Decree No. 99/2007/NĐ-CP On Management of Construction Investment Costs

DECREE

On the management of construction investment costs for projects

________________________

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Construction Law dated November 26, 2003;

Considering the proposal of the Minister of Construction.

DECREE:

PART I

GENERAL PROVISIONS

Article 1. Applicability

This Decree applies to organizations and individuals related to the management of construction investment costs for projects funded by state capital.

It is encouraged for organizations and individuals related to the management of construction investment costs for projects funded by other sources to apply the provisions of this Decree.

Article 2. Scope of application

This Decree stipulates the management of construction investment costs for projects including: total investment amount; project cost estimate; construction norms and prices; contracts in construction activities; payment and settlement of state-funded construction investment costs, including state budget funds, official development assistance funds, state investment credit development funds, state-guaranteed credit funds, and other state investment funds.

For projects using official development assistance (ODA) funds, if international treaties signed by competent authorities of the Socialist Republic of Vietnam contain different regulations on the management of construction investment costs compared to the provisions of this Decree, such treaties shall be followed.

Article 3. Principles of managing construction investment costs for projects

1. The management of construction investment costs for projects must ensure the objectives and effectiveness of construction investment projects and comply with the requirements of the market economy.

2. The management of construction investment costs for projects shall be conducted on a project-by-project basis, consistent with each stage of construction investment projects, design phases, types of funding sources, and state regulations.

3. The total investment amount and project cost estimates must be accurately calculated, adequately covered, and appropriate to the duration of the construction project. The total investment amount is the maximum cost that the investor is permitted to use to invest in constructing the project.

4. The State performs its function of managing construction investment costs through issuing, guiding, and inspecting the implementation of regulations on the management of construction investment costs.

5. The investor of the construction project bears full responsibility for the management of construction investment costs from the investment preparation phase until the completion and operation of the project.

Chapter II

TOTAL INVESTMENT AMOUNT FOR CONSTRUCTION PROJECTS

Article 4. Contents of the total investment amount for construction projects

1. The total investment amount for construction projects (hereinafter referred to as the total investment amount) is the estimated cost of the project determined according to Clause 1 of Article 5 of this Decree. The total investment amount serves as the basis for the investor to plan and manage capital when implementing construction investment projects.

2. The total investment amount includes: construction costs; equipment costs; land compensation and resettlement costs; project management costs, construction investment consulting costs; other costs; and contingency costs.

3. The costs of the total investment amount are specified as follows:

a) Construction costs include: costs for constructing buildings and building components; costs for demolishing and dismantling old structures; land leveling costs; temporary construction costs, auxiliary construction costs for construction purposes; temporary housing at the site for living and construction management;

b) Equipment costs include: costs for purchasing technological equipment; training and technology transfer costs, if applicable; installation, testing, calibration costs; transportation, insurance costs; taxes and other related fees;

c) Land compensation and resettlement costs include: costs for compensating houses, structures, crops on land, and other costs; resettlement implementation costs; organization of land compensation costs; land use costs during the construction period, if applicable; infrastructure technical construction investment costs, if applicable;

d) Project management costs include costs for organizing the implementation of project management work from project initiation to completion, acceptance, and handover for operation;

đ) Construction investment consulting costs include: survey, design, construction supervision, review consulting costs, and other construction investment consulting costs;

e) Other costs include: working capital during trial production for construction investment projects aimed at business purposes; interest on loans during the construction period, and other necessary costs;

g) Contingency costs include: costs for unexpected work volumes and costs for price escalation factors during the construction period.

Article 5. Determination of the total investment amount

1. The total investment amount is determined according to one of the following methods:

a) Calculated based on the basic design of the project, where construction costs are calculated based on the main quantities from the basic design, other quantities are estimated, and construction prices are consistent with the market; equipment costs are calculated based on the quantity and type of equipment suitable for the technological design, market equipment prices, and other factors, if applicable; land compensation and resettlement costs are calculated based on the compensation and resettlement volume of the project and relevant state policies; other costs are determined by preparing a budget or temporarily calculating a percentage (%) of the total construction and equipment costs; contingency costs are determined according to Clause 3 of this Article;

b) Calculated based on the area or capacity of the project and the comprehensive construction price per structural unit, area, or functional use (hereinafter referred to as the comprehensive construction price), the corresponding project investment rate at the time of project initiation, adjusted and supplemented with costs not included in the comprehensive construction price and investment rate to determine the total investment amount;

c) Based on data from similar projects with comparable economic-technical indicators that have been implemented. When applying this method, the data of similar projects must be converted to the time of project initiation and adjust the cost items not determined in the total investment amount;

d) Combining the methods prescribed in points a, b, and c of Clause 1 of this Article.

