Circular No. 03/2004/TT-BXD guiding the implementation of the turnkey construction form for power projects designated for bidding.

CIRCULAR

Guidelines for Implementing Turnkey Construction Contracts for Designated Power Projects

tendered power generation projects

Pursuant to the Investment and Construction Management Regulations issued together with Decree No. 52/1999/NĐ-CP and amended and supplemented by Decrees No. 12/2000/NĐ-CP and No. 07/2003/NĐ-CP of the Government.

Pursuant to document No. 797/CP-CN dated June 17, 2003 of the Government regarding power projects starting construction in 2003-2004 and document No. 400/CP-CN dated March 26, 2004 of the Government concerning the implementation mechanism for hydropower projects.

With the goal of accelerating the completion of power projects while enhancing the capabilities of state-owned enterprises, the Prime Minister has approved the application of turnkey construction contracts by consortiums formed from State-owned corporations to implement construction works for power projects. The list of contractors within the consortiums has been designated by the Prime Minister, and the tasks assigned to each contractor have been agreed upon by the contractors and the project sponsors. The consortium has a main contractor called the general contractor, and the other contractors are referred to as member contractors. The general contractor is responsible for overall site management and coordinating the construction work of member contractors to ensure the project's schedule and quality.

The Ministry of Construction provides guidance on certain aspects of implementing turnkey construction contracts for power projects as follows:

I. METHODS OF CONTRACT SIGNING AND TYPES OF ECONOMIC CONTRACTS

1. Method of signing contracts: Based on the tender designation document of the competent authority, the project sponsor and the consortium agree to sign economic contracts for construction works according to one of the following two methods:

a) The first method (hereinafter referred to as Method 1): The project sponsor signs a contract with the general contractor (representing the member contractors of the consortium), who then signs contracts with each member contractor to carry out the assigned work as agreed upon between the member contractors of the consortium and approved by the project sponsor.

Under this method, the general contractor is responsible to the project sponsor for the quantity, schedule, and quality of all construction works of the project according to the contract signed with the project sponsor. The member contractors of the consortium are responsible to the general contractor for carrying out their assigned work according to the contract signed with the general contractor.

According to document No. 797/CP-CN dated June 17, 2003 of the Government, for the hydropower projects: Plei Krông, A Vương, Quảng Trị, Bản Lả, and Buôn Kướp, the signing of economic contracts is carried out according to this method.

b) The second method (hereinafter referred to as Method 2): The project sponsor directly signs contracts with each member contractor of the consortium to carry out the assigned work.

Under this method, each member contractor of the consortium is responsible to the project sponsor for the quantity, schedule, and quality of the construction work they undertake according to the contract signed with the project sponsor, while also complying with the general contractor's overall management. The general contractor is responsible for organizing overall site management to ensure the construction schedule of the entire project.

In addition to their responsibilities for the quantity, schedule, and quality of the construction work they undertake according to the contract, both the general contractor and member contractors must also be accountable to the superior management authority and the Prime Minister for the assigned tasks.

2. Types of contracts: Economic contracts signed according to Method 1 or Method 2 are price-adjustable contracts as stipulated by current regulations.

3. To reduce administrative procedures and save time for project implementation, it is encouraged that project sponsors entrust member contractors with tasks such as site preparation, construction of temporary facilities, auxiliary and public works serving the site. Project sponsors must publicly disclose the budget for entrusted tasks and ensure timely payment to protect the interests of all parties.

II. REQUIREMENTS FOR CONTRACT CONTENT

1. The project sponsor, general contractor, and member contractors agree to include in the contract the main contents: Scope of work, responsibilities of the parties involved in the contract, site management methods, organization of quantity and quality control, construction schedule, acceptance, and payment consistent with the method of signing the contract.

The provisions regarding payment in contracts between the project sponsor, general contractor, and member contractors must be consistent and comply with the Contract Law.

2. In the case of signing contracts according to Method 1, the contract between the project sponsor and the general contractor must ensure that the project sponsor assigns the general contractor to undertake and be responsible for the quantity, schedule, and quality of all construction works of the project. The general contractor must have sufficient authority to manage the entire site to ensure the quantity, schedule, and quality of the works; At the same time, the general contractor has the right to review and adjust the scope of work of member contractors if they fail to meet the requirements for the assigned work schedule and quality.

The contract between the general contractor and member contractors must ensure that the general contractor assigns member contractors to undertake and be responsible for the quantity, schedule, and quality of the assigned work.

If the project sponsor pays through the general contractor, the contract between the project sponsor and the general contractor must include penalty clauses to prevent the general contractor from misappropriating funds or failing to transfer money fully and promptly to member contractors according to the signed contract.

3. In case of signing contracts under method 2, the contracts between the project owner and each subcontractor must ensure that the project owner assigns the subcontractor to carry out and be responsible for the quantity, progress, and quality of the assigned work. The subcontractor commits to comply with the general direction and management of the general contractor at the construction site. The contract must clearly specify the acceptance, handover, payment, and warranty for the construction installation works, and must include sanctions in cases where the subcontractor breaches its commitments or fails to comply with the general contractor's directions.

Contracts between the project owner and the member of the consortium who acts as the general contractor, in addition to the above requirements, the project owner must create sufficient conditions for the general contractor to fulfill its role in directing and managing the construction site, particularly tasks such as assigning the construction and use of auxiliary facilities to avoid waste, assigning the use and protection of the construction site area, and chairing construction site meetings to direct the implementation of the construction progress according to the approved technical design documents.

