JOINT CIRCULAR No. 72/TT-LB GUIDING THE AWARD AND PENALTY FOR RESPONSIBILITY IN COMPLETING DESIGN, INSTALLATION, AND HANDOVER OF PROJECTS FOR PRODUCTION AND USE

CIRCULAR

OF THE JOINT STATE COMMITTEE FOR BASIC CONSTRUCTION - MINISTRY OF FINANCE

Guidelines for rewarding and penalizing responsibility for completing design, construction, and putting projects into production and use

Pursuant to the Construction Management Regulations issued together with Decree No. 232-CP dated June 6, 1981 of the Council of Ministers; implementing Directive No. 32-CT dated July 29, 1981 of the Chairman of the Council of Ministers, the State Committee for Basic Construction and the Ministry of Finance issue guidelines for rewarding and penalizing responsibility for completing design, construction, and putting projects into production and use as follows.

 

I. GENERAL PRINCIPLES

1. Rewards and penalties under this circular aim to encourage the strengthening of contractual discipline and to enhance material responsibility among production and construction organizations and project sponsors in design and construction work, thereby promoting the timely completion and handover of projects for production and use as stipulated by the state, ensuring construction quality, labor safety, and investment savings.

The full reward will only be implemented upon the completion and handover of the entire project for production and use. For projects with a construction period exceeding one year, interim rewards may be granted for the completion of key project components or stages and annual progress milestones according to the approved general schedule. These interim amounts must be calculated and offset against the final reward upon the completion and handover of the entire project for production and use.

Penalties prescribed in this circular apply to each case where economic contract terms are not fulfilled, causing delays in the timely and complete handover of projects for production and use.

2. Rewards and penalties under this circular apply separately to each project or joint project for design organizations, construction contractors, project sponsors, and equipment, materials, and transportation suppliers directly involved in the construction process; they do not apply to surveying, planning, economic-technical feasibility studies, standard design, or state administrative agencies.

3. The conditions and levels of rewards and penalties under this circular must be determined in advance and clearly recorded in the economic contracts for each party as legal grounds for conducting reward and penalty assessments and payments.

4. In addition to the reward and penalty system under this circular, other existing reward and penalty systems of the state in basic construction continue to apply to organizations participating in the construction of the aforementioned projects.

II. REWARDS AND PENALTIES FOR RESPONSIBILITY IN COMPLETING DESIGN WORK ON PROJECTS

RECORD OF THE PROJECT

A. REWARDS FOR ORGANIZATIONS AWARDED DESIGN CONTRACTS

1. Organizations awarded design contracts shall be rewarded up to 10% of the design cost if they meet all requirements specified in Article 43 of the Construction Management Regulations, specifically delivering the required quantity of technical design documents and estimates within the approved timeframe, ensuring the quality of surveys and designs that meet the economic-technical feasibility study requirements at an appropriate level of economic-technical parameters with reasonable and economical capital investment, including minor adjustments and supplements that do not extend the construction period or increase the project estimate.

The assessment method for rewards is as follows:

- When delivering the approved technical design documents or technical design and total estimate, a reward of 8% of the design cost (for projects designed in one phase) or 6% (for projects designed in two phases) shall be given.

- Upon the completion and handover of the project for production and use, the sponsor will assess and award the remaining reward.

2. Cases and levels of reduced rewards:

a) If the design organization requests and the contracting organization agrees to extend the delivery time for the signed design documents and estimates, the reward level specified in Point 1 will be reduced as follows:

- First extension: the reward amount will be 75% of the specified level.

- Second extension: the reward amount will be 50% of the specified level.

- Third extension or more: no reward will be given.

b) If design errors (incorrect forecasting, incorrect price application, etc.) lead to a difference between the total estimate (for projects designed in one phase) or the sum of individual component estimates (for projects designed in two phases) and the final settlement exceeding 10%, but still meeting other requirements in Point 1, the reward will be reduced to 80% of the specified level.

B. PENALTIES FOR FAILURE TO COMPLETE RESPONSIBILITIES IN DESIGN WORK

During the performance of responsibilities for design work, if any of the following situations occur, the party at fault must pay a penalty to the co-signatory of the economic contract according to the specified level:

1. Delay in submitting initial documents for design and estimation, delay in submitting design and estimation documents for review: a penalty of 0.50% of the design cost per day for the first 30 days and 0.1% for subsequent days.

