Circular No. 01/2002/TT-BXD guiding the implementation of projects under the design-supply of materials and equipment-construction contract (EPC) form.

CIRCULAR

Guidelines for implementing projects under design-supply of materials and equipment-construction contracts (EPC)

materials, equipment - construction (EPC)

 

Pursuant to the functions, tasks, and authorities stipulated in Decree No. 15/CP dated March 4, 1994 of the Government, the Ministry of Construction provides guidance on certain aspects of implementing projects under Design-Supply of Materials and Equipment-Construction Contracts (turnkey contracts) as specified in Article 62 of the Investment and Construction Management Regulations issued together with Decree No. 52/1999/NĐ-CP dated July 8, 1999 of the Government as follows:

II- SUPPORT MEASURES FOR STATE-OWNED AGRICULTURAL FARMS AND FORESTRY COMPANIES IN THE FIELD OF SCIENCE AND TECHNOLOGY

1. This Circular guides the implementation of Design-Supply of Materials and Equipment-Construction Contracts for projects and tender packages funded by State budget, state-guaranteed credit, state investment development credit, and state-owned enterprise investment development funds that have been approved to implement Design-Supply of Materials and Equipment-Construction Contracts in the investment decision (for projects) or in the bidding plan (for tender packages).

2. Projects and tender packages implemented under Design-Supply of Materials and Equipment-Construction Contracts funded by direct foreign investment or other sources may apply the provisions of this Circular in conjunction with the regulations or agreements of the funding organization.

3. Definitions

3.1 Design-Supply of Materials and Equipment-Construction Contract (abbreviated in English as EPC Contract) or turnkey contract is a written agreement signed between the Project Investor and a Contractor or a consortium of Contractors (referred to collectively as the EPC General Contractor) to perform works related to design, supply of materials and equipment, technical services, construction, and installation of a project or tender package.

3.2 Investor's Request Document is a document prepared by the Investor to further clarify and specifically define the main contents and requirements stated in the Feasibility Study Report that has been approved.

The Investor's Request Document must be complete and clear so that the Contractor can determine the scope of work, estimate the volume of work and cost to sign the EPC Contract.

3.3 Payment Plan: is a document determining the total payment value of the EPC Contract divided according to the number of payments or payment stages (monthly, quarterly, annually) consistent with the progress and volume of work performed under the contract.

The Payment Plan is prepared by the EPC General Contractor and approved by the Investor as the basis for advance payment and payment of completed work volumes under the contract.

3.4 Investor's Consultant: is a consulting organization selected by the Investor to perform certain tasks such as preparing the contract, developing Technical Design - Total Estimate and Tender Invitation Document (if necessary), supervising the contract implementation process, issuing the Certificate of Completion (if applicable), and other consulting tasks requested by the Investor.

3.5 Subcontractor: is a subcontractor providing consultancy, surveying, designing, supplying materials and equipment, and technical services, directly signing a Subcontract with the EPC General Contractor.

3.6 Subcontract: is a contract signed between the EPC General Contractor and a Subcontractor to perform part of the work of the EPC General Contractor under the EPC Contract.

II - SOME CONTENTS IN THE IMPLEMENTATION OF EPC CONTRACTS

1 - Preparing the EPC Contract

To implement projects and tender packages under the EPC Contract form, the Project Investor needs to prepare the following works:

1.1 Preparing the Investor's Request Document

Based on the contents of the Feasibility Study Report and the approved total investment amount of the project, the Investor prepares the Investor's Request Document with the following contents:

a/ Requirements of the project, tender package regarding capacity, operational capability; degree of application of current technical standards; requirements for technical-scientific-commercial solutions; technical guidelines for materials, equipment, technical services, raw materials to be supplied to the project, tender package; requirements for the contractor's capacity and professional experience.

b/ Preliminary design in the approved Feasibility Study Report; specific requirements for architecture and initial design parameters as well as technical norms, standards applied in design and construction; natural conditions of the construction site area; requirements for quality management, testing, trial operation, and maintenance of the works;

c/ Scope of work and implementation schedule including: division of machinery, materials, equipment supply, power supply, water supply, transportation, communication to the construction site; guidance on local material supply sources; location of auxiliary works; key time points for major works;

d/ Estimated costs for implementing the EPC project, tender package;

e/ Information related to approval procedures; quantity of types of documents and files to be submitted; detailed information about the construction site location; environmental protection, safety assurance, fire prevention, and other issues.