III. QUALITY MANAGEMENT AND ACCEPTANCE

1. Quality management work for construction projects of power source projects shall be carried out in accordance with the Construction Project Quality Management Regulations issued together with Decision No. 18/2003/QD-BXD dated June 27, 2003 of the Minister of Construction.

2. Preparation of construction drawings and detailed estimates: The general contractor and subcontractors have the responsibility to organize the preparation of construction drawings and detailed estimates for each project component, submit them to the project management board for approval in accordance with regulations. The general contractor serves as the focal point to coordinate with subcontractors to prepare construction drawings and detailed estimates to ensure overall progress and consistency with the approved technical design documents.

The general contractor and subcontractors are entitled to receive design fees for preparing construction drawings and detailed estimates equal to 40% of the design cost value as stipulated in Decision No. 12/2001/QD-BXD dated July 20, 2001 of the Minister of Construction.

3. Acceptance work

a) Contracts signed under method 1:

- Work and component acceptance: The project owner organizes and directly accepts the work and components of the project carried out by the general contractor and each subcontractor. When accepting work and components carried out by subcontractors, the general contractor may participate alongside the project owner.

- Stage and completed project component acceptance: The project owner organizes and directly accepts stages and completed project components carried out by the general contractor and each subcontractor. The general contractor must participate alongside the project owner in the acceptance of stages and completed project components carried out by subcontractors, while simultaneously handing over completed project components to the project owner.

Each subcontractor is responsible for completing completion documents and related materials to serve the acceptance and handover of their assigned work.

b) Contracts signed under method 2:

- Work and component acceptance: The project owner organizes and directly accepts the work and components of the project carried out by the general contractor and each subcontractor.

- Stage and completed project component acceptance: The project owner organizes and directly accepts stages and completed project components carried out by each subcontractor, with the participation of the general contractor. - Each subcontractor is responsible for completing completion documents and related materials to serve the acceptance and handover of their assigned work.

- Each subcontractor is responsible for completing completion documents and related materials to serve the acceptance and handover of their assigned work.

IV. PROVISIONAL PAYMENTS AND SETTLEMENT

1. Provisional payments: Due to the large scale and complex technical nature of power source projects, technical designs and total estimates cannot be immediately approved, requiring contractors to mobilize a significant amount of equipment, materials, and labor to commence construction... To alleviate difficulties for contractors, the project owner and consortiums of contractors may agree and propose to the Prime Minister to allow provisional funding to facilitate contractors in meeting the set schedule.

2. Settlement of completed work volume:

a) Payment value: When the contractor has completed all required settlement documentation and procedures, the project owner must pay 100% of the value of the completed work volume. If the necessary documentation and procedures are not yet complete, the project owner temporarily pays the contractor 80% of the value of the work volume already executed based on local unit prices.

b) For contracts signed under method 1, payment shall be made in one of the following two ways: - The project owner pays the value of the installed work volume carried out by subcontractors through the general contractor; thereafter, the general contractor is responsible for timely and full payment to subcontractors in accordance with the signed contract and other agreements.

- The project owner directly pays the value of the installed work volume to each subcontractor after obtaining the approval of the authorized representative of the general contractor's legal entity.

c) For contracts signed under method 2, the project owner directly pays the value of the installed work volume to each subcontractor based on the acceptance documents and signed contract.

3. Construction works not included in the state-established economic and technical norms shall be agreed upon by the project owner with the Ministry of Construction to establish such norms and submit for approval in accordance with regulations.

For construction works requiring separate pricing, the project owner shall organize the establishment of separate pricing and submit for approval in accordance with regulations.

V. GENERAL CONTRACTOR FEES

Under the general contractor method, the general contractor is responsible for organizing the management and direction of the construction site, coordinating subcontractors to ensure the quantity, progress, and quality of the project. Therefore, the general contractor is entitled to management fees as stipulated in Circular No. 09/2000/TT-BXD dated July 17, 2000 and Circular No. 07/2003/TT-BXD dated June 17, 2003 of the Ministry of Construction. The general contractor fee is equal to 40% of the project management fee. In cases where the current project management fee regulations are insufficient for the operation of the project management board and the general contractor, the project owner and the general contractor shall agree to propose additional costs to the competent authority and incorporate them into the total estimate.

VI. PERFORMANCE BONDS FOR CONTRACT EXECUTION

VI. CONTRACT PERFORMANCE GUARANTEE

For power generation projects designated for tendering with large scale and total investment amounts, and difficult construction conditions, the Prime Minister has designated consortiums of contractors consisting of state-owned enterprises with sufficient capacity and experience to carry out specific tasks of the project; To reduce procedures and capital difficulties for contractors, the project owner and contractor may agree not to apply the form of performance bond for contractors who have been assigned to implement these projects. In cases where the project owner does not require the submission of a performance bond, the general contractor shall not request member contractors to submit a performance bond.

VII. ORGANIZATION AND MANAGEMENT OF THE CONSTRUCTION SITE

1. The consortium of contractors must have a written agreement on the division of work and responsibilities of each contractor; the role of the general contractor in managing the construction site; the coordination in the reasonable use of auxiliary works and construction works for construction purposes to avoid waste; the use and protection of the construction site area.

2. The general contractor is responsible for managing the construction site, holding meetings, urging progress, implementing the management of the construction site according to the written agreement of the consortium of contractors, and other related matters as stipulated in the signed contract.

Member contractors of the consortium must comply with the general contractor's direction and management regarding the management of the construction site.

VIII. IMPLEMENTATION

1. This Circular takes effect fifteen days after its publication in the Official Gazette.

2. Relevant agencies, units, and enterprises are responsible for organizing the implementation of this Circular; if there are any issues, they should report to the Ministry of Construction for resolution./.