Circular No. 01-BXD/CSXD guiding the management of construction for projects funded by direct foreign investment and foreign contractors undertaking construction in Vietnam

CIRCULAR

Guidelines for managing construction of projects funded by direct foreign investment

and foreign contractors undertaking construction in Vietnam

Pursuant to the Law on Foreign Investment in Vietnam;

Pursuant to Decree No. 12/CP dated February 18, 1997 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam, and Decree No. 42/CP dated July 16, 1996 of the Government promulgating the Regulations on Investment and Construction Management;

Pursuant to Decree No. 15/CP dated March 4, 1994 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Construction;

The Ministry of Construction hereby provides guidelines for managing construction of projects funded by direct foreign investment and foreign contractors undertaking construction in Vietnam as follows:

I. MANAGEMENT OF CONSTRUCTION PROJECTS
FUNDED BY FOREIGN DIRECT INVESTMENT

The management of construction of projects funded by foreign direct investment is regulated in Chapter XI of Decree No. 12/CP dated February 18, 1997, including:

1. Issuing planning certificates so that investors have a basis for preparing investment project proposals;

2. Reviewing planning and architectural aspects in investment projects involving construction works;

3. Reviewing technical design of construction works and deciding to commence construction;

4. Supervising tendering processes in construction and issuing consulting and construction contracting licenses to foreign contractors who win bids to implement construction projects;

5. Managing the quality of construction works.

1. Selection of construction site and issuance of planning certificate:

1.1 When preparing the project proposal, the investor must work with the People's Committee of the province or centrally governed city (hereinafter referred to collectively as the Provincial People's Committee) to obtain investment approval at the local level and proceed to select a construction site for the project.

1.2 Based on the investor's requirements, the Director of the Department of Construction or the Chief Architect of the city (for cities that have a Chief Architect) shall be responsible for introducing new construction sites or agreeing on existing sites that comply with the planning and issue the planning certificate according to Decree No. 91/CP dated August 17, 1994 of the Government and guidance documents from the Ministry of Construction to provide the investor with a basis for preparing the investment project proposal.

Model application form for planning certificate as per Appendix 1.

Model planning certificate as per Appendix 2.

2. Preparation and review of the construction component of the investment project:

2.1 When preparing the investment project proposal for construction, the investor must prepare a preliminary design, which should include: detailed master plan, architectural concept, layout of production lines and infrastructure facilities.

2.2 For areas where construction works are located without appropriate technical infrastructure to meet the operational requirements of the project, the investor must develop plans to improve or supplement existing infrastructure, or construct separate technical infrastructure for the project;

2.3 When preparing the project, environmental safety calculations and structural safety calculations must comply with relevant safety standards in accordance with Vietnamese Construction Standards and safety standards;

2.4 When reviewing the construction component of the investment project, the reviewing authority must base their conclusions on the issued planning certificate, approved detailed planning, Vietnamese Construction Standards, and Vietnamese safety standards for construction works. The review process is carried out in accordance with Article 83 of Chapter XII of Decree No. 12/CP dated February 18, 1997 of the Government.

3. Review of construction project design and decision to commence construction:

3.1 Content of design review:

Construction project design is reviewed in accordance with the provisions of Article 84 of Decree No. 12/CP dated February 18, 1997 of the Government and the following guidelines:

3.1.1 Legal status of the design organization:

a. Consulting and design organizations implementing the design of the investment project must have legal personality; possess a design practice license issued by Vietnam or abroad, and must be officially notified in writing by the investor as being selected or winning the bid through the tendering process as prescribed by the Tendering Regulations of the Vietnamese Government;

b. Vietnamese consulting and design organizations designing construction works must hold a consulting and design practice license; their capacity recorded in the practice license must be suitable to undertake the design of the construction works;

c. Foreign consulting and design organizations selected or awarded the contract to design construction works must collaborate with at least one Vietnamese consulting and design organization capable of designing such works and must register with the Ministry of Construction or the Department of Construction according to the division of responsibilities set out in Point II.5 of this Circular to obtain a design bidding license as prescribed;

d. Survey activities serving the design of construction works (including topographic survey, engineering geological survey, hydrogeological survey, and environmental survey) must be conducted by Vietnamese survey organizations with legal personality and sufficient capacity recorded in their practice license, upon request of the design organization through economic contracts;

In cases where special technical requirements for surveys cannot be met by Vietnamese survey organizations, the investor may choose foreign survey organizations to carry out the surveys, provided that the chosen foreign survey organizations must be granted a Survey License by the Ministry of Construction;

3.1.2 Compliance of design with planning and architectural requirements:

a. The design of construction works must ensure compliance with the selected preliminary design when approving the project and the approved detailed planning; solutions must not exceed the limits specified in the planning certificate; any adjustments required must be accepted in writing by the authority issuing the planning certificate;

b. Connection with external common infrastructure works outside the project boundary must comply with the planning; in cases where there is no planning, it must be agreed in writing by the specialized management authority;

3.1.3 Design must be carried out in accordance with Vietnamese Construction Standards and Building Standards or foreign building standards approved by the Ministry of Construction.