2. The preliminary total investment amount for projects that must prepare an investment report and projects applying turnkey contract form shall be estimated based on the unit cost of investment or costs of similar completed projects and factors affecting the total investment amount according to the construction period length.

3. The contingency reserve for unforeseen work volume is calculated as a percentage (%) of the total costs specified in points a, b, c, d, đ, and e of Clause 3, Article 4 of this Decree. The contingency reserve for inflation factor is calculated based on the construction period length and the annual construction price index corresponding to the type of construction project, taking into account domestic and international price fluctuations.

Article 6. Examination and Approval of Total Investment Amount

1. Examination of the total investment amount is part of the examination of the investment project. The contents of the examination of the total investment amount include:

a) The suitability of the method for determining the total investment amount with the characteristics, technical nature, and technological requirements of the construction investment project;

b) The completeness, rationality, and conformity with market realities of the cost items within the total investment amount;

c) Calculations regarding the efficiency of construction investment, risk factors, financial plans, capital repayment plans, if applicable;

d) Determining the value of the total investment amount ensuring the efficiency of construction investment.

2. The investment decision-maker decides on organizing the examination of the total investment amount or may hire organizations or individuals with sufficient qualifications and experience to review. The examination fee or review cost is included in other costs in the total investment amount. Organizations and individuals conducting the examination and review of the total investment amount must bear legal responsibility for the rationality and accuracy of the examination and review results.

3. The total investment amount is recorded in the investment decision approved by the investment decision-maker.

Article 7. Adjustment of Total Investment Amount

1. The approved total investment amount can only be adjusted in the following cases:

a) The appearance of force majeure factors such as earthquakes, typhoons, floods, landslides, tornadoes, tsunamis, landslips; war or the threat of war directly impacting the construction project;

b) When the approved planning scheme is adjusted, directly affecting the total construction investment amount;

c) Due to the investment decision-maker changing or adjusting the scale of the project when new factors appear that bring higher economic and social benefits.

2. Authority to adjust the total investment amount:

a) For construction projects using state budget funds: the investor must report to the investment decision-maker for approval before implementing the adjustment of the total investment amount;

b) For construction projects using state-guaranteed credit, state development credit, and other state investment capital: the investor decides independently and bears responsibility for the adjustment of the total investment amount.

3. The portion of the adjusted total investment amount differing from the previously approved total investment amount must be examined according to the provisions of Article 6 of this Decree.

Chapter III

CONSTRUCTION ESTIMATE

Article 8. Contents of Construction Project Budget Estimate

1. The construction project budget estimate (hereinafter referred to as the project budget estimate) is determined based on specific construction projects and serves as the basis for the investor to manage construction investment costs.

2. The project budget estimate is prepared based on the quantity of work determined according to the technical design or construction drawing design, tasks to be performed by the project, and construction unit prices, cost norms calculated as a percentage (%) (hereinafter referred to as percentage norms) necessary to perform the workload and tasks.

3. The contents of the project budget estimate include: construction costs, equipment costs, project management costs, construction investment consulting costs, other costs, and contingency reserves.

Article 9. Preparation of Construction Project Budget Estimate

1. The construction project budget estimate is prepared as follows:

a) Construction costs are prepared for the main project, major project components, specific project works, and are determined by preparing a budget estimate. For auxiliary projects, temporary construction projects serving construction, temporary houses at the site for living and construction management, construction costs are determined by preparing a budget estimate or using percentage norms;

Construction costs include direct costs, common costs, pre-tax income, value-added tax, and construction costs of temporary houses at the site for living and construction management;

b) Equipment costs in the project budget estimate include procurement costs of equipment, including training and technology transfer costs, if any; installation costs of equipment, testing, calibration costs, and other related costs, if any;

Procurement costs of equipment are determined based on the quantity, number, type of equipment needed to purchase or manufacture, and the purchase or manufacturing price of the equipment. Training and technology transfer costs, installation costs of equipment, testing, calibration costs, and other related costs (if any) are determined by preparing a budget estimate;

c) Project management costs include necessary costs for the investor to organize project management. Project management costs are determined by percentage norms;

d) Construction investment consulting costs include costs for consulting on investment project preparation, surveying, designing, construction supervision, review consulting, and other construction investment consulting costs. Construction investment consulting costs are determined by percentage norms or preparing a budget estimate;

đ) Other costs include costs not specified in points a, b, c, and d of Clause 1 of this Article and are determined by preparing a budget estimate or using percentage norms;

e) Contingency reserves for unforeseen work volume are calculated as a percentage (%) of the total costs specified in points a, b, c, d, and đ of Clause 1 of this Article. Contingency reserves for inflation factor are calculated based on the construction period length and the annual construction price index corresponding to the type of construction project.

