Decree 115/2024 on selecting investors to implement projects using land in Vietnam

Implementing the Law on Bidding 2023, up to now, the Government has issued a total of 03 Decrees guiding the Law on Bidding 2023: Decree 23/2024/ND-CP, Decree 24/2024/ND-CP, Decree 115/2024/ND-CP. Recently, on September 16, 2024, the Government issued Decree 115/2024/ND-CP, detailing several articles and measures to implement the Law on Bidding on selecting investors to implement investment projects using land. The Decree takes effect at the same time as the date of promulgation of the Decree (September 16, 2024). Below, Viet An Law will analyze some notable contents of Decree 115/2024 on selecting investors to implement projects using land in Vietnam.

What contents does Decree 115/2024/ND-CP guide?

This Decree details several articles and measures for implementing the Law on Bidding and the Law on Land on selecting investors to implement investment projects using land, including:

Detailed regulations on several articles of the Law on Bidding on selecting investors to implement investment projects using land

• Ensure competition in investor selection;
• Incentives in investor selection;
• Cost of selecting investors;
• Method of selecting investors;
• Process and procedures for selecting investors;
• Process, procedures, costs, roadmap for online bidding to select investors; national database on investor selection; cases where investors are not selected through the National Bidding Network;
• Methods and standards for evaluating bid documents;
• Contents of investment project contracts using land;
• Check and supervise bidding activities to select investors;
• Handle situations in investor selection.

Detailed regulations on the Law on Land on selecting investors to implement investment projects using land

Detailed regulations on Point b, Clause 1 and Clause 9, Article 126 of the Law on Law 2024 on selecting investors to implement investment projects using land.

Identify investment projects using land that must organize bidding to select investors

Under Article 4 of Decree 115/2024/ND-CP, investment projects using land that are subject to bidding to select investors pursuant to the Law on Land include:

• Urban area construction investment projects, rural residential area projects: under point a, clause 1, Article 126 of the Law on Land 2024.
• Projects under the law on industry and sector management: Point b, Clause 1, Article 126 of the Law on Land 2024.

Specifically, Clause 1, Article 126 of the Land on Law 2024 stipulates as follows:

“Article 126. Allocating land or leasing out land through bidding for investor selection

1. The State will allocate land with land levy payment or lease land through bidding for investor selection in the following cases:

a) The projects specified in clause 27 Article 79 of this Law for which the People’s Councils of first-level administrative divisions decide on land allocation or lease through bidding for investor selection.

The People’s Councils of first-level administrative divisions shall provide criteria for deciding on bidding for investor selection by the actual situation of the divisions;

b) Land-based investment projects that fall into the case where the State expropriates land in Article 79 of this Law and do not fall into the case prescribed in point a of this Clause but are subject to bidding for investor selection by laws on specific sectors and fields.

Thus, in order to guide the provisions of the Law on Land 2024, Decree 115/2024/ND-CP has specified in detail the investment projects using land that must organize bidding to select investors.

• In Clause 2, Article 4, the Decree also clarified the scope of projects that must organize bidding to select investors according to the provisions of the law on industry and sector management, including construction projects such as Domestic solid waste treatment works; clean water supply works; market construction; construction of rest stops; aviation service works at airports; socialized projects in the fields of education, health, culture, sports, environment;…
• The Decree also stipulates two prerequisites when organizing bidding: the land funds must be in cases where the State recovers land under Article 79 of the Law on Land 2024 and must be on the list of land areas for bidding decided by the Provincial People’s Council.

Compared to the previous Decree 25/2020/ND-CP, Decree 115/2024/ND-CP has overcome legal gaps in the lack of a process for selecting investors for projects according to the laws governing sectors and fields. At the same time, it has contributed to synchronizing and perfecting the legal mechanism for selecting investors in all areas of social infrastructure, especially the real estate sector.

Incentives in investor selection

Decree 115/2024/ND-CP also clearly stipulates investors who are entitled to incentives and the level of incentives.

Beneficiaries and level of incentives

Decree 115/2024/ND-CP also clearly stipulates investors who are entitled to incentives and the level of incentives.

• Specifically, investors with solutions applying advanced technology, high technology, environmentally friendly technology, and the best available techniques to minimize environmental pollution for projects in the group with a high risk of negative impact on the environment will enjoy a 5% incentive when evaluating bidding documents;
• Investors who commit to technology transfer and carry out high-tech activities for high technologies and high-tech products in the List of high technologies prioritized for investment and development and the List of high-tech products encouraged for development will enjoy a preferential rate of 2% when evaluating bidding documents.
• Investors who are eligible for the above incentives and are selected to sign a contract must comply with the commitments in the bidding documents and investment project contracts using land.

How to calculate incentives

The total score of the beneficiary is calculated according to the following formula:

T’TH = TTH + TTH x MUD

In there:

• T’TH: is the aggregate score of investors enjoying incentives including the incentive level for comparison and ranking.
• TTH: is the aggregate score of investors eligible for incentives when the incentive level is not included
• MUD: the level of incentives that investors receive.

This is the first time the formula for calculating incentives has been prescribed, aiming to guide investors as well as state management agencies when applying regulations on incentives in selecting investors.

Simplify investment selection procedures and processes.

The notable new point in Decree 115/2024/ND-CP compared to Decree 25/2020/ND-CP is the simplification of procedures, cutting time and costs in investor selection activities in the direction of simplifying procedures, cutting time, and costs in investor selection; thoroughly decentralizing localities in bidding for investor selection such as:

• Integrate and reduce some intermediate procedures such as Cut procedures for preparing, appraising, and approving plans for selecting investors; appraising interest invitation documents, and lists of technically qualified investors; allowing preparation of bidding documents, and interest invitation documents at the same time as the process of carrying out procedures for planning and approving investment policies.
• Abolish the procedure of requiring the provincial People’s Committee to consult the Ministry of Planning and Investment on the dossier of approval of investors to implement projects under the investment policy decision authority of the Prime Minister to enhance the initiative and responsibility of localities.
• Only stipulate the minimum time for investors to prepare bidding documents; the time for preparing, appraising, and submitting for approval the bidding contents is decided by the competent person who is responsible for the progress and quality.
• Speed ​​up the process of selecting investors online and eliminate costs that are the responsibility of investors on the National Bidding Network System.