The content of the Investor's Request Document is part of the EPC Tender Invitation Document.

1.2 Preparing design documents for tendering EPC; establishing and approving Technical Design.

a/ In cases where the Investor already has Technical Design-Total Estimate, the EPC tendering is based on the approved Technical Design-Total Estimate.

b/ If the preliminary design document in the approved Feasibility Study Report is not sufficient to tender the EPC, the Investor must supplement and complete the preliminary design to meet the specific requirements of the project, tender package for review and approval as the basis for EPC tendering.

c/ The Investor assigns the EPC General Contractor to develop Technical Design based on the Investor's Request Document (or Tender Invitation Document).

In this case, if the EPC General Contractor proposes new designs but still meets the project and tender package requirements, the Investor must report to the competent authority for consideration and decision on these proposals.

d/ The review and approval of the design of the EPC project, tender package will be carried out as follows:

d/ The review and approval of the project's design, the EPC tender package shall be carried out as follows:

- For projects and packages that implement EPC tendering based on the Preliminary Design that has been supplemented and completed in accordance with Point b of this Clause, the Project Owner shall organize the review and submit for approval the Supplementary and Completed Design Documents. The EPC General Contractor is responsible for preparing the Detailed Engineering Design and reporting to the Project Owner for approval.

- In cases where the EPC General Contractor prepares the Detailed Engineering Design in accordance with Point c of this Clause, the EPC General Contractor is responsible for submitting through the Project Owner for review and approval of the Detailed Engineering Design in accordance with current regulations.

1.3 The scope of work under the EPC Contract includes: main construction items, other construction items necessary to ensure synchronous and complete operation of the entire project according to approved design. Construction support works such as: building temporary housing for workers, auxiliary areas, internal site roads and access roads to the construction site (if applicable), power supply, water supply and drainage, communication and other works within the content of the EPC Contract.

Depending on the specific characteristics of the project and package, the Project Owner may agree to entrust the EPC General Contractor to undertake certain additional works outside the content of the EPC Contract.

1.4 Selection of the EPC General Contractor

a/ The Project Owner selects the EPC General Contractor through direct assignment or tendering based on reviewing and approving the Bidder's Proposal regarding the degree of compliance with the project requirements or the Bidder's Tender Document in case of winning the bid.

The appointment of the EPC General Contractor must be approved by the Investment Decision Authority based on the tender request document submitted by the Project Owner (except in special cases decided by the Prime Minister).

The tendering process to select the EPC General Contractor shall be carried out in accordance with the Law on Bidding.

b/ The selected Bidder or Joint Venture of Bidders as the EPC General Contractor must meet the following main criteria:

- Having a business registration consistent with the content of the project and package to be implemented under the EPC Contract.

In the case of a Joint Venture of Bidders selected as the EPC General Contractor, there must be a representative Bidder responsible for overall responsibility and must have a Commitment to perform the work according to the division of responsibilities among the Bidders.

- Possessing sufficient capacity and experience to fulfill the functions and responsibilities of the EPC General Contractor, such as having successfully implemented similar scale projects and packages; being able to provide a list of suitable Subcontractors; having advisory design units, manufacturing and processing units, material and equipment supply units, and construction units within the structure of the Bidder or Joint Venture of Bidders.

- Being capable of meeting the financial requirements of the project and package.

1.5 The negotiation and signing of the EPC Contract must be based on the results of the approved tender (in case of tendering) or the Bidder's Proposal regarding the degree of compliance with the project requirements (in case of direct assignment).

The Project Owner must report to the Investment Decision Authority about the content of the contract before it is signed and becomes effective.

