Local contractors prioritised

-Local contractors enjoy more preferences under the draft amended Law on Public Procurement

Article 5 of the latest draft amendment of the existing Law on Public Procurement announced last week by the Ministry of Planning and Investment (MPI) stated: “In international bidding in Vietnam, foreign contractors have to come into partnership with and use Vietnamese sub-contractors.”

Article 13 also said that during international bidding, priorities shall be given to local contractors providing consultancy and non-consultancy services, and construction and installation packages.

Priorities shall also be granted to a partnership having local contractors who can undertake more than half of the bidding package.

Priorities shall also be given to contractors providing goods whose production cost in Vietnam occupies at least 30 per cent of the total production costs.

Also under Article 13, during domestic bidding, priorities shall be given to contractors with 30 per cent of total employees being female workers, wounded veterans, disabled people, post drug-detoxification people, and HIV carriers. Priorities shall also be used for small- and medium-sized enterprises.

The MPI’s Public Procurement Department said these regulations were quite new as compared to the existing Law on Public Procurement, and they were in line with Vietnam’s World Trade Organisation commitments.

“It is very good news for local contractors because they will have opportunities to join big bidding packages which are now often implemented by foreign contractors,” said Phung Quang Hai, chief of Bidding Department under Vietnam Industry Construction Group’s Song Hong Joint Stock Corporation.

“The new regulations can help Vietnam generate more employment and help domestic contractors gain experience and improve their capacity in carrying out big bidding packages,” Hai said.

According to Vietnam Construction Association, almost all engineering-procurement-construction (EPC) contracts of Vietnam are currently deployed by foreign contractors from Japan, China and South Korea. Chinese contractors are holding more than 90 per cent of the country’s EPC contracts, focusing on many important industries like electricity, oil and gas, mineral exploitation, metallurgy and chemical.

At present, under the existing Law on Public Procurement promulgated in December 2005, and the Decree 85/2009/ND-CP guiding the implementation of this law, a contractor offering the lowest prices and technical standards meeting only 70-80 per cent of a bidding package’s technical requirements could win the bidding. Thus a contractor meeting all technical standards but offering higher prices could not be selected. As a result, almost bidding packages have fallen in the hands of foreign contractors who often offer very low prices.

In order to prioritise Vietnamese contractors, the draft amendment also stipulates that in case bidding dossiers of local and foreign contractors are classified at the same level, local contractors’ dossiers will be prioritised.

According to the MPI, regarding incentives for and protection of local production, many local contractors and management agencies suggested that priorities would need to be given to contractors using made-in-Vietnam goods and materials, as well as consultancy services implemented by Vietnamese labourers.