Delay in submitting design and estimation documents for construction: a penalty of 0.01% of the value of the corresponding construction work per day for the delayed submission.

2. Failure to promptly address deficiencies in the design drawings leading to construction delays: a penalty of 0.01% of the value of the construction work volume requiring correction per day.

3. Large design errors requiring construction stoppage for correction: a penalty of 0.01% of the value of the construction work volume requiring correction (based on the old estimate) per day of stoppage.

4. The total penalty for organizations awarded design contracts shall not exceed 10% of the design cost.

III. REWARDS AND PENALTIES FOR RESPONSIBILITY IN COMPLETING CONSTRUCTION AND HANDING OVER PROJECTS FOR PRODUCTION AND USE

A. REWARDS FOR TIMELY COMPLETION AND HANDOVER OF THE ENTIRE PROJECT

1. Reward criteria.

If the project is completed and handed over for production and use and meets all the following requirements, it will be eligible for a reward:

a) The project is completed in a synchronized and comprehensive manner according to the design (including main and auxiliary construction items, such as flower gardens, greenery, surface cleaning, and worker housing if applicable), within the time limit specified in the approved overall progress plan, consistent with the state plan's objectives for mobilizing the project for production and use.

b) The quality of the project meets the requirements of the current national regulations on acceptance and handover of construction projects.

c) The actual investment capital of the project does not exceed the total approved budget estimate (including any additional approved estimates for increased quantities that are reasonable).

2. Reward level.

a) For construction projects or joint construction projects that meet all the requirements set forth in point 1, section A, part III upon completion and handover, a reward of 2.2% of the approved total construction installation budget estimate shall be given.

b) If the project is confirmed by the acceptance committee to have a quality rating of good or higher (including decoration work, completion, site clearance, and industrial cleaning), an additional reward not exceeding 0.8% of the approved total construction installation budget estimate of the project shall be given (of which 0.3% is allocated for excellent completion work).

In cases where the completion and handover deadline is extended with approval from the competent authority, the reward amount will decrease proportionally to the percentage of the extended period compared to the initially determined construction period. If the extension exceeds 50% of the initially determined construction period, no reward will be given.

B. TEMPORARY WITHHOLDING OF REWARDS FOR COMPLETION OF CONSTRUCTION ITEMS AND ACHIEVEMENT OF KEY STAGE PROGRESS, ANNUAL PROGRESS

1. To encourage the completion of construction items and key stage progress in construction projects with a duration of over one year, organizations participating in the construction project may temporarily withhold rewards after meeting the following requirements:

- Completion of construction items or achievement of key stage progress according to the mobilization deadlines stipulated in the overall progress plan.

- Achievement of annual construction progress according to the mobilization deadlines stipulated in the overall progress plan (for projects without completion deadlines for construction items or key stage progress in the overall progress plan).

2. The method of temporary withholding of rewards is as follows:

- In cases where the general contracting system or main contracting system for construction installation is applied, the project owner temporarily withholds the reward money for the main contractor to reward subcontractors who have fully fulfilled their construction responsibilities according to signed economic contracts, and temporarily withholds rewards for other participating construction organizations (including the main construction installation contractor) who have completed construction items, achieved key stage progress, or annual progress according to the mobilization deadlines stipulated in the overall progress plan.

- In cases where the direct tendering system for construction installation is applied, the project owner temporarily withholds the reward money to reward direct contractors who have fully fulfilled their construction responsibilities according to signed economic contracts, and temporarily withholds rewards for other participating construction organizations who have completed construction items, achieved key stage progress, or annual progress according to the mobilization deadlines stipulated in the overall progress plan.

3. The maximum amount temporarily withheld as a reward is 2.2% of the value of the completed construction installation budget estimate.

4. This temporarily withheld reward amount must be accounted for and considered for offset when calculating the reward for completing the entire project for production and use.

In cases where the entire project does not receive a reward, the main contractor must return the temporarily withheld amount to the project owner; subcontractors who fail to fully fulfill their responsibilities according to signed economic contracts must return the temporarily withheld reward amount to the main contractor (in cases where the general contracting system or main contracting system for construction installation is applied); direct contractors who fail to fully fulfill their responsibilities according to signed economic contracts must return the temporarily withheld reward amount to the project owner (in cases where the direct tendering system for construction installation is applied).