2. For small-scale projects that only prepare an economic-technical report, the total investment amount simultaneously serves as the project budget estimate.

3. For projects with multiple works, the project investor may determine the total budget estimate of the project to serve project management purposes. The total budget estimate of the project is determined by summing up the estimates of the works included in the project.

Article 10. Examination and Approval of Work Budget Estimates

1. The project investor organizes the examination of work budget estimates before approval. The examination includes:

a) Checking the consistency between the main estimated quantities and the design quantities;

b) Verifying the correctness and reasonableness of the application and adjustment of construction unit prices, cost ratios, consulting service budget estimates, and other cost item estimates in the work budget estimate;

c) Determining the value of the work budget estimate.

2. In cases where the project investor lacks the conditions and capacity for examination, they are permitted to hire organizations or individuals with the necessary qualifications and experience to examine the work budget estimates. Organizations or individuals providing consulting services for the examination of work budget estimates bear responsibility under the law and to the project investor regarding the examination results.

3. The project investor approves the work budget estimate after examination and bears legal responsibility for the approval result. The approved work budget estimate serves as the basis for determining the tender price, construction cost, and is the basis for negotiating and signing contracts, and making payments to contractors in cases of direct award.

4. Construction works or components thereof using state budget funds must have their designs and budget estimates approved before commencement of construction.

Article 11. Adjustment of Work Budget Estimates

1. Work budget estimates may be adjusted in the following cases:

a) The cases stipulated in Clause 1 of Article 7 of this Decree;

b) Cases where changes or additions to the design are allowed without contravening the basic design or changing the cost structure within the approved work budget estimate, including contingency costs.

2. The project investor organizes the examination and approval of adjusted work budget estimates.

Chapter IV

CONSTRUCTION RATES AND CONSTRUCTION PRICES OF WORKS

Article 12. Construction Quantities

1. Construction rates include economic-technical rates and cost ratios.

2. Economic-technical rates serve as the basis for establishing construction unit prices and composite construction prices.

3. Cost ratios are used to determine the costs of certain types of work, costs in construction investment including investment consulting services, auxiliary works, site preparation, common costs, pre-tax income, and other costs.

Article 13. Establishment and Management of Construction Rates

1. The Ministry of Construction guides methods for establishing construction rates, developing, and publishing construction rates.

2. Based on the method for establishing construction rates prescribed in Clause 1 of this Article, ministries and provincial People's Committees organize the development and publication of construction rates for specific works and tasks in their respective sectors and localities.

3. For construction activities already included in the published system of construction rates but not suitable for construction methods, conditions, or technical requirements of the work, the project investor, contractor, or consulting organization adjusts those rates appropriately for application to the work.

4. For new construction activities not yet included in the published system of construction rates, the project investor, contractor, or consulting organization bases adjustments on technical requirements, construction conditions, and the method for establishing rates guided by the Ministry of Construction to develop rates for such activities or apply similar construction rates from other works.

5. The project investor may hire consulting organizations with the necessary qualifications and experience to guide, establish, or adjust the construction rates specified in Clauses 3 and 4 of this Article. Consulting organizations bear responsibility for the rationality and accuracy of these construction rates.

6. New construction rates established in accordance with Clause 4 of this Article, when used to set unit prices for payment of works funded by state budget funds, must be agreed upon for application by competent state management agencies.

Article 14. SYSTEM OF CONSTRUCTION PRICES OF WORKS

1. The system of construction prices of works includes construction unit prices and composite construction prices. Construction unit prices are established for specific construction works. Composite construction prices are compiled from construction unit prices.

2. The system of construction prices of works is used to determine construction costs in the total investment ceiling and work budget estimates.

