Vietnam law has regulations on Construction investment costs and construction contracts. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I want to ask what are principles of management of construction investment costs? What are contents of management of construction investment costs? Thanks for answering my questions!”
Legal grounds
- 2014 Vietnam Construction Law
Principles of management of construction investment costs
– Management of construction investment costs must ensure investment objectives and effectiveness of projects, follow the order of construction investment and suit funding sources. Construction investment costs shall be calculated accurately and fully for each project, construction work or bidding package and must be suitable to design requirements, construction conditions and market price levels.
– The State shall manage construction investment costs through promulgating, guiding and examining the implementation of, legal provisions; guiding methods of estimating and managing construction investment costs, measuring work volumes, construction machine and equipment shift prices, adjusting construction cost estimates, construction price index, controlling costs in construction investment; and guiding and managing the grant of construction valuation certificates; and publicizing construction criteria and norms and construction price index.
– Project owners shall manage construction investment costs from the stage of project preparation to the completion of construction and putting of projects into operation and use within the approved total investment amounts of projects. Project owners may hire cost management consultancy organizations and individuals with full capability conditions to estimate, appraise and control construction investment costs.
– The inspection, examination and audit of construction investment costs shall be conducted based on conditions for and methods of determining construction investment costs already approved by investment deciders and project owners in accordance with regulations and guidelines on the estimation and management of construction investment costs and the order of construction investment.
– Construction investment costs of projects using state funds shall be determined according to regulations on the estimation and management of construction investment costs.
Contents of management of construction investment costs
– Contents of management of construction investment costs include total investment amounts, construction cost estimates, prices of construction bidding packages, prices of construction contracts, construction norms and prices, expenses for project management and construction investment consultancy; payment and settlement of construction investment funds; and rights and obligations of investment deciders, project owners and construction contractors in the management of construction investment costs.
– The Government shall detail the management of construction investment costs.
Total construction investment amount
– Total construction investment amount includes all construction investment costs of a project determined according to the basic design and contents of the construction investment feasibility study report. In case a construction investment pre-feasibility study report is to be made, the total investment amount determined according to the preliminary design shall serve as a basis for estimating construction investment costs.
– The contents of total construction investment amount include costs of construction, equipment, compensation, support and resettlement, project management, construction investment consultancy, other costs and provisional amounts for arising volumes and inflation. For projects for which only construction investment economic-technical reports are required to be made, the total construction investment includes the costs in the work construction cost estimate prescribed in Article 135 of 2014 Vietnam Construction Law, compensation, support and resettlement expenses and other costs.
– The total construction investment amount shall be determined based on the construction volume calculated according to the basic design and other necessary requirements of projects, or determined based on the construction investment capital ratio or data on costs of previously constructed similar works.
– The total construction investment amount shall be appraised and approved and serve as the basis for managing project costs. For projects using state funds, the approved total construction investment amount is the maximum level which project owners may use to implement the projects.
– The approved total construction investment amount of a project using state funds may be adjusted only when the project is adjusted under Clause 1, Article 61 of 2014 Vietnam Construction Law. For projects using other funds, investment deciders shall decide on the adjustment of their total construction investment amounts.
Regulations on Construction cost estimates
– Construction cost estimate covers costs necessary for constructing a work, performing a bidding package or construction job, which shall be determined based on the volume calculated according to the technical design, construction drawing design, requirements of the job to be done and construction norms and prices.
– Contents of a construction cost estimate include costs of construction, equipment, project management, construction investment consultancy, other costs and provisional fund.
– A construction cost estimate using state funds shall be approved under Clauses 1 and 2, Article 82 of 2014 Vietnam Construction Law and serve as a basis for determining the price of the bidding package and for negotiating and signing the construction contract.
– The approved construction cost estimate of a project using state funds may be adjusted only in the following cases:
+ Adjusting the total construction investment amount under Clause 1, Article 61 of 2014 Vietnam Construction Law;
+ The design is permitted to be modified or supplemented not against the basic design or the estimated construction cost structure is permitted to be changed but must not exceed the approved total construction investment amount;
+ The adjustment of the construction cost estimate shall be appraised and approved in accordance with the construction law.
– For projects using other funds, investment deciders or project owners shall decide on the adjustment of their construction cost estimates.
Construction norms, prices and price index
– The system of construction norms includes economic-technical norms and cost norms. The construction price of a work includes detailed construction unit prices and general construction prices for different groups and types of construction jobs, structural units, parts of the work or the whole work.
– Construction unit prices of a work shall be determined based on market prices or construction norms and prices of materials, labor, construction machines and other necessary cost elements compatible with market price levels in construction areas.
– The system of construction norms and prices prescribed in Clause 1 of this Article shall be publicized by competent state agencies and used or referred to by project owners for determining and managing construction investment costs.
– Construction price index is an indicator reflecting the level of time-based fluctuation of construction prices of works and serving a basis for determining and adjusting total investment amounts and cost estimates of works and prices of construction contracts and for managing construction investment costs of works.