1.6 The contract price of the EPC Contract is formed and determined based on the Request for Proposal of the Project Owner (or Invitation to Tender); the Bidder's Proposal regarding the degree of compliance with the project requirements (or the Bidder's Tender Document in case of winning the bid) and the results of negotiations between the Project Owner and the EPC General Contractor.

a/ In the case of tendering to implement the project and package, the EPC Contract price is determined based on the approved bid price by the Investment Decision Authority.

b/ In the case of direct assignment, for types of projects and packages such as residential buildings, schools, shops, etc., the EPC Contract price is determined immediately upon signing the contract based on the estimated implementation costs in the Project Owner's Request for Proposal.

For large-scale and technically complex projects and packages, the EPC Contract price is temporarily determined based on the estimated implementation costs in the Project Owner's Request for Proposal and is officially determined after the approval of the Detailed Engineering Design and total estimate.

c/ In principle, the EPC Contract price shall not exceed the approved tender price or the investment capital of the EPC package within the approved total project investment.

1.7 The EPC General Contractor implements the supply of materials and equipment according to the content of the EPC Contract through direct procurement, competitive bidding, tendering, or assigning a Supplier.

In the case of tendering for the supply of materials and equipment, the EPC General Contractor must prepare and agree with the Project Owner on the Tender Document for the Supply of Materials and Equipment.

The content of the contract for the supply of materials and equipment must be consistent with the content and progress of the EPC Contract.

2/ Responsibilities and authorities of the Project Owner, EPC General Contractor, and related agencies and units

Based on the provisions of the Management Regulations for Investment and Construction issued together with Decrees No. 52/1999/NĐ-CP and No. 12/2000/NĐ-CP of the Government, the responsibilities and authorities of the Project Owner, EPC General Contractor, and related agencies and units in implementing the project under the EPC Contract are specifically guided as follows:

2.1 Responsibilities and authorities of the Project Owner include:

a/ Managing the project funds and paying the EPC General Contractor according to the Payment Plan and progress schedule.

b/ Preparing the Project Owner's Request for Proposal, Invitation to Tender (in case of organizing a tender), and submitting these documents for approval.

c/ Entrusting the EPC General Contractor to prepare the Detailed Engineering Design and Tender Document for the Supply of Materials and Equipment (if any) of the project and package. In cases where the technical nature of the project and package is particularly special, the Project Owner may report to the competent authority for consideration and decision on hiring consultants to prepare the Detailed Engineering Design and Total Estimate and Tender Document for the Supply of Materials and Equipment.

d/ Submitting for approval (or agreeing to approve) the Detailed Engineering Design and Total Estimate and Implementation Plan; handling approval or other agreement procedures.

e/ Compensating, clearing and handing over the construction site to the EPC General Contractor (if applicable).

f/ Applying for construction permits (if required).

g/ Enter into a contract with the EPC General Contractor to construct preparatory construction items such as: roads, electricity, water, communication facilities on the construction site, and other technical works;

h/ Agree with the EPC General Contractor on Construction Drawings for major project components and Tender Documents for purchasing materials and equipment (if tendering is organized);

i/ Agree with the EPC General Contractor on the list of Subcontractors;

j/ Directly or through Consultants supervise on-site activities related to design, supply of materials and equipment, construction and installation, acceptance, trial operation, and other tasks;

k/ Organize acceptance and procedures to issue a Certificate of Project Use (if necessary);

l/ Organize training for management and operation staff;

m/ Propose and recommend to competent authorities to allow the application of preferential policies of the project (if any) for the EPC General Contractor;