For construction areas with complex natural conditions regarding terrain, geology, climate, and environment, Vietnamese standards must be applied.

3.1.4 Responsibility for design:

a- The investor shall be responsible under Vietnamese law for the safety of the project, fire prevention and explosion control, and environmental protection during the construction process as well as throughout the period of using the project;

b- Surveying and design organizations shall be responsible to the investor and Vietnamese law for their surveying and design products; designs must ensure structural stability and safety, and must fully specify fire prevention and explosion control safety, and environmental safety throughout the construction and usage periods of the project;

c- In cases where necessary, the investor may engage another consulting organization to review calculations and design results. The design review consulting organization shall perform the review through a contract with the investor at an agreed price, consistent with international prices. The review conclusion must be documented in writing and signed and stamped. The design review consulting organization shall be responsible to the investor and Vietnamese law if the project has incidents due to errors in the review process;

3.2- Design appraisal organizations of state management agencies:

3.2.1- The分级审批设计的实施依据是1997年2月18日政府第12号决定第85条的规定。

a- The Ministry of Construction directly receives the investor's files to appraise the technical design of construction projects belonging to Group A projects;

b- Provincial Construction Departments directly receive Group B design files from investors to organize the appraisal and submit them to the provincial People's Committee for decision;

3.2.2- Investors must submit three sets of design files directly to the appraisal agency, each set including:

a- An application for design appraisal and permission to construct the project (signed and stamped by the investor) according to Appendix 3;

b- Documents determining the legal status of the design organization as stipulated in Section 3.1.1;

c- Technical design documents including:

c.1- A comprehensive design description of the project accompanied by climate, geological, environmental survey data, and a list of foreign standards used in the design that have been approved by the Ministry of Construction. A list of software programs used for designing the project;

c.2- Contracts for review and conclusions of the review organization (if any);

c.3- Master plan drawings of the project and layout diagrams of production lines;

c.4- Overall architectural drawings of the project including cross-sections, longitudinal sections, elevations, and composite foundation structure drawings;

c.5- Comprehensive drawings of the project's infrastructure systems and connection diagrams to common infrastructure systems;

c.6- Copies of investment permits and agreements with state management authorities on environmental protection and fire prevention and explosion control;

c.7- Legal copies of land lease decisions or land lease contracts with cadastral maps at scales of 1/200 to 1/500 attached;

3.2.3- When appraising designs related to other construction specialties, the appraisal agency must invite relevant departments of the Ministry of Construction or provincial Construction Departments and the Chief Architect of the city to participate;

The technical design of the project must be approved in writing by the Minister of Construction or the Chairman of the provincial People's Committee according to the model in Appendix 3 of this Circular. After receiving notification of the appraisal result, the investor may proceed with construction of the project;

3.2.4- Appraised design files must be stamped by the appraisal agency and returned to the investor one set, kept one set by the appraisal agency, and handed over one set to the local Construction Department for monitoring;

3.2.5- For large-scale projects comprising multiple independent components, the design can be divided into several phases. The investor must determine in writing a reasonable division of design phases to be approved by the Ministry of Construction or the provincial People's Committee. Appraisal will be conducted phase by phase according to the approved schedule, and appraisal fees will be charged per phase;

3.2.6- The deadline for appraising the entire project or by phase is twenty days from the date of receipt of complete valid files. For incomplete files as required above, the appraisal agency will issue a document requesting the investor to supplement the files. In such cases, the design appraisal period will be extended accordingly with the time taken to supplement the design files;

3.2.7- The investor pays the design appraisal fee to the appraisal agency according to the regulations of the Ministry of Finance;

3.2.8- After twelve months from the date of notification of the decision on design appraisal and construction, if the project has not yet commenced construction, the appraisal document and decision will no longer be enforceable. If continued construction is needed, the investor must provide reasons in writing for the appraisal agency to consider and decide on continuation. Any changes to architecture, planning, and main structures in the design must be approved by the design appraisal agency before implementation;

3.2.9- The design appraisal agency is responsible to the state and Vietnamese law for the contents of its appraisals and decisions;

