Tt 08 09 7 2003 nd quan ly hop dong epc english

MINISTRY OF CONSTRUCTION No 08/2003/QD-BXD SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom – Happiness Hanoi, July 09, 2003 CIRCULAR ON THE GUIDING THE CONTENTS AND MANAGEMENT OF GENERAL ENGINEERING-PROCUREMENT-CONSTRUCTION (EPC) CONTRACTS In furtherance of the provisions in Clause 21, Article of the Government's Decree No 07/2003/ND-CP of January 30, 2003 amending and supplementing a number of articles of the Regulation on Investment and Construction Management, issued together with the Government's Decree No 52/1999/ND-CP of July 8, 1999 and Decree No 12/2000/ND-CP of May 5,2000, the Ministry of Construction hereby guides the contents and management of general engineeringprocurement-construction (EPC) contracts as follows: I GENERAL PROVISIONS This Circular guides the contents and management of the performance of general engineering-procurement-construction contracts (called general EPC contracts for short) for projects (sub-projects) and bidding packages funded with investment capital sources as prescribed in the Regulation on Investment and Construction Management, promulgated together with the Government's Decree No 52/1999/ND-CP of July 8,1999 Where a budget-funded project or bidding package involves foreign elements, the application of the form of general EPC contract shall comply with the provisions of the signed aid or loan agreement To encourage the application of the form of general EPC contract to projects and bidding packages where the investors wish to streamline their managerial apparatus or are not capable to directly manage the execution thereof, and to projects and bidding packages which have been invested and constructed universally, with clearly determined work scopes, volumes and prices The contractors that are selected to enter into general EPC contracts must fully satisfy the conditions on experience and capability under the Regulation on the construction capability conditions in the Construction Minister's Decision No 19/2003/QD- BXD of July 3, 2003 In the process of preparing, entering into and performing the contracts, the contractors are encouraged to put forward initiatives, measures or apply their experiences in order to fulfill the contractual jobs, meet the objectives and requirements of the projects or bidding packages and raise their efficiency The conclusion and performance of general EPC contracts must comply with the law provisions on economic contracts Interpretation of terms In this Circular, the following phrases are construed as follows: a/ General engineering-procurement-construction contract means the written agreement concluded between the investor and a contractor or a contractor partnership (referred collectively to as general contractor) for performing a package of jobs of a project or bidding package from engineering- provision of supplies, equipment and technical services-construction and installation to operation and putting of the whole project to use b/ Investor's requirement dossier means documents compiled by the investor in order to clarify and specify orientations for the major contents of the project or bidding package mentio - ned in the already approved feasibility study report or investment report The investor's requirement dossier shall serve as a basis for the contractor to make the EPC contractor's bid offer dossier in case of contractor designation or to make the EPC bidding dossier in case of bidding c/ Payment plan means the document determining the total payment value of a general EPC contract, which phases the payment according to the completion times or stages suitable to the implementation progress and volumes of the contractual jobs The payment plan shall be elaborated by the general EPC contractor and approved by the investor, serving as a basis for making capital advance and payment for the completed work volume d/ Investor's consultant means the professional organization hired by the investor for doing a number of jobs such as preparation of the investor's requirement dossier, compilation of EPC bidding dossiers, participation in the contract negotiation, supervision of the contract perfor - mance process, and other consulting jobs at the investor's request el Subcontractor means the contractor that directly signs a contract with the general contractor for doing some of the general contractor's jobs under the general EPC contract f/ Subcontract means the contract signed between the general contractor and a subcontractor g/ Bid offer dossier means the document presented by the contractor designated as general contractor to clarify the extent of satisfaction of the investor's requirement dossier II PREPARATION AND CONCLUSION OF GENERAL EPC CONTRACTS After the investment in a project is decided, in order to execute the project or bidding package in the form of general EPC contract, the investor needs to the following preparatory jobs: Setting up a new project management unit or consolidating the existing one to make it satisfy the capability condition prescribed in the Regulation on the construction capability conditions in the Construction Minister's Decision No 19/2003/QD-BXD of July 3, 2003 so as assist the investor in doing such jobs as hiring consultants to supervise the process of contract performance, compilation of the investor's requirement dossier and bidding dossiers, selection of the general