Circular No. 08/2003/TT-BXD guiding the contents and management of design-supply-construction general contracting contracts (EPC).

 

CIRCULAR

Guidelines on the Content and Management of Design-Supply-Construction General Contract (EPC)

Pursuant to Clause 21 - Article 1 of Decree No. 07/2003/NĐ-CP dated January 30, 2003 of the Government amending and supplementing certain provisions of the Investment and Construction Management Regulation issued together with Decree No. 52/1999/NĐ-CP dated July 8, 1999 and Decree No. 12/2000/NĐ-CP dated May 5, 2000 of the Government, the Ministry of Construction provides guidelines on the content and management of design-supply-construction general contracts (EPC) 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 content and management of implementation of design-supply-construction general contracts (referred to as EPC contracts in English) for projects (sub-projects), tender packages using investment funds according to the Investment and Construction Management Regulation issued together with Decree No. 52/1999/NĐ-CP dated July 8, 1999 of the Government. In cases where projects or tender packages use state budget funds with foreign elements, the application of EPC contracts shall be carried out in accordance with the provisions of assistance and loan agreements already signed.

2- Encouragement is given to the application of EPC contracts for projects or tender packages where the investor wishes to reduce the management structure or does not have the necessary conditions to directly manage the project, and for projects or tender packages that have been commonly constructed, with clearly defined scope of work, volume, and cost.

3- The contractor selected to sign an EPC general contract must meet the conditions regarding experience and capacity as stipulated in the Decision on Conditions for Construction Business Capacity No. 19/2003/QĐ-BXD dated July 3, 2003 of the Minister of Construction. During the preparation, signing, and execution of the contract, it is encouraged for the contractor to propose innovative ideas, measures, or apply their own experience to complete the tasks under the contract, ensuring the objectives and requirements, and enhancing the efficiency of the project or tender package.

4- The signing and execution of EPC general contracts must comply with the provisions of the Law on Economic Contracts.

5- Explanation of Terms

In this Circular, the following terms are understood as follows:

a. EPC general contract is a written agreement concluded between the investor and a contractor or a consortium of contractors (collectively referred to as the general contractor) to undertake all works of a project or tender package from design - supply of materials, equipment, technical services - construction installation to synchronized operation and commissioning.

b. Investor's requirement documentation: is the document prepared by the investor to clarify and specifically define the main contents of the project or tender package mentioned in the Feasibility Study Report and the Approved Investment Report. The investor's requirement documentation serves as the basis for the contractor to prepare the EPC tender proposal in the case of direct assignment or to prepare the EPC tender invitation in the case of organized bidding.

c. Payment plan: is the document determining the total payment value under the EPC general contract, including the division of payment times according to the progress and completion stages of the contract works. The payment plan is prepared by the general contractor and approved by the investor as the basis for advance funding and payment of completed work volumes.

d. Investor's consultant: is a specialized organization hired by the investor to perform certain tasks such as preparing the investor's requirement documentation, preparing the EPC tender invitation, participating in contract negotiations, supervising the contract execution process, and other consulting tasks as required by the investor.

đ. Subcontractor: is a contractor directly signing a contract with the general contractor to undertake part of the work of the general contractor under the EPC general contract.

e. Subcontract: is a direct contract signed between the general contractor and a subcontractor.

f. Tender proposal: is the document submitted by the designated general contractor to clarify the extent of compliance with the investor's requirement documentation.

II- PREPARATION AND SIGNING OF EPC GENERAL CONTRACTS

After the project has been decided upon for investment, to implement the project or tender package through the EPC general contract form, the investor needs to carry out the following preparatory tasks:

1- Establish or improve the project management board with sufficient capacity as stipulated in the Decision on Conditions for Construction Business Capacity No. 19/2003/QĐ-BXD dated July 3, 2003 of the Minister of Construction to assist the investor in performing tasks such as hiring supervision consultants, preparing the investor's requirement documentation and tender invitations, selecting the general contractor, negotiating and signing the contract, and other tasks. For projects not using state budget funds, the investor may use their existing support staff with sufficient capacity as stipulated to perform these tasks without needing to establish a project management board.