It can be seen that the above regulations not only contribute to compliance with the provisions of the Law on Bidding 2023 but also contribute to promoting the process of selecting investors in a simple, quick, transparent manner and creating competitiveness in bidding.

Procedures for selecting investors under Decree 115/2024 on selecting investors to implement projects using land in Vietnam

Open bidding, limited bidding in one-stage, one-envelope method

For projects applying open bidding or limited bidding in one-stage, one-envelope method as prescribed in Clause 1, Article 35 of the Law on Bidding:

• Announcement of investment projects using land;
• Prepare to bid to select investors;
• Organize bidding to select investors;
• Evaluate bid documents;;
• Submit, appraise, approve, and publicize the results of investor selection;
• Negotiate, finalize, and sign contracts.

Open bidding in one-stage and two-envelope method

For projects requiring architectural works of value according to the provisions of the law on architecture, open bidding in one-stage, two-envelope method as prescribed in Clause 2, Article 35 of the Law on Bidding shall be applied:

• Announcement of investment projects using land;
• Prepare to bid to select investors;
• Organize bidding to select investors;
• Evaluate technical proposal documents;
• Evaluate financial proposal documents;
• Submit, appraise, approve, and publicize the results of investor selection;
• Negotiate, finalize, and sign contracts.

The project must determine the number of interested investors.

For projects that must determine the number of interested investors as prescribed in Clause 2, Article 46 of the Law on Bidding:

• Announcement of investment projects using land;
• Invitation for Interest;
• In case the project has 02 or more investors meeting the conditions for inviting interest, it shall be implemented according to the regulations on projects applying open bidding in the form of one-stage, one-envelope method or projects applying open bidding in the form of one-stage, two-envelope method.

Note that at the time of bid closing, if there are less than 03 investors submitting project registration documents, the competent authority can choose the following option:

• Allow extension of closing time, can adjust the invitation for interest or bidding documents to increase the number of investors implementing the project, participating in the bid
• Allow immediate opening of bids for evaluation.

Thus, for projects using land (including “urban area” and “rural residential area” projects), open bidding must be organized; investor approval procedures will not be applied. The competent authority will not have to carry out procedures to determine the number of interested investors but will organize bidding after the project has been announced.

The new regulation will limit the situation where businesses can make “secret” or “conciliatory” agreements when participating in selecting investors to implement projects. Land-use projects must be bid openly and transparently even when there is only one investor registered to implement the project.

Changing the way of determining standards for evaluating land use efficiency

Previously, Decree 25/2020/ND-CP determined the value of the payment to the state budget in addition to land use fees and land rent (formerly known as M3) in localities facing difficulties due to:

• There is no reference land fund because there are no auction results or there are too many reference land funds leading to difficulties in synthesis;
• Difficult to determine expected land use fees and land rent;
• Difficulty in coordination between local agencies in this valuation work.

This is one of the reasons why many localities are confused when organizing bidding for projects using land. To overcome the above shortcomings, Article 48 of Decree 115/2024/ND-CP stipulates the minimum rate of payment to the state budget (generally referred to as value M) when bidding to select investors to implement urban area projects; rural residential areas are calculated as a percentage instead of the amount as before.

The minimum rate of payment to the state budget is the average increase rate after the auction of land use rights calculated on a unit area of ​​all land plots, land funds, and reference land plots determined by the formula.

Thus, the percentage is calculated based on the reference of the average increase rate after the land use rights auction (the difference between the starting price and the winning auction price) of the land plots implementing the project in the locality. The actual value paid to the state budget (value M) will be equal to the budget payment rate proposed by the investor multiplied by the actual land use fee and land rent of the project.

Note on handling situations in choosing investors

Article 59 of Decree 115/2024/ND-CP stipulates the handling of many complicated situations arising in the process of selecting investors that have arisen in practice but were not previously regulated, causing difficulties and obstacles in implementation, such as:

In case at the time of bid closing, no investor submits a project registration dossier, the bidding documents

The inviting interest party and inviting party shall report to the competent authority for consideration and resolution in one of the following two ways:

• Allow extension of bid closing date up to 30 days;
• Decide to cancel the invitation for expression of interest and invitation for bids, and request the inviting party and the inviting party to adjust the invitation for expression of interest and invitation for bids and reorganize the selection of investors.

In the case at the time of bid closing, there are less than 03 investors submitting project registration documents, and bidding documents.

The inviting interest party and the inviting party shall report to the competent authority for consideration and resolution within no more than 24 hours from the time of bid closing in one of the following two ways:

• Allow extension of the bid closing date, and review and edit the invitation for expression of interest or bidding documents (if necessary) to increase the number of investors registering to implement the project and participate in the bidding.
• Allow immediate opening of bids for evaluation.

In case the bidding documents are found to contain content that leads to unclear or different understandings

The inviting party reports to the competent authority for consideration and handling according to the following steps:

• Amend and clarify bidding documents;
• Notify all investors who have submitted bids of the amendment to the bidding documents and request investors to submit additional bids;
• Organize re-evaluation of bidding documents.

Above are some notable contents in Decree 115/2024 on selecting investors to implement projects using land in Vietnam. If you have any related questions related to Bidding Law in Vietnam, please contact Viet An Law for the best advice and support!