Article 15. Establishment of Construction Unit Prices of Works

1. Construction unit prices of works are established based on economic-technical rates and the following cost factors:

a) Construction material prices are determined in accordance with standards, types, and quality of materials used for specific construction works. Construction material prices are determined based on market prices provided by organizations authorized to supply, quotations from manufacturers, information from suppliers, or prices applied to other works with similar standards and quality. Material prices at the construction site are calculated according to the method for establishing construction unit prices.

b) Construction labor prices are determined according to the prevailing labor market wage levels in each region, province, and industry. Construction labor prices are calculated based on the minimum wage level announced by competent state authorities; the investor's financial capacity and payment ability, and other requirements.

c) Prices of machinery and construction equipment are determined according to the method guided by the Ministry of Construction.

2. For construction works funded by ODA that require the use of foreign labor, imported materials, imported construction equipment, and other special requirements, construction unit prices are supplemented with costs based on actual conditions and special features of the work.

Article 16. Management of Construction Prices of Works

1. The project investor establishes construction unit prices and composite construction prices based on the method for establishing construction unit prices, technical requirements, and specific construction methods of the work, serving as the basis for determining the total investment ceiling and construction work budget estimates to manage construction investment costs.

2. The project investor is entitled to hire organizations or individuals with sufficient capacity and experience to provide consultancy services for tasks related to the establishment of construction project costs. Such organizations or individuals must be responsible before the project investor and the law for ensuring the rationality and accuracy of the construction project costs they establish.

3. The People's Committee of the province shall base on the management requirements of investment construction costs to guide the establishment and management of construction project costs for construction projects within its jurisdiction.

Article 17. Construction price index

1. The construction cost index is an indicator reflecting the degree of fluctuation of construction project costs over time and serving as a basis for determining the total investment amount and managing investment construction costs. The construction cost index is determined according to the type of construction project, by region, and published at different time points.

2. The Ministry of Construction shall publish the construction cost index and the method of establishing the construction cost index. Consulting organizations with sufficient capacity may determine and publish the construction cost index for reference purposes.

Article 18. Management consultancy for investment construction costs

1. Management consultancy for investment construction costs is a conditional business activity.

2. Organizations engaged in management consultancy for investment construction costs must have at least three persons holding a certificate as a construction cost engineer. Organizations engaged in management consultancy for investment construction costs are classified into two categories as follows:

a) Category 1: having at least five first-class construction cost engineers;

b) Category 2: having at least three second-class construction cost engineers or one first-class construction cost engineer.

3. Individuals independently engaged in management consultancy for investment construction costs must hold a certificate as a construction cost engineer.

4. Organizations or individuals providing management consultancy for investment construction costs can only undertake consultancy tasks within their defined scope of activities and are responsible under the law and the project investor for their consultancy activities.

5. The Ministry of Construction shall define the scope of activities for individuals and organizations engaged in management consultancy for investment construction costs and the categories of construction cost engineers, and provide guidance on training, issuing, and managing certificates for construction cost engineers.

Chapter V

CONTRACTS IN CONSTRUCTION ACTIVITIES

Article 19. Contracts in construction activities

1. A contract in construction activities (hereinafter referred to as a construction contract) is a written agreement between the Tendering Party and the Contractor regarding the establishment, modification, or termination of rights and obligations of the parties involved in the contract to carry out all or part of the work in construction activities. A construction contract is a legal document binding the rights and obligations of the parties involved in the contract. Disputes among the parties involved in the contract are resolved based on the signed and effective contract.

2. A construction contract includes the following main contents: works and tasks to be performed; types of guarantees; quality and other technical requirements of the work; time and progress schedule; contract price and payment methods; conditions for acceptance and handover; warranty period; liability for breach of contract; contract adjustment; other agreements according to each type of contract; language used in the contract.

3. A construction contract can only be concluded when the Tendering Party has completed the selection of the contractor in accordance with regulations and the parties involved have concluded the contract negotiation process.

4. Main types of construction contracts include:

a) Consultancy contract: a construction contract for performing one, several, or all consultancy works in construction activities;

b) Supply contract for materials and equipment: a construction contract for supplying materials and technological equipment for construction investment projects;

c) Construction execution contract: a construction contract for executing and installing equipment for the project, project component, or part of the construction work according to the design;

d) Design-supply-construction contract (EPC contract): a construction contract for carrying out all works from design, supply of materials and equipment to construction of the project, project component;

đ) Turnkey contract: a construction contract for undertaking all works including project proposal preparation; design; supply of materials and equipment; construction of the project.