C. DISTRIBUTION OF REWARDS TO ORGANIZATIONS THAT HAVE COMPLETED RESPONSIBILITIES FOR CONSTRUCTION

OF THE PROJECT

Rewards under this circular are distributed to organizations that have completed construction responsibilities as follows:

1. In cases where the general contracting system or main contracting system for construction installation is applied:

a) Construction installation organizations receive 93% of the total reward amount. Of this:

- 2% is for the main contracting task.

- 7% is managed by the main construction installation contractor to reward other production and business organizations serving construction installation that have contractual responsibility relationships with them (including organizations supplying equipment, materials, components, building materials, and transportation).

- 84% is for construction installation organizations including the main contractor if the main contractor participates directly in construction installation. The reward for each construction installation organization is calculated proportionally to the share of distribution (Si); determined for each organization according to the formula:

Si = x ki

Where:

- Gi: The value of the completed construction installation budget estimate handed over by the construction installation organization responsible for implementation.

- Ni: Labor productivity measured in the value of one construction installation worker in the construction installation contractor i (based on average indicators according to the plan assigned by the principal ministry).

- ki: Adjustment factor determined by the project owner and construction installation organizations within the range of 0.95 to 1.5 based on the average grade of the entire completed construction installation volume belonging to construction installation organization i.

b) The project owner and project management board departments receive 2% of the total reward amount.

c) The remaining amount (5% of the total reward amount) is managed by the project owner to reward other production and business organizations that have contractual economic responsibility relationships with them (including organizations undertaking transportation, equipment storage, material supply...).

2. In cases where the direct tendering system for construction installation is applied:

a) Construction installation organizations receive 84% of the total reward amount. The distribution method is the same as point a, section 1 above.

b) The project investor and units under the construction management board shall be awarded 4% of the total bonus amount.

c) The remaining portion (12% of the total bonus amount) shall be managed by the project investor to distribute among other production and business organizations directly serving the construction and installation of the project.

3. During the process of distributing bonuses, the project investor and the organizations receiving bonuses may negotiate to adjust the distribution levels up or down by no more than 15% of the specified bonus distribution rates but shall not increase the total bonus amount received.

4. Organizations participating in the construction of the project that fail to complete their construction responsibilities according to economic contracts shall not receive their share of the bonus. This portion of the bonus shall be redistributed by the project investor together with the main contractor based on the contribution of each organization in mitigating the consequences caused by the non-receiving organizations.

5. The bonus distributed to workers and staff participating in the construction of the project at each organization shall be decided by the head of that organization based on the volume, quality, nature of work, and completion time of each individual's tasks, after consulting with the same-level trade union organization.

D. PENALTY FOR FAILURE TO COMPLETE RESPONSIBILITIES IN THE CONSTRUCTION AND COMMISSIONING OF PROJECTS FOR PRODUCTION AND USE

During the performance of responsibilities for construction activities, if any of the following situations occur, the party at fault must pay a penalty to the other party signing the contract according to the prescribed level:

- Delay in submitting design documents and estimates: a penalty of 0.01% of the value of the corresponding construction and installation work for each day of delay.

- Delay in delivering the construction site: a penalty of 0.01% of the value of the subsequent construction estimate for each day of delay.

- Delay in delivering equipment for installation: a penalty of 0.05% of the value of the equipment installation estimate for each day of delay (for the first ten days) and 0.5% (for subsequent days).

- Delay in delivering components, details, and construction materials: a penalty of 0.05% of the value of the delayed quantity for each day of delay (for the first ten days) and 0.2% (for subsequent days).

- Extension of the handover period for the project, project component, or completed construction work: a penalty of 0.05% of the value of the project, project component, or completed construction work handover estimate for each day of extension.

- Extension of the acceptance and receipt period for the project, project component, or completed construction work: a penalty of 0.05% of the value of the completed construction work handover estimate for each day of extension.

- The total penalty amount for a construction organization violating the above cases shall only be implemented up to 1% of the value of the construction work estimate taken on by the organization.