contractor, negotiation and conclusion of the contract, and some other jobs For projects not funded with the State budget, the investor may use an assisting apparatus which is capable under the investor's regulations to the above-said jobs without having to set up a project management unit Compilation of the investor's requirement dossier: Based on the already approved feasibility study report or investment report and total investment of the project, the investor shall compile the investor's requirement dossier with the following contents: a/The project's or bidding package's requirements on the to be-selected scale, capacity and product plan, exploitation and use capabilities; the extent of application of technical standards used in engineering and construction under the current regulations; the requirements on technical, technological and commercial solutions; the technical specifications for supplies, equipment, technical services to be supplied by the contractor, materials and raw materials to be used; requirements on the contractor's professional capabilities and experiences; b/The preliminary design in the approved feasibility study report and documents detailing the preliminary design as prescribed in Clause of this Part; details of the construction location, documents and data regarding the natural and geological conditions of the construction location area, specific architectural requirements and initial designing parameters; requirements on construction quality management, test, trial operation, warranty and maintenance of the project; c/ The work scope expected to be undertaken in the form of general EPC contract; d/ Division of responsibilities between the investor and the general contractor for the supply of electricity and water, communication, internal roads and other services to be available on the construction site; e/ The schedule for execution of major jobs and the schedule for completion of the whole project before being put into exploitation and use; f/ Information related to the approval procedures; the number of dossiers and documents to be submitted; g/ Requirements on environmental protection and safety assurance, fire and explosion prevention and fight, and other matters; The investor's requirement dossier should be simple, complete and explicit for determining the scope of contractual work, anticipating the work volume and applying appropriate price quotations to the compilation of EPC bidding dossiers or bid offer dossiers The contents of these documents should also raise matters on which contractors may give their comments right from the beginning, such as designing documents in the investor's requirement dossiers, the anticipated scope of jobs to be done under the contracts and other necessary contents Where the investors wish to additionally assign the contractors to formulate the investment construction projects, the investor's requirement dossiers ""should.' be supplemented with the requirements on the project compilation as well as guidance for the completion of relevant procedures The investors may compile by themselves or hire consultants to compile the investor's requirement dossiers; in cases where consultants are hired to prepare this document, the consulting organizations must also work as consultants to supervise the process of contract performance Preparation of the designing document for EPC bidding a/ The designing document for EPC bidding or EPC contractor designation is the prelimi nary design in the approved feasibility study report This document may be supplemented and further detailed in a number of cases, depending on its completeness and details as well as compati - bility with other concrete contents in the investor's requirement dossiers 4 - Where the contents of the preliminary design are satisfactorily complete and detailed, the preliminary design can be immediately used as the designing document for EPC bidding or EPC contractor designation - Where the contents of the preliminary design still lack details, it should be supplemented and detailed with documents, instructions, explanations and additional drawings so that it can be used as designing document for EPC bidding or EPC contractor designation b/ Before concluding a contract, the contractor should give further suggestions to the investor on solutions and plans for supplementing or replacing the designing document for EPC bidding and the investor shall have to consider and approve or disapprove these suggestions c/ The supplementation and detailing of the contents of the preliminary design must not alter the objectives and basic requirements already set for the project or bidding package, and the investor shall take responsibility before the authorities competent to make investment decisions for any alterations in the preliminary design's contents Compilation of EPC bidding dossiers a/ The EPC bidding dossiers shall be compiled according to the law provisions on bidding and on the basis of the investor's requirement dossiers b/ The approver of EPC bidding dossiers shall be accountable to law for the compatibility of the bidding dossiers with the approved project Conditions for general contractors a/ The investor shall select a general contractor through bidding or contractor designation according to the law provisions on bidding b/ The contractor selected as general contractor must have adequate operation capability as prescribed in the