2.2 The responsibilities and authorities of the EPC General Contractor include:

a/ Receive and manage the overall construction site, preserve benchmarks, reference points, and boundary markers of the project, and coordinate activities among subcontractors (if any);

b/ Prepare Detailed Technical Design;

c/ Prepare and agree with the Project Owner on Construction Drawings based on approved Technical Design Documents;

d/ Prepare and agree with the Project Owner on Tender Documents for supplying materials and equipment and organize the selection of suppliers (if any);

e/ Prepare and agree with the Project Owner on Implementation Schedule Plans for construction phases or main project components;

g/ Prepare and agree with the Project Owner on Payment Plan;

h/ Select Subcontractors through tendering or direct assignment;

i/ Receive and manage the use of project components outside the EPC contract handed over by the Project Owner (if any);

j/ Establish a quality management system for construction;

k/ Conduct testing, calibration; perform integrated trial operation of the project; participate in guiding, training operators, transferring technology and related technical documents, secrets (if any) concerning operation, use, and maintenance of the project; hand over the project to the Project Owner according to regulations within the framework of the EPC Contract;

l/ Develop measures to ensure environmental hygiene conditions, fire prevention, explosion protection, and labor safety on the construction site;

m/ Enter into contracts with domestic or foreign Consultants (if necessary) to carry out certain tasks of the EPC General Contractor;

n/ Perform warranty services for the project according to current regulations;

2.3 Ministries, sectors, localities, and superior agencies of the Project Owner have the responsibility to:

a/ Examine and resolve issues and procedures related to the implementation of the project and EPC contract within their functional scope and authority, such as: reviewing and approving the Owner's Request for Proposal (or Tender Documents), documents appointing the EPC General Contractor (or tender results), Technical Design-Tentative Budget, and any design modifications (if any) according to the分级授权体系。请继续翻译剩余的内容，保持格式和准确性。

b/ Direct the resolution of issues arising during the implementation of the project and EPC contract.

3/ Implementation of the EPC Contract

3.1 The EPC Contract shall be signed with the following main contents:

a/ Parties and objects of the contract

b/ Timeframe for execution

c/ Conditions of the contract

d/ Contract price and acceptance, payment

e/ Use of Subcontractors

f/ Warranty of the project

g/ Effectiveness of the contract and dispute resolution.

The EPC Contract also includes appendices such as: drawings, technical instructions; Owner's Request for Proposal; written agreements between the Owner and the EPC General Contractor; Tender Documents, Bid Documents (or proposals from bidders) and other relevant documents.

3.2 The EPC Contract price can only be adjusted when the contract clearly specifies the scope, degree, and method of price adjustment. The principles for adjusting the EPC Contract price are as follows:

a/ For additional quantities outside the contract due to reasons not attributable to the Contractor such as supplementary or changed designs, changes in geological conditions of the project, then:

- The quantity of additional work that is already included in the contract's work list will be adjusted according to the contract unit price (including inflation factors).

- For additional quantities of work not included in the contract's work list, the Owner must reach an agreement with the EPC General Contractor on determining the applicable unit price for the additional work according to current state regulations.

b/ For EPC Contracts that are not lump-sum contracts and have an implementation period exceeding 12 months, from the 13th month onwards, the contract price will be reviewed for adjustment for some types of key materials and construction costs and labor costs.

c/ When there are significant changes in national policies affecting investment and construction that impact the structure of the contract price, the EPC Contract price will be adjusted accordingly.

d/ The EPC General Contractor is responsible for calculating, explaining, and agreeing with the Owner on price adjustments.

3.3 Payment of the EPC Contract shall be carried out based on the following principles:

a/ The payment price of the EPC Contract is the contract price and conditions recorded in the contract consistent with the provisions at Point 1.6, Clause 1 and Points 3.1 and 3.2 - Clause 3 - Section II of this Circular.

b/ When implementing the Contract, the Owner temporarily advances funds to the EPC General Contractor (except where both parties have agreed otherwise). The level of temporary advance and the recovery of the temporary advance are stipulated as follows:

- The initial temporary advance for the EPC General Contractor shall be at least 15% of the value of the EPC Contract (excluding the value of technological equipment).