2- Prepare the investor's requirement documentation

Based on the Feasibility Study Report and the Approved Investment Report of the project, the investor prepares the Investor's Requirement Documentation with the following main contents:

a. Project and tender package requirements regarding scale, capacity, and selected product solutions, operational capabilities; the degree of application of current technical standards in design and construction; technical, technological, and commercial solution requirements; technical specifications for materials, equipment, and technical services provided by the contractor, raw materials used; requirements for the contractor's professional experience and qualifications;

b. Preliminary design as stated in the approved feasibility study report and detailed design documents as specified in this section, Clause 3; details about the construction location, natural and geological data of the construction site area; specific architectural requirements and initial design parameters; requirements for construction quality management, testing, trial operation, warranty, and maintenance content;

c. Scope of work expected to be implemented under the EPC general contract form

d. Allocation of responsibilities between the project sponsor and the general contractor regarding the provision of electricity, water, telecommunications, internal transportation routes, and other available services on the construction site;

đ. Schedule for the implementation of key tasks and the completion progress to put the project into operation and use;

e. Information related to approval procedures; quantity of various types of documents and materials required to be submitted;

f. Requirements for environmental protection, safety assurance, fire prevention, and other issues.

The project sponsor's request documentation must be simple, complete, and clear to define the scope of work according to the contract, estimate the volume of work, and apply appropriate unit prices to prepare the tender invitation or EPC bid documents. This document should also prompt issues that contractors can provide feedback from the outset, such as design documents in the sponsor's request documentation, anticipated scope of contract works, and other necessary contents.

In cases where the project sponsor wishes to entrust the contractor with additional tasks such as preparing the investment project feasibility study, the sponsor's request documentation must include additional requirements for project preparation and guidance on relevant procedures.

The project sponsor may prepare the request documentation independently or hire consultants to do so. If hiring consultants to prepare this documentation, the consulting organization must concurrently serve as the supervising consultant during the contract execution process.

3- Preparation of Design Documentation for EPC Tendering

a. The design documentation for EPC tendering or direct award is the preliminary design approved in the Feasibility Study Report. This documentation may be supplemented and detailed further depending on its completeness, detail, and compatibility with other specific contents in the sponsor's request documentation.

- If the preliminary design content is already complete and detailed, it shall be used directly as the design documentation for EPC tendering or direct award;

- If the preliminary design content lacks detail, it needs to be supplemented and detailed through additional documents, instructions, explanations, and supplementary drawings to form the EPC tendering design documentation.

b. Before signing the contract, the contractor must continue to propose solutions and alternative plans for the EPC tendering design documentation to the project sponsor, who bears the responsibility to review, approve, or reject these proposals.

c. Supplementing and detailing the preliminary design content must not alter the project's objectives and basic requirements, and the project sponsor must bear responsibility before the competent authority for any modifications made to the preliminary design content.

4- Preparing the EPC Tender Invitation Document

a. The EPC tender invitation document is prepared in accordance with the laws on bidding, with the sponsor's request documentation serving as the basis for its preparation.

b. The person approving the EPC tender invitation document is legally responsible for its compliance with the approved project.