3.3- Implementation of construction projects:

After obtaining the decision on design appraisal and construction, the investor may commence construction but must notify the design appraisal agency and local authorities of the commencement date and comply with the provisions stated in the decision;

For cities with a Chief Architect, the investor must copy one set of the appraised design files and one decision of the design appraisal agency for the Chief Architect of the city to manage architecture and planning;

4- Inspection of bidding procedures for construction projects:

4.1- To construct projects funded directly by foreign capital, the investor must conduct bidding in Vietnam according to the Tendering Regulations issued by Government Decree No. 43/CP dated July 16, 1996, and Joint Circular No. 02/TTLB dated February 25, 1997, of the Ministry of Planning and Investment, the Ministry of Construction, and the Ministry of Trade, and must comply with the following provisions:

4.1.1- Vietnamese construction organizations participating in bidding for construction projects must hold a valid construction practice certificate issued under current regulations and have the capacity appropriate to the scale and technical requirements of the project; 4.1.2- Foreign construction organizations participating in bidding must hold a valid professional certificate from their home country, have the capacity to ensure the quality of the project, and commit to forming a consortium with at least one Vietnamese construction contractor having the appropriate professional capacity for the project to bid; after winning the bid, they must sign a contract to fulfill this commitment;

4.1.3- The consortium with Vietnamese construction organizations can be established through a contract in accordance with Appendix 4 of this Circular to determine each party's responsibilities according to:

a- Allocation of bidding responsibility based on percentage value and allocation of risks and benefits agreed upon by both parties;

b- Allocation based on project components or parts for each party to undertake construction and independently bear responsibility for the quality and finance of the allocated portion;

c- Allocation of main, sub, or primary sub-contracting responsibilities to undertake the entire project construction.

4.2- The Ministry of Construction and Provincial Construction Departments shall check the legality of the bidding results in accordance with regulations before issuing a construction bidding permit to foreign contractors through the investor's report on the bidding process and results, evaluation, and a copy of the authority's acceptance document of the bidding result in accordance with the tendering regulation provisions.

4.3- Foreign construction contractors, when winning the bid or being directly selected as the main or sub-contractor, must apply for a construction bidding permit in accordance with the guidance provided in Section II of this Circular.

4.4- Upon completion of the project, the investor must report completion and settle the construction portion, implementing the provisions of Articles 88, 89, and 90 of Decree No. 12/CP. These reports must be submitted to the design approval agency. The construction settlement report must be confirmed by the inspection organization as stipulated in Article 90 of Decree 12/CP: the inspection organization may be the auditing agency or a legitimate construction cost management agency of Vietnam that performs through a contract with the investor.

5- Quality Management of Construction Projects:

5.1- The quality of construction projects funded directly by foreign capital built in Vietnam shall be managed in accordance with the provisions of the Construction Project Quality Management Regulation promulgated together with Decision No. 498/BXD-GD dated September 18, 1996, by the Minister of Construction. Specifically, Chapters III, IV, V, and VI of the Construction Project Quality Management Regulation (excluding provisions related to the establishment and responsibility of the National Acceptance Council mentioned in Articles 29 and 32 of that Regulation) must be implemented.

5.2- State management of construction project quality is delegated as follows:

The National Construction Quality Inspection Agency under the Ministry of Construction assists the Minister of Construction in managing the quality of projects belonging to Group A.

Construction Departments of provinces and centrally-administered cities assist the Chairman of the People's Committee of the province in managing the quality of projects belonging to Group B.

5.3- Construction consulting organizations and construction contractors must obtain insurance for their activities at Vietnamese or international insurance agencies and must provide warranty for the project after completion in accordance with Vietnamese state regulations and must be recorded in the contract.

5.4- After completing each part of the construction project:

Foundation,

Structural body,

Installation of technical equipment systems, completion of the project, the investor must organize acceptance and notify the competent state agency responsible for construction project quality (as delegated in Section 5.2) to witness or inspect if necessary.

When the investor accepts the completion and puts the entire project into use, the aforementioned authority has the right to inspect compliance with acceptance regulations and may require the investor to rectify any discovered violations.

The partial project acceptance record or the completion acceptance record of the project put into use and the list of acceptance documents are established according to the models in Appendix 5 attached to this Circular.

5.5- In case of an incident, within 24 hours after the incident occurs, the investor must report to the competent state agency responsible for construction project quality (as delegated in Section 5.2) and relevant law enforcement agencies. Within 24 hours after receiving the notification, the agency must send staff to the site for inspection. Incident reports must be kept and established according to the model in Appendix 5-5.

