Important changes to procurement law

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The law states that in order to engage in a state-funded bidding package on non-consultancy services, and construction and installation packages, a local or foreign contractor must submit his/her technical dossier for careful scrutiny by the project developer or owner. Once the dossier is approved, the contractor can submit their financial dossier for final approval.

“This is a very important point in the law, because it will help select competent contractors to ensure the quality of projects. Specifically, technical standards are looked at first, followed by financial factors. This is a determinant for a contractor to win a bidding package,” said the Ministry of Planning and Investment’s (MPI) Public Procurement Department head Le Van Tang.

The law, which replaces the Law on Public Procurement issued in 2005, also highlights governing scope. In the previous law, development projects subject to bidding requirements are only those in which there is more than 30 per cent state capital invested.

However, the new law expands this scope to all development projects of government bodies and state-owned enterprises, as well as other projects in which the state has invested at least 30 per cent, or if total state capital exceeds VND500 billion ($23,445).

The new law also expands governing scope to contractors within Vietnam that serve to implement outbound investment projects for Vietnamese enterprises. It is applicable when either the proportion of state capital is 30 per cent or more, or state capital invested exceeds VND500 billion ($23,445)

The new law also consolidates and improves existing regulations on the selection of investors for public private partnership (PPP) projects and projects involving land use; online bidding; and the purchase of drugs and medical materials, as well as the provision of public goods and services. These regulations were previously included in different legal documents and were at times incompatible with the procurement law.

Under the new law, regarding the participation of foreign contractors, t become eligible to take part in an international bid in Vietnam, foreign contractors are now required to partners with domestic contractors or employ domestic sub-contractors, unless domestic contractors do not have the capacity to participate in any part of the bidding package. Formerly this requirement was only applicable to foreign contractors in the construction industry.

In terms of foreign contractors partnering with domestic firms, those in which the domestic company takes charge of 25 per cent or more of the work value will be rewarded with preferential treatment.

Additionally, in a bidding process to provide goods, if the value of domestically sourced goods accounts for 25 per cent or more, the contractors will also be eligible for preferential treatment.

As for contracts with contractors, the new law provides greater detail on issues such as signing, performance and adjustment.

Specifically, the new law categorises contracts into four types based on pricing mechanisms, including lump-sum contracts, fixed-unit price contracts, modifiable unit price contracts, and time-based contracts.

Lump-sum contracts are the standard, and the use of other types must be justified before being approved.