5- Conditions for the General Contractor

a. The project sponsor selects the general contractor through bidding or direct award in accordance with the laws on bidding.

b. The selected general contractor must have sufficient operational capacity as stipulated in the Decision No. 19/2003/QĐ-BXD dated July 3, 2003, of the Minister of Construction, and meet the sponsor's requirements. Specifically:

- They must have business registration for activities consistent with the project's and package's content. In the case of a consortium of contractors selected as the general contractor, they must have a consortium agreement, including a representative contractor responsible for overall operations, and commitments to perform tasks based on the division of responsibilities among the consortium members, each member must have business registration for activities consistent with their assigned tasks;

- They must have sufficient capacity and experience in performing general contractor duties, such as technical experience, capability, and experience in managing construction projects and packages with similar technical requirements and scale; within the contractor's organizational structure, there must be units responsible for design consultancy, manufacturing, material supply, equipment provision, and installation;

- They must have a good reputation with lending organizations and the ability to meet the financial requirements of the project and package.

c. Strictly prohibited are actions such as disclosing information, colluding, buying and selling bids, conspiring, or undercutting prices during the selection of the general contractor. The selection of the general contractor can only proceed after fully implementing the provisions of Sections 1, 2, 3, and 4 of Part II of this Circular.

6- Signing the EPC General Contract

a. Negotiation and signing of the EPC general contract are based on the sponsor's request documentation, tender invitation document, project documentation, bid documentation (bid proposal), approved bidding results, or the direct award document issued by the competent authority. During negotiation and contract execution, encouragement should be given to the contractor to continue proposing innovative ideas and solutions to unify certain aspects of contract implementation, such as detailed sponsor requirements, design documents in the sponsor's request documentation, scope of work between parties, and related issues;

b. The time for negotiation and signing of the contract should align with the overall schedule and ensure the effectiveness of the project implementation;

c. In cases where a consortium of contractors is chosen as the general contractor, along with the lead contractor, each member of the consortium may sign the EPC general contract directly with the sponsor or designate the lead contractor to sign and take responsibility according to the division of labor in the signed consortium agreement;

d. The content of the signed contract must comply with the provisions of economic contract laws, and all parties involved in the contract must bear legal responsibility for the legality and compliance of the contract content with the approved project.

III- CONTENTS OF THE EPC GENERAL CONTRACT

1- Contract Documentation

Contract documentation includes the contract agreement and accompanying documents.

a. The agreement on the contract shall be established according to the model set out in the Appendix attached to this Circular.

b. The documents accompanying the contract agreement include: the dossier on the investor's requirements, the tender invitation dossier, the bid dossier (tender submission dossier), the notification of successful tender or the tender designation document, general and specific conditions of the contract, drawings, written agreements between the investor and the main contractor, and other related documents. The documents accompanying the contract agreement form part of the content of the EPC general contracting contract.

In case of necessity, the parties involved in signing the contract may refer to additional guidance materials from the International Federation of Consulting Engineers (FIDIC) regarding the detailed contents of the contract documents.

2- Contract price and adjustment of contract price

a. The EPC general contracting contract price is formed and determined based on the dossier on the investor's requirements, the tender invitation dossier, the selected bidder's bid dossier (tender submission dossier), and the results of contract negotiations according to the principle:

- In the case of tendering, the contract price is determined based on the winning bid price and the results of negotiations between the investor and the winning bidder;

- In the case of direct assignment, for projects and packages with common characteristics, clear scope of work, and volume of implementation, the contract price is determined immediately upon signing the contract; for large-scale projects and technically complex packages, the contract price is temporarily agreed upon by the investor and the main contractor based on the allocated investment capital for the EPC project/package within the approved total investment ceiling and is officially determined when there are results from equipment procurement bidding and technical design - overall estimate approval or agreement;

b. In principle, the EPC general contracting contract price is a lump sum price that does not change throughout the contract period (except for cases where the price is adjusted according to the provisions in point d of this clause) and must not exceed the allocated investment capital for the EPC project/package within the approved total investment ceiling.

c. The EPC general contracting contract price includes all necessary costs for the main contractor to perform the works under the signed contract. The cost factors forming the contract price are determined according to Circular No. 07/2003/TT-BXD dated June 17, 2003, of the Ministry of Construction on "Amending and Supplementing Certain Points in the Circular guiding the establishment and management of construction project costs under investment projects No. 09/2000/TT-BXD dated July 17, 2000".

d. Adjustment of the EPC general contracting contract price shall be carried out in the following cases:

- The signed contract clearly specifies the scope, extent, and method of price adjustment;

- Additional volumes of work outside the contract due to reasons not attributable to the main contractor, which have been approved by the competent authority, shall be adjusted into the contract price according to the principle: if the work is already included in the contract's work list, it will be calculated at the contract unit price, and if it is not included, it will be calculated at the state-prescribed unit price for similar work; in the absence of a state-prescribed unit price, the investor and the main contractor must agree on the applicable unit price to submit for approval by the competent authority (if required) according to the regulations on managing construction project costs under investment projects;

- For projects and packages with an implementation period exceeding 12 months, starting from the 13th month onwards, if there are significant changes in national policies affecting investment and construction, the contract price will be adjusted accordingly.

The main contractor is responsible for calculating, explaining, and agreeing with the investor on price adjustments to submit for review and approval by the competent authority.

3- Advance payment and contract payment

Advance payment and payment for the EPC general contracting contract shall be carried out according to the following principles:

a. The payment price for the EPC general contracting contract is the contract price and the conditions recorded in the contract in accordance with the provisions stated in Clause 2 of this Part.

b. When implementing the contract, the investor shall make advance payments to the main contractor (unless otherwise agreed by both parties). The level of advance payment and the recovery of advance payment shall be regulated as follows:

- Advance payment to the Main Contractor shall be implemented in accordance with Point 13, Clause 17, Article 1 of Government Decree No. 07/2003/NĐ-CP dated January 30, 2003;

- Advance payment by the main contractor to subcontractors shall be implemented in accordance with current regulations on investment and construction management;

- The advance payment will be gradually recovered during each payment period based on the percentage corresponding to the completed volume and will be fully recovered when the completion payment reaches 80% of the value of the completed volume.

c. The investor shall pay the main contractor according to the progress of work implementation, the contract value, and the conditions of the signed contract based on the quantity of work accepted at each stage of implementation or upon completion of the project or project component, in accordance with the contract payment plan.

- For procurement and supply of materials and equipment, payment shall be made in installments based on delivery and corresponding invoices for the value of purchased materials and equipment;

- For construction and installation work volume, payment shall be based on the completed volume at each stage of implementation or upon completion of the project component, the payment plan, and the payment proposal submitted by the main contractor;

- For other works and services (such as design, supervision, and management by the main contractor, domestic transportation, training, and technology transfer...), payment shall be made based on the completed volume of work at each stage of implementation or based on the time spent on the work.

4- Subcontracting contract

a. The general contractor selects subcontractors through bidding or direct assignment. The general contractor must list subcontractors in the tender dossier (bid dossier) and obtain the investor's approval. The signing of the subcontract between the general contractor and the subcontractor must be consistent with the content of the EPC general contracting contract and the provisions of the law on economic contracts. Within the scope of performing the EPC general contracting contract, the subcontractor does not have a direct contractual relationship with the investor and is only responsible to the general contractor for the work performed under the subcontract. The general contractor is responsible to the investor for all works performed under the EPC general contracting contract, including those performed by the subcontractor.

b. In principle, the general contractor is not permitted to subcontract the main works of the project, packages that are critical to the quality and completion time of the construction project, without the agreement of the investor. Assigning subcontracts to subcontractors not listed in the tender dossier (bid dossier) must be approved in writing by the investor, and the investor may not refuse to issue such written approval without valid reasons.