IV. SOURCES OF BONUSES AND PENALTIES

1. The design bonuses and bonuses for completing the commissioning of projects for production and use under this circular shall be sourced from the project investment capital and recorded as a separate item in the total estimate.

2. The source of funds for design organizations, construction organizations, and other production and business organizations to pay penalties shall be drawn from their own capital or enterprise fund. Penalties paid by the project investor shall be drawn from the production and business organization's own capital invested in the project. If the project investor does not have its own capital, it must report to the competent authority for approval to draw from the investment capital for payment.

V. IMPLEMENTATION PROCEDURES

1. Examination and temporary withholding of bonuses.

a) The examination and decision on awarding or temporarily withholding bonuses under this circular for the main contractors or direct contractors shall be the responsibility of the project investor; for subcontractors, it shall be the responsibility of the main contractor.

The basis for examining and temporarily withholding bonuses includes:

- Milestones for submitting design documents and estimates (for design work). Milestones for completing and handing over the project for production and use, completing project components, and key stage progress, annual progress according to the approved overall schedule (for construction work).

- Economic contracts related to the examination of bonuses (including supplementary contracts), which clearly specify conditions and bonus levels.

- Records of receiving approved design documents and estimates (for design work). Records of inspecting and handing over the project, project components, and key stage construction work quantities or confirmation of annual progress completion according to the approved overall schedule (for construction work).

- Reports on the implementation of construction estimates for the examined entities.

b) Within the prescribed time limits for the following cases, the responsible organization mentioned in point a of this section must conduct the examination and issue a decision on awarding or temporarily withholding bonuses along with copies of the relevant documents serving as the basis for the examination.

For organizations contracting design work, the first examination shall be conducted within five days from the date of completing the submission of technical design documents (or construction technical design documents) accompanied by the approved general estimate, and the second examination within ten days from the date of handing over the entire project for production and use.

For organizations involved in construction and other production and business organizations directly participating in the construction of the project, examination and temporary withholding of bonuses.

- When completing and handing over the entire project for production and use: to be conducted within fifteen days from the date of handover.

- When completing project components and key stage progress: to be conducted within five days from the date of completion and handover.

- When completing annual progress according to the approved overall schedule: to be conducted within ten days from the end of the construction year.

2. Examination of penalties.

a) When a violation occurs as stipulated in Section II, Part B and Section III, Part D of this circular, the penalized party must notify the offending party to establish a record of penalty examination within five days from the start of the violation. Each violation case must have a record of penalty examination specifying the degree of violation and the amount of penalty. If the offending party fails to establish the record beyond the deadline, the penalized party may establish it themselves, and such record will still be enforceable. If the offending party disagrees, they may appeal to the economic arbitration court for adjudication.

b) The penalty assessment must be based on the provisions set forth in the signed economic contracts, evidence proving the violation, and the penalties specified for each case in this Circular.

3. Payment of bonuses, fines, and temporary withholding of bonuses.

All payments of bonuses, fines, and temporary withholding of bonuses under this Circular shall be processed through the Investment and Construction Bank that provides funding for the project, based on valid award, fine, and bonus withholding review documents.

Specifically, the documents for payment of bonuses and temporary withholding of bonuses must include a distribution table of funds among the receiving organizations.

If the deposit account of the organization responsible for paying bonuses and fines lacks sufficient funds, the Investment and Construction Bank will provide mandatory loans to facilitate the payment.

4. This Circular takes effect from the date of issuance. For projects that commenced construction before but were completed after the issuance date, bonuses will only be calculated for the volume of work carried out after June 6, 1981, and fines will be calculated based on the remaining workload from the date of this Circular's issuance.

Advance bonuses and those issued according to guiding documents implementing the completion handover bonus system and annual construction progress bonus for certain projects issued by the State Basic Construction Committee and the Ministry of Finance prior to the issuance date of this Circular shall be recognized and paid when reviewing the completion handover bonus for the entire project put into production and use as stipulated in this Circular.

Any guiding documents on bonus and penalty systems in basic construction issued by ministries, sectors, and localities that conflict with this Circular shall not be enforceable.

During the implementation of this Circular, if difficulties arise or special cases not covered are encountered, ministries, sectors, and localities should report to the State Basic Construction Committee and the Ministry of Finance for joint research and resolution of each specific case.