Article 20. DOCUMENTATION OF CONSTRUCTION CONTRACTS

1. Documentation of construction contracts consists of the construction contract and accompanying documents.

2. Accompanying documents of construction contracts are integral parts of the contract. Depending on the scale and nature of the work, accompanying documents of construction contracts may include all or some of the following documents:

a) Notice of award or tender appointment document;

b) Contract conditions (specific and general conditions of the contract);

c) Bidder's proposal;

d) Technical instructions and reference conditions;

đ) Design drawings;

e) Written amendments and supplements;

g) Performance guarantee, advance payment bond, and other types of bonds, if applicable;

h) Other related documents.

3. The parties involved in signing the contract agree on the priority order for applying contract documents if there are conflicting provisions among them.

Article 21. CONTRACT PRICE IN CONSTRUCTION CONTRACTS

The contract price in construction contracts is the amount of funds that the Tendering Party pays to the Contractor to perform the volume of work according to the requirements of progress, quality, and other stipulations in the construction contract. Depending on the characteristics and nature of the construction project, the parties involved in signing the contract must agree on the contract price in construction contracts according to one of the following forms:

1. Lump-sum contract price:

a) The lump-sum contract price is a fixed price throughout the contract implementation period, except for cases permitted to adjust as specified in the contract, if any;

b) The lump-sum contract price applies to the following cases:

Projects or tenders where the quantity, quality, and time of implementation are clearly defined, or in certain cases where the quantity cannot be determined but the Contractor has the capacity, experience, and documentation to calculate and determine the lump-sum price and accepts the risks associated with determining the lump-sum price.

A tender package or a simple consultancy service for which the contract price is determined as a percentage of the value of the project or the volume of work.

2. Contract price based on fixed unit prices:

a) The contract price based on fixed unit prices is the price determined based on provisional quantities of work and fixed unit prices for each item of work in the contract, which remain unchanged throughout the execution of the contract, except for adjustments permitted as specified in the contract, if any;

b) The contract price based on fixed unit prices applies to projects or tender packages where the quantity cannot be accurately determined but the unit prices for performing the work can be determined, and the contractor has the capability, experience, and documentation to calculate and determine the fixed construction unit prices and related risks;

c) Fixed unit prices do not change throughout the execution of the contract, except for adjustments clearly stated in the construction contract.

3. Contract price based on adjustable prices:

a) The contract price based on adjustable prices is the price determined for work quantities and unit prices that may be adjusted under circumstances specified in the contract;

b) The contract price based on adjustable prices applies to projects or tender packages where, at the time of signing the contract, the quantity of work to be performed or cost factors to determine unit prices cannot be accurately determined;

c) Adjustable prices will be adjusted when conditions allow for determining the quantity and unit prices according to the provisions in the contract.

4. Combined contract price is the price determined according to the forms prescribed in Clauses 1, 2, and 3 of this Article. The combined contract price applies to large-scale projects with complex technology and long implementation periods. The tenderer and contractor shall base their agreement and determination of the types of work subject to lump-sum contract price (turnkey), fixed unit price contract price, or adjustable price contract price on the types of work stipulated in the contract.

Article 22. Adjustment of unit prices in construction contracts

The adjustment of unit prices in construction contracts must be recorded in the contract and adjusted in the following cases:

1. When signing the contract, provisional unit prices are used for works or volumes of work for which, at the time of signing the contract, the tenderer and contractor have not been able to accurately determine the unit prices and agree to adjust them when sufficient conditions are met.

2. When the volume of additional work exceeds 20% of the corresponding volume of work that the contractor must perform under the contract, the unit price of the additional work should be considered for adjustment.

3. Unit prices that the investor and contractor agree to review and adjust after a certain period from the start of contract execution and are clearly stated in the contract.

4. In cases where there is a significant fluctuation in fuel, material, and equipment prices mentioned in the contract, directly affecting the performance of the contract, or when the state changes relevant policies, a report must be submitted to the competent authority for consideration and decision.

5. Due to force majeure cases as defined in the contract.

Article 23. Adjustment of Construction Contract Prices

1. The construction contract price may only be adjusted in the following cases:

a) Supplementing works outside the scope defined in the signed contract;

b) Cases stipulated in Article 22 of this Decree;

c) Price slippages already specified in the contract. The basis for calculating price slippages shall be determined 28 days prior to the contractor submitting the payment application.