- The temporary advance for purchasing technological equipment and technical services shall be determined by agreement between the EPC General Contractor and the manufacturer/supplier and must be consistent with the progress of the EPC Contract implementation;

- The temporary advance of the EPC General Contractor for Subcontractors shall be carried out in accordance with current investment and construction management regulations;

- The temporary advance fund will be gradually recovered through each payment period and fully recovered when the work reaches 80% completion value.

c/ The Project Owner shall pay the EPC General Contractor according to the progress of work completion, based on the bid price or the contract value already signed, and other conditions of the contract, based on the volume of work accepted at each stage of implementation or upon completion of individual project components.

- For construction and installation works, payment shall be based on the completed volume, the Payment Plan, and the Payment Request Form submitted by the EPC General Contractor.

- For procurement and supply of materials and equipment, payment shall be made in accordance with the material and equipment supply contracts that have been signed.

- For consulting services performed by the EPC General Contractor, payment shall be based on the volume of consulting work completed and accepted at each stage or during the period of consulting service performance.

3.4 Subcontractors and Subcontracts

a/ The EPC General Contractor shall select Subcontractors through bidding or direct assignment. The list of selected Subcontractors must be approved in writing by the Project Owner.

The EPC General Contractor is not permitted to subcontract main works (those carried out domestically) of the project, which are critical to the quality and completion time of the project. Any other subcontracting activities of the EPC General Contractor must be agreed upon in writing by the Project Owner, and the Project Owner may not refuse such written agreement without valid reasons.

b/ The signing of subcontracts between the EPC General Contractor and Subcontractors must comply with the contents of the EPC Contract and the current laws governing contracts.

c/ Within the scope of the EPC Contract execution, Subcontractors do not have direct relations with the Project Owner and are only responsible to the EPC General Contractor for the subcontracted work as stipulated in the subcontracts.

3.5 Supervision of Contract Execution and Project Acceptance

a/ The Project Owner, directly or through its Consultant, shall inspect and supervise the contract execution according to the signed contents and current regulations on construction project quality management, including:

- Checking the management system and ensuring the quality of the project of the EPC General Contractor.

- Monitoring the construction quality, manufacturing, and installation of equipment throughout the construction process; recording minutes and notifying the EPC General Contractor (directly or in writing) when discovering activities inconsistent with approved designs or applicable technical norms and standards for the EPC General Contractor to rectify and adjust.

- Verifying and confirming additional work volumes not due to the Contractor's fault for supplementation and payment resolution.

b/ The EPC General Contractor is responsible for fully complying with the quantity and quality requirements stipulated in the EPC Contract, including:

- Organizing a quality assurance system to conduct inspection, supervision, testing, and acceptance in accordance with current regulations.

- Responding (directly or in writing) and addressing the Project Owner's recommendations related to construction quality.

- Preparing complete documentation for phased, component, or completed project acceptance as required.

c/ The acceptance work between the Project Owner and the EPC General Contractor shall be conducted in phases or upon completion of the project or project components.

- Prior to construction, the Project Owner needs to agree with the EPC General Contractor on the division of completion stages for acceptance and transition to subsequent construction steps, as well as identifying critical construction stages affecting the quality, progress, and operational safety of the project.

- The Project Owner shall organize and oversee the acceptance work based on evaluating the actual status of completed work and reviewing the Project Acceptance Documentation along with other relevant documents submitted by the EPC General Contractor. For projects with complex technical requirements, the Project Owner must organize acceptance at technical stop points or critical construction stages.

3.6 The EPC General Contractor shall undertake full warranty of the project for the duration and amount specified as follows:

a/ The warranty period shall be determined according to the agreement (or regulation) of the manufacturer or supplier for machinery and equipment, and according to current state regulations for construction projects and their components.

b/ The warranty amount shall be agreed upon between the Project Owner and the EPC General Contractor for machinery and equipment parts, and according to current state regulations for construction projects and their components.

III- IMPLEMENTATION

1/ This Circular shall take effect fifteen days from the date of issuance.

2/ Ministers, Heads of ministerial-level agencies, Chairpersons of provincial People's Committees under central cities, Boards of Directors of State-owned Corporations, and Heads of units concerned shall be responsible for implementing this Circular.