Common errors of bidding contracts in Vietnam

Adjustment, implementation, and payment of contracts in bidding are complex legal issues that require careful consultation. To help the Client better understand common errors of bidding contracts in Vietnam and avoid legal risks in bidding, Viet An Law informs the Client in the following article.

Regarding entering into contracts

Enterprises need to understand that the process of entering into contracts in bidding begins as soon as the enterprise submits a bid document expressing its desire to sign a contract with the investor. The bidding process requires both investors and contractors to strictly comply with regulations. The investor is responsible for properly and fully implementing the process. Contractors must bind their bidding responsibilities with a bid guarantee and their contract performance responsibilities with a contract performance guarantee (except for consulting bidding). The two essential parts of the bidding process are the bidding documents – the document that shows all of the investor’s requirements, and the bid documents – the document that shows all of the contractor’s offers.

When enjoy bidding, businesses need to clearly understand the investor’s requirements. If it is unclear, the Client must exercise your right to request clarification from the investor. The investor can organize a pre-bid conference to directly explain to all participating contractors his requirements or send a document clarifying the bidding documents to all participating contractors. Avoid the situation of “vaguely understanding” the bidding documents, leading to affecting the quality of the bid documents.

The content of the bid documents cannot be changed after the bid closing time. This means that after that point, changing any content of the bid, including the letter of discount, is a violation of the law. Bids can be clarified (only for contractors whose bids need clarification) at the written request of the bidding party, however, this clarification must not change the nature of the bid documents, or the bid price. The contractor’s bid preparation process needs to be done meticulously and thoughtfully. It is especially careful not to make errors in legal documents or violate the prerequisites of the bidding documents and ensure:

• Validity of the bid form: The bid form must be filled out and signed by the contractor’s legal representative as required by the bidding documents;
• Have one of the following valid documents as required by the bidding documents: Enterprise registration certificate, Investment registration certificate, Establishment decision; Certificate of legal operation registration; appropriate professional certification;
• Number of originals and photocopies of technical proposal documents;
• Appendices and documents attached to the bid documents.

The main documents belong to the bidding documents

• Dossier of technical capacity, financial capacity, and experience – including documents introducing the business, operating process and experience, number of personnel, physical and technical facilities, and audited financial statements over the years. If there is no audited financial statement, it can be a tax self-finalization declaration certified by the tax authority or a tax finalization inspection record. This is the dossier that every business needs to promote their activities. Normally, this document is always prepared and updated regularly by businesses so that when preparing bid documents, they do not waste time on this type of document.
• Technical proposal dossier – this is the technical solution to implement a specific bidding package. For consulting packages, it is the presentation of solutions, methodology, and staffing… to perform consulting tasks stated in the terms of reference (TOR) of the bidding documents. For goods procurement bidding, it is the content of proposing an implementation plan, proving the satisfaction of the offered goods compared to the requirements of the bidding documents… For construction and installation bidding, these are the Technical solutions, construction solutions, quality assurance measures, and human resource arrangements… to complete the project according to the requirements stated in the bidding documents.
• Financial proposals dossier – financial proposals must be consistent with the technical proposals dossier. Note: in case there is a difference between these two documents, the technical proposal dossier is considered the basis for adjusting the financial proposal dossier. Bidding documents will be rejected if there are arithmetic errors (incorrect addition, subtraction, multiplication, division) with a total absolute value greater than 10%; There are deviations (for example: deviations in the scope of supply…) whose total absolute value is greater than 10%. The bid price must accurately reflect the requirements for each form of contract mentioned above.

Regarding the right to petition

Regulations on contractors’ right to petition are mentioned in the Bidding Law 2013. This is one of the advanced regulations to ensure transparency and fairness in bidding. A proposal in bidding is a request for contractors and investors participating in the bidding to review the results of contractor selection, investor selection results, and issues related to the process of selecting contractors and investors when realizing their rights and interests are being affected. There are two types of recommendations: (1) recommendations about related issues in the bidding process (for example: recommendations about errors in bidding documents, about the investor’s implementation time, etc.); (2) recommendations on contractor selection results.

The process of resolving complaints in bidding includes 3 levels: (1) handling by the bidding party, (2) in cases where the bidding party cannot resolve, then handled by the investor, (3) cases where the investor can not resolve, the matter will be handled by the competent person. For petitions about contractor selection results, the competent person will set up an Advisory Council to resolve the petition. If the contractor is not satisfied, he can bring the case to the Economic Court.

Conditions for considering and resolving a petition:

• The proposal must be from the contractor to the project investor, or from the investor to the bidding party or competent person.
• The petition must be signed by the person signing the bid or the contractor’s legal representative and sealed.
• Time to receive petitions on issues related to the bidding process: before the announcement of bidding results. Time to receive petitions about bidding results: 10 days from the date of notification of contractor selection results.
• The content of the petition has not yet been brought to court.
• Pay full fees to the Advisory Council to resolve the petition if the petition is related to the contractor selection results. In case the contractor’s recommendations are concluded to be correct, this cost will be refunded to the contractor.

Regarding the subject of the contract

It is necessary to comply with the regulations on the subject of signing the contract. The contract must be signed between the investor and the winning contractor. In many cases, project management boards are only responsible for assisting the investor (based on the decision to establish a project management board) to implement the project, taking on the role of Bidder in bidding, which is not enough eligibility to sign contracts according to regulations.