2. Within the scope of the tender package price approved in the bidding plan, the adjustment of the construction contract price must be clearly recorded in the construction contract by both the Tenderer and the Bidder.

3. Based on the provisions of Article 22 of this Decree, the project investor has the right to approve the adjusted contract price and bears full responsibility for such approval. For projects funded with state budget capital, before approving the adjusted contract price, the project investor must report to the investment decision-maker.

4. In case the adjusted contract price exceeds the tender package price approved in the bidding plan, the project investor must report to the competent authority for approval before approving the adjusted contract price.

5. The adjustment of the construction contract price for a project must not exceed the total investment ceiling approved by the competent authority.

Article 24. Advance Payment for Implementing Construction Contracts

1. Advance payment for construction investment must be stipulated in the construction contract and implemented immediately after the contract becomes effective. The level of advance payment for construction investment is as follows:

a) For consultancy contracts, the minimum advance payment is 25% of the contract price;

b) For construction execution contracts, the minimum advance payment is 10% of the contract price for contracts valued over 50 billion VND; 15% for contracts valued between 10 billion VND and 50 billion VND; and 20% for contracts valued under 10 billion VND;

c) For supply contracts, the advance payment level varies according to the contract value but must not be less than 10% of the contract price;

d) For EPC contracts, advance payment for equipment purchases is based on the supply schedule in the contract; for other tasks such as design and construction, the minimum advance payment is 15% of the value of those tasks in the contract.

2. Advance payment for land clearance work is carried out according to the land clearance plan.

3. The Tenderer and Bidder must agree on the advance payment and capital recovery plan to produce certain components or semi-finished products in construction with significant value to ensure construction or purchase certain materials that need to be stored seasonally.

Article 25. Payment of Construction Contracts

1. Payment of the contract must be consistent with the type of contract, the contract price, and the conditions stipulated in the contract by the parties involved. The number of payments, payment stages, and payment conditions must be clearly recorded in the contract.

2. For lump sum contract prices: payment is made according to a percentage of the contract price or the completed project or project component price corresponding to the payment stages recorded in the contract after the payment file has been reviewed and confirmed by the investor. The Bidder is entitled to receive full payment of the signed contract price and any adjusted price amounts (if applicable) after completing the contract and receiving acceptance.

3. For fixed unit price contracts: payment is based on the volume of completed work (including additional work, if any) accepted during the payment stage and the unit price corresponding to those works as recorded in the contract or supplementary contract appendices.

4. For adjustable price contracts: payment is based on the volume of completed work (including additional work, if any) accepted during the payment stage and the adjusted unit price as stipulated in the contract. If the adjusted unit price has not yet been established at the time of payment, the provisional unit price at the time of signing the contract will be used for payment, and the payment amount will be adjusted when the adjusted unit price is established according to the contract's provisions.

5. In cases where combined pricing as stipulated in Clause 4 of Article 21 of this Decree is applied, payment will be made in accordance with the provisions of Clauses 2, 3, and 4 of this Article.

6. Advance payment is gradually recovered through each payment. Recovery of advance payment begins with the first payment and ends when the paid volume reaches 80% of the contract value. For land clearance work, recovery of advance payment ends after completion of the land clearance work.

7. Within ten working days from the date the contractor submits a valid payment application, the investor must pay the value of the completed work to the contractor. For construction projects funded with state budget capital, within three working days from the date of receipt of a valid payment application from the contractor, the investor must complete all procedures and transfer the payment request to the funding or lending agency. By the end of the construction year or the year the project is put into operation, the investor must pay the contractor the value of the completed work minus the retention amount for warranty of the project as stipulated.

Article 26. Payment Application Documents for Construction Contracts

1. Necessary documents and certifications in the payment application must be clearly recorded in the construction contract. The payment application, prepared by the Bidder, includes the following main documents:

a) A record of quantity acceptance for the work completed during the payment period, confirmed by representatives of the contractor, Tenderer, and supervising consultant, if any;

b) Confirmation of the adjusted quantity increase or decrease compared to the contract, confirmed by representatives of the contractor, Tenderer, and supervising consultant, if any;

c) A calculation table of the proposed payment amount based on the confirmed completed work volume and the unit price recorded in the contract;

d) The Bidder's payment request, specifying the completed volume, completed value, increased (decreased) value compared to the contract, advance payment amount, and the proposed payment amount for the period.