5.6- Within the latest three months after putting the project into use, the investor must submit one set of completed construction project files, quality inspection documents, and project acceptance files to the National Archive in accordance with Vietnamese state regulations on document storage.

II. MANAGEMENT OF FOREIGN CONTRACTORS ACCEPTING CONSTRUCTION CONSULTANCY, SURVEY, DESIGN, CONSTRUCTION MANAGEMENT OR CONSTRUCTION INSTALLATION PROJECTS IN VIETNAM

1.1- Foreign contractors include construction consultancy contractors (including project management consultancy, construction bidding consultancy, survey, design, construction quality management, and construction installation consultancy) and construction installation contractors collectively referred to as construction contractors who accept contracts to implement construction projects in Vietnam must establish files in accordance with this Circular to obtain a permit for construction consultancy or construction project implementation.

1. Principles:

1.2- The permit for construction consultancy or construction bidding permit (collectively referred to as construction bidding permit) is granted to foreign contractors for each project. When accepting bids for another project, foreign contractors must establish new permit application files. If the project is located within the same area as the previously permitted project, the application file for this project only includes the application form and supplementary documents compared to the existing file.

1.2 - Construction consultancy permit or construction bidding permit (collectively referred to as construction bidding permit) shall be issued to foreign contractors for each specific project. When undertaking a different project, foreign contractors must submit an application for a new permit. In cases where the project is located within the same area as the previously permitted project, the application procedure for this project shall only include an application form and additional supporting documents compared to the existing file.

1.3- The bidding construction permit issued to foreign contractors is a legal certificate for foreign contractors to implement consultancy construction contracts and/or undertake construction works to relate with Vietnamese state agencies to implement business-related policies as prescribed by Vietnamese law.

2- Conditions for foreign contractors to be granted a bidding construction permit:

2.1- Legal entity status: Foreign contractors must have a legal entity certificate, a practice certificate or a business license for consultancy construction or installation works issued by their country, having won bids through tendering procedures or been selected according to point 5, section 1 of this Circular.

2.2- Have a joint venture commitment letter or a joint cooperation contract with a Vietnamese construction consultancy organization or installation organization that has appropriate capacity to fulfill the contract and commit to comply with relevant Vietnamese laws governing their activities.

2.3- Must have issued share capital or minimum statutory capital as follows:

2.3.1- For main construction contractors: Not less than 5,000,000 USD.

2.3.2- For consultancy and design contractors: Not less than 100,000 USD.

2.3.3- For subcontractors or contractors undertaking individual tasks (including survey work): Not less than 20% of the amount specified in points 2.3.1 and 2.3.2.

2.4- Must have total annual revenue in the two most recent years according to the type of contracted work as follows:

2.4.1- For construction installation contractors: Not less than 20,000,000 USD/year.

2.4.2- For subcontractors undertaking individual construction installation tasks: Not less than 4,000,000 USD/year.

2.4.3- For construction consultancy contractors must provide a declaration of professional expertise and projects completed with values in the last three years.

2.5- Conditions regarding materials and technology:

2.5.1- Must maximize the use of available construction materials and equipment in Vietnam.

2.5.2- Produce building structures based on existing capabilities in Vietnam.

2.5.3- Apply advanced management and construction technologies at the project site.

2.6- Regarding personnel:

2.6.1- Only managers, technical staff, and skilled workers that Vietnam cannot adequately supply may be brought into Vietnam.

2.6.2- Must register the name of the authorized representative of the company to execute the contract in Vietnam; when changes occur, re-registration is required.

3- The application dossier for a bidding construction permit submitted by foreign construction contractors includes one original set and three copies (photocopies); the original set contains:

3.1- A bid request form for construction projects (according to the model in Appendix 6).

3.2- A copy of the tender process report, evaluation, and tender results sent by the project owner to the Ministry of Planning and Investment or the Provincial People's Committee where the investment project is located, and a confirmation document about the tender results (notarized) or the decision and Investment License for domestic-funded projects.

3.4- Legal entity certificates of foreign contractors including: Company establishment permit and Articles of Association (or Business License) and Practice Certificate issued by the home country (notarized copy from the registered country).

3.5- Declarations according to the model in Appendix 6.

3.6- Overall project drawings and major construction quantities undertaken.

3.7- Joint venture contract or cooperative agreement between foreign contractors and Vietnamese construction organizations to undertake the construction contract.