The Ministry of Construction shall publicize the national construction price index; provincial-level People’s Committees shall publicize local construction price indexes.
Payment and settlement for construction investment projects
– The payment and settlement for construction investment projects must comply with the law on management of investment capital. Project owners or their lawful representatives shall take responsibility before law for the accuracy and lawfulness of unit prices, volumes and values requested for payment in payment dossiers.
– After construction works are completed, pre-acceptance tested, handed over and put into use, settlement of construction investment projects shall be made. For projects using state funds, investment deciders shall approve settlements for construction investment projects within their approved investment amounts. The Government shall specify the settlement time limit for construction investment projects.
– The payment and settlement for construction contracts must comply with Articles 144 and 147 of 2014 Vietnam Construction Law.
General provisions on construction contracts
– Construction contracts are civil contracts established in writing between principals and contractors to perform in part or wholly the work in construction investment activities.
– The principles of signing construction contracts include:
+ Voluntariness, equality, cooperation, non-violation of law and social ethics;
+ Assurance of adequate funds for payment according to contractual agreement;
+ Having completed the selection of contractor and concluded the process of contract negotiation;
+ If the contractor is a partnership of contractors, there must be a partnership agreement. The partners shall sign and append their seals (if any) to the construction contract, unless otherwise agreed by the parties.
– The principles of performance of construction contracts include:
+ The contractual parties shall properly implement their commitments in the contract regarding the scope of work, quality requirements, quantity, category, schedule, methods and other agreements;
+ Honesty, cooperation and lawfulness;
+ No infringement upon the interests of the State and community and lawful interests of other organizations and individuals.
– Language used in construction contracts is Vietnamese. For construction contracts with the participation of foreign parties, the languages used therein are Vietnamese and another language as agreed upon by the parties.
– Construction contracts shall be signed and performed in accordance with 2014 Vietnam Construction Law and relevant laws.
Effect of construction contracts
– A construction contract becomes effective when fully meeting the following conditions:
+ The contract signees have full civil act capacity and act according to their competence in accordance with law;
+ The principles of signing of construction contracts prescribed at Point a, Clause 2, Article 138 of 2014 Vietnam Construction Law are adhered to;
+ The contractor has full construction operation and practice capability conditions prescribed by 2014 Vietnam Construction Law.
– The time when a construction contract becomes effective is the time of its signing or another specific time as agreed upon by contractual parties.
Types of construction contract
– Construction contracts shall be categorized according to the characteristics and contents of work to be performed and applied contract prices.
– According to the characteristics and contents of work to be performed, construction contracts include:
+ Construction consultancy contract;
+ Work construction contract;
+ Contract on supply of equipment for installation in construction work;
+ Contract on designing, procurement of supplies and equipment and construction, turnkey contract;
+ Other construction contract.
– According to the form of applied contract price, construction contracts include:
+ Package contract;
+ Fixed unit price-based contract;
+ Adjustable unit price-based contract;
+ Time-based contract;
+ Charge-plus cost-based contract;
+ Combined price-based contract;
+ Other construction contract;
+ Construction contract using State funds may only use types of contract prescribed at Points a, b, c and d of this Clause or a combination of these types of contract.
Contents of construction contracts
– A construction contract includes the following contents:
+ Applied legal bases;
+ Language used in the contract,
+ Content and volume of work;
+ Quality, technical requirements of work; pre-acceptance test and handover;
+ Contract performance duration and schedule;
+ Contract price, advance payment, currency used in payment, and payment for the contract;
+ Contract performance security, contract advance guarantee;
+ Adjustment of the construction contract;
+ Rights and obligations of the parties to the construction contract;
+ Liability for violations of the contract, rewards and fines for violations of the contract;
+ Suspension and termination of the contract;
+ Settlement of disputes over the contract;
+ Risks and force majeure events;
+ Settlement and liquidation of the contract;
+ Other contents.
– For general construction contracts, beside the contents prescribed in Clause 1 of this Article, the management contents and responsibilities of the construction contractor shall be added.
– The Government shall detail construction contracts
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Fequently asked questions
Management of construction investment costs must ensure investment objectives and effectiveness of projects, follow the order of construction investment and suit funding sources. Construction investment costs shall be calculated accurately and fully for each project, construction work or bidding package and must be suitable to design requirements, construction conditions and market price levels.
The State shall manage construction investment costs through promulgating, guiding and examining the implementation of, legal provisions; guiding methods of estimating and managing construction investment costs, measuring work volumes, construction machine and equipment shift prices, adjusting construction cost estimates, construction price index, controlling costs in construction investment; and guiding and managing the grant of construction valuation certificates; and publicizing construction criteria and norms and construction price index.
Project owners shall manage construction investment costs from the stage of project preparation to the completion of construction and putting of projects into operation and use within the approved total investment amounts of projects. Project owners may hire cost management consultancy organizations and individuals with full capability conditions to estimate, appraise and control construction investment costs.
Conclusion: So the above is Construction investment costs and construction contracts in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