Note: a joint venture contractor is when two or more businesses form a joint venture (note: not a joint venture with legal status) converging different capabilities and experiences to meet the requirements of the bidding package. At that time, the bid form must be signed by the legal representative of each joint venture member or the leading member of the joint venture must sign the bid form on behalf of the joint venture according to the provisions in the joint venture agreement document. There must be a written joint venture agreement to ensure validity: the joint venture agreement must clearly define the responsibilities, powers, volume of work to be performed, and the corresponding value of each member of the joint venture, including the head of the joint venture and the responsibilities of the head of the joint venture, signatures of members, seals (if any). The contract must be signed between the investor and all members participating in the joint venture.

Regarding contract price adjustment

As analyzed above, contract price adjustment only applies to unit price and time-based forms. The contract must stipulate the content of the adjustment (for example: labor costs, machine costs, material costs, etc.), the method and time for calculating the adjustment, and the input database for calculating price adjustment.

The price adjustment method specified in the contract must ensure compliance with the nature of the work stated in the contract. The input database for calculating price adjustments must be consistent with the work content. The contract should stipulate the use of price quotes or price indexes issued by local and central competent authorities or independent foreign specialized agencies for costs originating from abroad.

In case the price of fuel, supplies, and equipment stated in a contract controlled by the State (determined by the State) fluctuates significantly, directly affecting the performance of the contract, which is agreed to be adjusted in the contract. The investor must report to the competent person for consideration and decision. The adjustment is made according to the principle of applying new prices to parts of work performed at the time of price fluctuations according to price announcements of competent state agencies.

In case the state changes tax and salary policies that directly affect the contract price, adjustments will be made according to these policies from the effective of policies.

Regarding contract adjustments (including package forms)

In case there is reasonably arising work outside the provisions of the contract without changing the investment objective or total investment (for construction work applying the package form, in addition to the work volume must be performed according to the design, for construction work applying the form of unit price (in addition to the work volume in the contract), the investor shall negotiate with the contractor to calculate additional work incurred and report to a competent person for consideration and decision. In case the agreement is not successful, the arising work content will form a new bidding package and the contractor will be selected by regulations. In case additional work arises, the investor and contractor must sign an additional contract appendix according to the principles:

• In case this additional work volume is less than 20% of the corresponding work volume stated in the contract but has a unit price in the contract, use the unit price stated in the contract for payment;
• In case this additional work volume is 20% or more of the corresponding work volume stated in the contract or the additional work volume does not have a unit price in the contract, the investor and contractor will agree to determine the unit price. The new price follows the principles specified in the contract regarding the unit price of the generated volumes. If it is a construction job, before signing the additional contract appendix, there must be an approved estimate according to regulations.

Regarding payment records

Payment is made at the State Treasury at all levels based on compliance with the payment terms specified in the contract. In cases where individuals cause difficulties during the payment process, they will be handled according to regulations. To facilitate payment, payment documents for each form of contract need to be agreed upon by the parties in the contract.

For construction work, the unit price method applies

• Minutes of acceptance of the volume performed during the payment period with confirmation from representatives of the contractor, investor, and supervision consultant (if any);
• A confirmation of the volume adjusted to increase or decrease compared to the contract with confirmation from representatives of the contractor, investor, and supervision consultant (if any);
• Calculation table of proposed payment value based on the confirmed completed work volume and unit price stated in the contract;
• Payment request from the contractor, clearly stating the completed volume and completed value, increase (decrease) in value compared to the contract, value of advance, and value of payment request during the payment period. maths.

For construction work, a package form is applied

• Minutes of acceptance of the volume performed during the payment period with confirmation from representatives of the contractor, investor, and supervision consultant (if any). This volume confirmation record is to confirm the completion of the project, construction items, and work of the project by the design without needing to confirm the detailed completed volume;
• A confirmation of the volume adjusted to increase or decrease compared to the contract with confirmation from representatives of the contractor, investor, and supervision consultant (if any);
• Calculation table of proposed payment value based on the confirmed completed work volume and unit price stated in the contract;
• Payment request from the contractor, clearly stating the completed volume and completed value, increase (decrease) in value compared to the contract, value of advance, and value of payment request during the payment period. maths.

For purchasing goods

Depending on the nature of the goods, appropriate payment documents must be specified such as contractor invoices, list of packaged goods, transport documents, insurance policies, quality certificates, goods acceptance records goods, Certificate of Origin, and other related documents and vouchers.

For work, apply the time form and the percentage form

Depending on the nature of the consulting work, appropriate payment documents must be specified such as acceptance records of consulting work results, documents confirming the progress of contract implementation, and other related documents and vouchers.

For construction work and goods procurement work, except in cases where the contract price adjustment clause stipulates that the investor and contractor agree to apply the unit price stated in the input invoice (for elements such as machinery, materials, equipment, and other inputs) as a basis for price adjustment, requiring the contractor to present input invoices is only to determine the origin and other relevant information without Based on the unit price stated in the input invoice to pay the contractor. Payment must be based on the contract price and payment terms stated in the contract, not on the estimate or current regulations and instructions of the State on norms and unit prices, except in the case of the appointed contractor.

Above is Viet An Law’s consulting content related to common errors in contracts in bidding for your needs in drafting, consulting, and resolving related disputes in the field of bidding. Please contact Viet An Law for the most effective advice.