No. 50/2014/QH13 amended by Point c Clause 64 Article 1 of the Law No. 62/2020/QH14 on amendments to the Law on Construction.”

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“2. The Ministry of Construction shall inspect and provide guidance on the implementation of regulations of law on construction contracts; provide guidance on adjusting construction contracts, methods of adjusting construction contract prices, types of construction contracts, forms of construction contracts; on EPC contract form; simple and small-scale construction contract form and other necessary contents of this Decree with a view to satisfaction of requirements for state management of construction works.”

Article 2. Transitional clauses

1. Any construction contract which has been signed and is being performed before the effective date of this Circular shall be performed in accordance with regulations on construction contracts before the effective date of this Decree and contents of the signed contract.

2. Any construction contract which is under negotiation and have not been signed contains any content unconformable with regulations of this Decree, it must be reported to the investment decision maker for consideration and decision on the principle that quality, schedule and efficiency of the construction project are ensured and the lawful rights and interests of the parties are not infringed.

3. Any content regarding construction contracts in the approved but unreleased bidding documents or request for proposals which is unconformable with regulations of this Decree must be adjusted to make it conformable; if bidding documents or request for proposal has been released, any adjustment to the contents relating to construction contracts with a view to conformity with regulations of this Decree must be notified to all bidders that have bought the bidding documents or request for proposals; if the bid has closed, the regulations set out in Clause 2 of this Article shall be implemented.

Article 3. Effect and implementation

1. This Decree comes into force from the day on which it is signed.

2. Ministers, heads of ministerial agencies, heads of Governmental agencies, Chairmen/Chairwomen of People’s Committees of provinces and central-affiliated cities, heads of political organizations, socio-political organizations, socio-occupational-political organizations, Presidents of Boards of Directors of Economic Groups and State Corporations and relevant entities are responsible for the implementation of this Decree.

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ON BEHALF OF THE GOVERNMENT
THE PRIME MINISTER




Nguyen Xuan Phuc