2. In the case of payment under a lump-sum contract price: the record confirming the quantity at point a, Clause 1 of this Article is confirmation of completion of the project, project component, or work in accordance with the design (detailed completion quantity confirmation is not required).

Article 27. Unit price for additional work outside the construction contract

1. Additional work outside the construction contract includes:

a) Additional work beyond the scope defined in the contract for a lump-sum contract price method;

b) Work without unit prices or work with unit prices but additional quantities arise for a fixed unit price contract and adjustable price method as stipulated in Clauses 2 and 3 of Article 21 of this Decree.

2. For additional work less than 20% of the corresponding quantity recorded in the contract and already having unit prices in the contract, the unit price recorded in the contract shall be used for payment.

3. For additional work exceeding 20% of the corresponding quantity recorded in the contract or additional work without unit prices in the contract, the Contractor and Subcontractor shall agree to determine the unit prices for additional quantities according to the principles specified in the contract regarding unit prices for additional quantities.

4. For additional work beyond the scope defined in the contract for a lump-sum contract price method, the supplementary value will be budgeted. The Contractor and Subcontractor shall negotiate and agree on a supplementary contract for this additional value.

5. The investor has the right to approve unit prices for additional work, pay for additional work, and bear responsibility for such approval and payment. For projects funded by state budget, the investor must report to the investment decision-maker before approving unit prices for additional work and paying for additional work.

Article 28. Construction project insurance and warranty

1. The objects of insurance, insurance levels, insurance period, and insurance responsibilities of the Contractor and Subcontractor must be clearly stipulated in the construction contract.

2. Insurance for the construction project and assets belonging to the Contractor shall be purchased by the Contractor. If the insurance premium has been included in the bid price, the Subcontractor shall purchase the insurance.

3. The Subcontractor must purchase necessary insurances to ensure its operations.

4. The Contractor and Subcontractor shall agree and stipulate in the contract the conditions, duration of warranty, and responsibilities of each party regarding the warranty of the construction project, as well as the amount retained to fulfill the warranty obligation. With the Contractor's consent, the Subcontractor may submit a warranty bond instead of the amount retained by the Contractor for the warranty of the construction project.

Article 29. Rewards, penalties, and resolution of construction contract disputes

1. The terms of rewards and penalties for breach of contract must be clearly stipulated in the construction contract.

2. The reward level shall not exceed 12% of the value of the contract portion that benefits; the penalty level shall not exceed 12% of the value of the contract portion breached.

3. Disputes between parties to the contract shall be resolved through negotiation, mediation among the parties, or arbitration or court proceedings in accordance with the law.

Article 30. Settlement of construction contracts

1. The Contractor and Subcontractor have the responsibility to settle the construction contract within thirty days after the Subcontractor completes all obligations under the contract (except for the warranty obligation as provided) and requests settlement of the contract.

2. The Subcontractor is responsible for preparing the contract settlement and submitting it to the Contractor. The contract settlement must clearly specify the signed contract price, the amount paid, the amount payable, and other obligations that the Contractor needs to perform according to the contract. The Contractor is responsible for reviewing and settling with the Subcontractor and bears responsibility for the settled contract value.

3. Immediately upon completing the warranty obligation according to the terms of the signed contract, the Contractor (or investor) is responsible for paying the retained amount for the warranty of the construction project (if any) to the Subcontractor and performing the contract termination to end the responsibilities of the parties involved in the contract.

Chapter VI

PAYMENT AND SETTLEMENT OF CONSTRUCTION INVESTMENT FUNDS

Article 31. Payment of construction project investment capital

1. Within seven working days from the date of receipt of the payment request and valid documentation, the funding and lending agency is responsible for paying the investment capital based on the investment plan assigned, according to the investor's (or the investor's authorized representative) payment request.

2. The investor (or the investor's authorized representative) is legally responsible for the value of the payment request submitted to the funding and lending agencies. During the payment of construction project investment capital, if any errors or inconsistencies in the investor's (or the investor's authorized representative's) payment request are discovered, the funding and lending agencies must immediately notify the investor to explain, supplement, and perfect the documentation.

3. The investor has the right to claim compensation or file administrative or economic lawsuits against the funding and lending agencies for damages caused by delayed payments. It is strictly prohibited for funding and lending agencies and investors to establish illegal regulations concerning the payment of construction project investment capital.