IV - MANAGEMENT OF THE IMPLEMENTATION OF EPC GENERAL CONTRACTING CONTRACTS

Based on the regulations of the Investment and Construction Management Regulations issued together with Decrees No. 52/1999/NĐ-CP, No. 12/2000/NĐ-CP, and No. 07/2003/NĐ-CP of the Government, the management of the implementation of EPC general contracting contracts should be carried out according to the principle of increasing the autonomy and responsibility of the general contractor while ensuring strict control by the investor, while still maintaining flexibility in the allocation of tasks during the implementation of the project and package:

1. The content of contract implementation management includes:

a. Managing the scope of work implementation according to the project objectives and the work items listed in the signed contract; checking the accuracy, completeness, and appropriateness of survey, design, and technical documents applied.

b. Controlling the progress of work implementation in accordance with the overall project schedule, package schedule, and signed contract.

c. Inspecting and managing the quality of work implementation in accordance with state regulations on construction project quality management.

d. Managing the costs of work implementation according to the contract; controlling, settling, and adjusting the contract price (if necessary) in accordance with regulations on the establishment and management of construction project costs under investment projects.

2. Responsibilities and authorities of the investor and the general contractor.

a. Responsibilities and authorities of the investor:

+ During the contract implementation process, the investor has the responsibility to:

- Apply for construction permits as prescribed;

- Compensate, clear land, and hand over the entire construction site to the general contractor for management and use. If necessary, the investor may agree to entrust the general contractor with the compensation, clearance, and delivery of the construction site to ensure the project's progress and effectiveness;

- Hire supervisory consultants for the contract implementation process. Depending on the specific conditions of the project and package, supervisory consultants may be authorized to perform some functions and powers of the investor, such as directly transacting with the general contractor's representative at the construction site to resolve tasks assigned by the investor, inspecting and supervising all or part of the contract management contents mentioned in Clause 1 of this Part, representing the investor in certain necessary cases;

- Organizing acceptance, review, approval, or submitting to the competent authority (according to the分级翻译任务已经完成，以下是按照要求格式化的翻译结果：

- Reporting to the competent authority for consideration and decision on additional design proposals suggested by the general contractor;

- Proposing and recommending to the competent authority to apply preferential policies for the project (if applicable) for the general contractor;

- Managing the project funds, package funds, advance payments, and timely payment to the general contractor according to the payment plan and contract implementation progress;

- Confirming the quantities of completed work according to the contract and additional quantities outside the contract for submission to the competent authority for consideration and decision or decision based on the division of authority;

- Purchasing construction project insurance in accordance with current regulations;

- Preparing personnel and coordinating with the general contractor in training management staff and maintenance workers;

- Organizing acceptance and taking over the completed construction project according to the agreed contract terms and state regulations on acceptance and transfer of completed construction projects;

The investor shall bear full responsibility under the law for the implementation of regulations in investment and construction management, regarding quality, progress, cost implementation, and effective use of investment capital.

+ The investor's rights and authorities during the contract implementation process include:

- Approving the list of subcontractors not named in the EPC general contracting contract upon the general contractor's proposal;

- Agreeing with the general contractor on the tender documents for purchasing major technological equipment and the procurement costs of equipment included in the total contract price based on the tender results for equipment;

- Supervising the contract implementation by the general contractor from the organization of quality management systems to design, supply of materials and equipment, construction, installation, acceptance, and integrated trial operation of the completed project;

- Deciding to stop, suspend, or terminate the contract implementation according to the law and the agreement among the parties to the contract;

- Refusing or temporarily suspending payment under the contract when the general contractor fails to fulfill all obligations committed in the contract;

- Other rights as prescribed by law.

b. Responsibilities and authorities of the general contractor in implementing the contract

+ The general contractor has the responsibility to:

Accept and manage the entire construction site, preserve the centerline, elevation, boundary markers of the project, or clear the land if entrusted by the investor according to the agreement between the parties.