4- The registration dossier for consultancy construction permits submitted to the issuing authority includes one original set and three copies (photocopies); the original set contains:

4.1- A request for a Construction Bidding Permit (according to the model in Appendix 6). 4.2- Notification of the decision to select the contractor or tender results from the project owner (as per item 3.2).

4.3- A copy of the investment permit issued by the Ministry of Planning and Investment or the Provincial People's Committee (no notarization required).

4.4- Legal entity certificates for consultancy construction issued by the home country (notarized copy). Declaration of professional capacity of consulting and design experts for the project.

4.5- List of major similar projects completed in the last three years.

4.6- Scope of work for the project.

4.7- Contract or document signed with a Vietnamese consultancy organization to perform consultancy and/or design work.

5- Issuance of construction bidding permits:

5.1- The Minister of Construction shall issue construction bidding permits for contractors implementing Group A projects decided by the Prime Minister and other Group B projects not within the investment permit issuance authority of the Provincial People's Committee.

5.2- The Director of the Department of Construction shall issue construction bidding permits for projects for which the Provincial People's Committee issues investment permits.

5.3- The issuance of construction bidding permits for foreign contractors must be completed within twenty days from the date of receipt of complete valid dossiers as prescribed. In cases where the dossier is incomplete, the issuing authority must issue a supplementary document requesting additional information; in such cases, the permit issuance period will be extended accordingly.

The construction bidding permit or consultancy construction permit issued to foreign contractors shall follow the model in Appendix 7.

Fees for issuing construction bidding permits shall be implemented according to Circular No. 06/TTLB dated January 22, 1994, of the Ministry of Finance and the Ministry of Construction "Guidelines for the Collection and Use of Fees for Issuing Professional Practice Permits in Construction."

6- Matters that foreign contractors must undertake after obtaining a construction bidding permit:

6.1- Before commencing main work in any locality, foreign contractors must present the issued construction bidding permit to the Provincial People's Committee through the Construction Department where the construction project is located for knowledge and monitoring.

6.2- Register office address, telephone, and fax in Vietnam and legal representative with the Provincial People's Committee where the project is located and notify the Ministry of Construction and the Construction Department.

6.3- Open a business account at a Vietnamese bank for the implementation of the construction bidding permit.

6.4- Register accounting and statistical systems and pay taxes to the tax authority in the province where the contract is executed.

6.5- Report semi-annually and upon completion of the contract on activities under the issued permit to the Ministry of Construction and the Construction Department (according to the model in Appendix 8).

III. INSPECTION AND HANDLING OF VIOLATIONS

1- Organizing inspection:

1.1- The Ministry of Construction, provincial construction departments shall cooperate to inspect the construction of projects funded by direct foreign investment and the activities of foreign contractors on an annual basis and upon completion of each phase as notified by the project owner. When conducting inspections, they must inform the investment permit issuing authority for coordination.

Surprise inspections shall be carried out when violations of construction laws by the project owner or construction contractor are discovered, when parties request handling due to their interests being infringed upon, or when there is an accident involving the project; the inspection agency must handle such inspections according to the procedures prescribed by law.

The project owner and foreign construction contractors have the responsibility to facilitate conditions for inspection agencies to perform their functions effectively.

1.2- During inspections, if violations of construction management regulations or other provisions of Vietnamese law are found, they shall be handled according to Vietnamese law.

1.3- All arbitrary inspection activities not in accordance with construction management regulations or other provisions of Vietnamese law are strictly prohibited and shall be handled according to Vietnamese law.

1.4- Agencies conducting audits and inspections must submit a report to the Minister of Construction, the Minister of Planning and Investment, and the Chairman of the People's Committee of the province where the project is located within ten days after completing the inspection for knowledge and necessary action.

1.5- Every six months, provincial construction departments must report to the Ministry of Construction on the issuance of construction tender permits and the operation and implementation of construction of projects funded by foreign investment in their respective localities using Model Appendix No. 9.

2- Violation Handling:

Any organizations or individuals involved in construction investment activities within the territory of Vietnam who violate the provisions of this Circular shall be subject to legal action under Vietnamese law.

IV. IMPLEMENTATION PROVISIONS

1- This Circular takes effect from the date of signature and replaces:

Circular No. 08/BXD dated March 30, 1995 of the Ministry of Construction guiding the management of construction of projects funded by foreign investment in Vietnam and foreign contractors undertaking construction in Vietnam.

Files submitted or resolved before the signing date of this Circular shall continue to be processed according to the provisions of Circular 08/BXD-CSXD.

2- Ministries, ministerial-level agencies, and government agencies, provincial and centrally-administered city people's committees, and construction departments are responsible for guiding and implementing this Circular./.