Article 32. Settlement of construction project investment capital

1. The settled investment capital is the total legitimate costs incurred for the construction project investment and putting the project into operation. Legitimate costs are those incurred within the approved design and budget estimates, including adjustments and supplements, or costs incurred in accordance with the signed contract and in compliance with the law. For projects funded by the state budget, the settled investment capital must be within the approved total investment ceiling by the competent authority.

Depending on the scale, nature, and construction period of the project, the investor may settle the investment capital for each component of the project or the entire project immediately after the completion and commissioning of the component or the project according to the requirements of the investment decision-maker.

2. The investor shall be responsible for preparing the settlement documents for the investment capital of completed projects or components to submit to the investment decision-maker for approval, not later than twelve months for national key projects and Group A projects, nine months for Group B projects, and six months for Group C projects from the date of completion and commissioning of the project. Within six months from the date of the decision approving the settlement of the investment capital of the completed project, the investor shall be responsible for settling debts, closing the project account at the payment agency, lending institution, and capital disbursement agency.

3. For construction projects using official development assistance funds, the investor shall be responsible for implementing the settlement of investment capital in accordance with the regulations of the State and the provisions of the financier, if any.

Chapter VII

STATE MANAGEMENT OF INVESTMENT COSTS FOR CONSTRUCTION PROJECTS

Article 33. Ministry of Construction

The Ministry of Construction is the agency responsible for uniformly managing state affairs regarding investment costs for construction projects and shall be responsible for:

1. Guiding the preparation and management of investment costs including total investment amount, construction project estimates, norms, and construction project prices; methods for measuring construction volume; methods for determining machinery and equipment construction price indices.

2. Publishing construction norms, investment capital rates, construction price indices, methods for determining construction price indices; guiding contracts in construction activities and other contents prescribed in this Decree.

3. Inspecting and supervising the implementation of regulations on the management of investment costs for construction projects.

Article 34. Ministry of Finance

1. Guiding the settlement of investment capital for construction projects.

2. Guiding and promulgating insurance costs for consulting services and construction projects.

3. Inspecting and supervising the settlement of projects funded by the state budget.

Article 35. Ministries and People's Committees of provinces

1. Ministries and People's Committees of provinces shall organize the establishment and publication of construction norms for special projects and works of the ministries and localities based on the construction norm preparation methods guided by the Ministry of Construction.

2. Provincial People's Committees shall guide the preparation and management of construction project prices within their province; inspect the implementation of regulations on the management of investment costs for construction projects within their jurisdiction.

Chapter VIII

IMPLEMENTING PROVISIONS

Article 36. Transitional provisions

1. Investment construction projects approved before the effective date of this Decree but not yet implemented or being implemented shall comply with the regulations on the management of investment costs for construction projects stipulated in Decree No. 16/2005/NĐ-CP dated February 7, 2005 of the Government on project management for investment construction projects, Decree No. 112/2006/NĐ-CP dated September 29, 2006 of the Government amending and supplementing certain articles of Decree No. 16/2005/NĐ-CP on project management for investment construction projects, and other relevant legal documents.

In cases where it is necessary to adjust the total investment ceiling according to the provisions of this Decree, the investment decision-maker shall consider and decide on the adjustment while ensuring that it does not disrupt the implementation of the investment construction project.

2. Investment construction projects that have been prepared and reviewed but not yet approved before the effective date of this Decree shall comply with the provisions of this Decree.

3. Organizations and individuals currently engaged in consulting management of investment costs for construction projects may continue their operations until December 31, 2008. From January 1, 2009, these organizations and individuals must meet the conditions stipulated in this Decree if they wish to continue providing consulting management of investment costs for construction projects.

Article 37. Effectiveness

This Decree shall take effect fifteen days after its publication in the Official Gazette.

Article 38. Implementation

1. Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, Chairmen of provincial and centrally-administered city People's Committees, and related organizations and individuals shall be responsible for implementing this Decree.

2. This Decree replaces the regulations on the management of project investment costs, and contracts in construction activities stipulated in Decree No. 16/2005/NĐ-CP dated February 7, 2005 of the Government on project management for investment construction projects, and Decree No. 112/2006/NĐ-CP dated September 29, 2006 of the Government amending and supplementing certain articles of Decree No. 16/2005/NĐ-CP dated February 7, 2005, and other provisions contrary to the regulations in this Decree.

3. The Ministry of Construction shall take the lead and coordinate with relevant ministries and sectors to be responsible for guiding the implementation of this Decree./.