- Prepare technical design or construction drawings for main project components in accordance with approved preliminary design and submit to the project owner for review, approval, or endorsement;

- Develop and agree with the project owner on the schedule for implementing construction phases and major project components, as well as the payment plan under the contract;

- Organize the procurement, manufacture, and supply of materials and equipment according to the requirements and progress of the EPC general contract; agree and unify with the project owner on the content of tender documents for purchasing key technological equipment and the costs of purchasing equipment included in the total price of the basic contract based on bidding results for equipment;

- Construct the project in accordance with the approved design;

- Establish and ensure quality management systems and guarantee the quality of works carried out in compliance with construction quality management regulations and contractual agreements;

- Organize, coordinate, and manage activities on the construction site; implement measures to ensure environmental hygiene, fire prevention, labor safety, and security on the construction site;

- Proactively cooperate with the project owner in organizing training for management staff and workers to operate and use the project; carry out technology transfer, hand over relevant technical drawings and documents related to operation, use, and maintenance of the project to the project owner;

- Conduct testing, calibration, and trial operation of the project; prepare completion records and hand over the completed project to the project owner in accordance with contractual agreements and state regulations;

- Purchase insurance for construction materials, equipment, and workshops serving construction, work injury insurance for employees, and civil liability insurance for third parties in accordance with regulations;

- Fulfill warranty obligations for the project in accordance with state regulations;

- Bear legal responsibility and responsibility to the project owner for the quality and progress of work implementation under the signed contract, including subcontracted work, and must compensate for material losses caused by their own fault;

+ In the execution of the contract, the general contractor has the following rights and responsibilities:

- Propose supplementary, revised designs, alternative solutions, and methods in the organization of implementation to be consistent with actual conditions while still ensuring the requirements and effectiveness of the project and tender package;

- Control all construction means and methods within the construction site;

- Select subcontractors through bidding or designation; supplement or replace subcontractors (if necessary) to ensure quality, cost, and progress of contract works;

- Suspend or terminate the contract in accordance with laws on contracts and contractual agreements between the parties;

- Other rights as prescribed by law.

V. IMPLEMENTATION

1- This Circular replaces Circular No. 01/2002/TT-BXD dated January 7, 2002, issued by the Ministry of Construction and takes effect fifteen days after its publication in the Official Gazette;

2- For projects and tender packages that have been implemented under the EPC general contract form before this Circular takes effect, management and implementation shall be based on the contractual agreements already signed;

3- The Ministers, Heads of ministerial-level agencies, Chairmen of People's Committees of provinces and centrally-administered cities, Boards of Directors of State-owned Corporations, and Heads of relevant units shall be responsible for implementing this Circular;

 

ANNEX

ANNEXED TO Circular No. 08/2003/TT-BXD dated July 9, 2003

of the Ministry of Construction guiding the contents and management of EPC General Contract (Design - Supply of Materials and Equipment - Construction)

AGREEMENT ON THE EPC GENERAL CONTRACT

(Model)

…, day … month… year …

I. Basis for signing the contract

II. Representatives of the contracting party and the contractor

1. Inviting tenderer:

- Name of the project owner

- Position

- Business address

- Bank account number … at Bank …

2. Contractor

- Name of the EPC General Contractor

- Position

- Business address

- Bank account number … at Bank …

III. Contents of the EPC General Contract

1. In this contract, terms will have the meanings as defined in the contract conditions set forth below.

2. The following documents are integral parts of this agreement and together constitute the EPC General Contract, including:

a. Contract Agreement

b. Notice of Award or Tender Assignment Document

c. Owner’s Request Documents, Tender Invitation Documents

d. Bid Documents or Proposal Documents

e. Special Conditions of the Contract

f. General Conditions of the Contract

g. Drawings

h. Appendices, Tables, Charts

i. Other written agreements relevant to the contract

j. Guarantee documents (if any)

The Contract Agreement shall take precedence over other documents in the Contract. In case of conflict among the documents in the Contract, the priority application shall follow the order …

3. Scope of work and products of the contract

4. Duration of the contract

5. Value of the contract

6. Responsibilities and obligations of the parties and the role of the owner's consultant

7. Advance payment and payment method

8. Principles for handling disputes

9. Rewards, penalties; suspension, termination of the contract

10. Liquidation of the contract

11. Governing law

12. Commitments of the parties

This contract is made in ... copies, in the language ..., each party retains ... copy. All copies have equal legal force

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