Regulation on construction capability conditions in the Construction Minister's Decision No 19/2003/ QD-BXD of July 3, 2003 and meet the investor's requirements Specifically: - Having the registration certificate for the business line(s) compatible with the contents of jobs of the project or bidding package In cases where a contractor partnership is selected to be the general EPC contractor, one contractor must represent such partnership and assume the general responsibility and a commitment must be made to jobs according to the division of responsi bilities among the contractors Each contractor in the partnership must have a registration certificate for the business line(s) compatible with the assigned jobs; - Having adequate capabilities and experiences to perform the tasks of a general contractor, such as: technical experiences, capabilities and experiences in acting as general contractors for construction of projects or bidding packages of equivalent technical requirements and sizes; the contractor's organizational structure consisting of units specialized in engineering consultancy, proces - sing and manufacturing, provision of supplies and equipment as well as construction and installation; - Being prestigious among lending organizations and capable of meeting financial require ments of the project or bidding package 5 c/All acts of divulging information, fixing, purchasing and selling contracts, colluding or dumping in the process of selection of general contractors are strictly forbidden The selection of general contractors shall only be conducted after all the provisions in Sections 1,2,3 and 4, Part II of this Circular have been complied with Conclusion of general EPC contracts a/ The negotiation and signing of general EPC contracts must be based on the investor's requirement dossiers, the bidding dossiers, the bid dossiers (the bid offer dossiers), the approved bidding results or the written contractor designation of competent authorities In the process of negotiating and performing the contracts, the contractors should be encouraged to put forward more initiatives and solutions so as to reach agreement on a number of contents regarding the contract performance, such as concrete requirements of the investor, the designing document in the investor's requirement dossiers, the scope of work performance of the involved parties, and other related matters; b/ The time for negotiating and signing contracts must be in line with the general schedule and ensure efficiency in the project execution; c/ Where a contractor partnership is selected to be the general contractor, together with the representing contractor, either each contractor in the partnership can sign the general EPC contract directly with the investor or only the partnership representative signs and assumes the responsibility for the assigned jobs under the signed partnership contract; d/The contents of the signed contracts must comply with the law provisions on economic contracts and the parties to the contracts must bear responsibility before law for the legality as well as the compatibility of the contracts' contents with the approved projects III CONTENTS OF GENERAL EPC CONTRACTS Contract dossiers A contract dossier consists of a contractual agreement and enclosed documents: a/ The written contractual agreement shall be made according to a set form b/The enclosed documents include: the investor's requirement dossier, the bidding dossier, the bid dossiers (the bid offer dossiers), the bid-winning notice or the written contractor designation, general and specific terms of the contract, drawings, written agreements between the investor and the general contractor, and other related documents The documents enclosed with the contractual agreement shall constitute part of the contents of the general EPC contract In case of necessity, the signatories to the contracts may refer to the guiding documents of the International Federation of Consulting Engineers (FIDIC) on the detailed contents of the contract documents Contractual prices and adjustment thereof a/ The EPC contractual prices shall be formulated and determined on the basis of the investor's requirement dossiers, the bidding dossiers, the bid dossiers (the bid offer dossiers) of the selected contractors as well as the result of contract negotiation on the following principles: - In case of bidding, the contractual price shall be determined on the basis of the bidwinning price and the result of contract negotiation between the investor and the winning contrac tor - In case of contractor appointment, for projects or bidding packages of an universal type, with a clear work scope and volume to be performed, the contractual prices shall be determined rightat the time of concluding the contracts; with regard to large-scale projects and bidding packages with technical complexity, the contractual prices shall be temporarily calculated by the investor and the general contractor on the basis of the investment capital amount reserved for the EPC project or bidding package within the approved total investment, then be officially determined after the result of the bidding for procurement is made available and the technical design-total cost estimate is approved or agreed upon; b/ In principle, the EPC contractual prices are package prices and shall not change throughout the period of contract performance (except where they are adjusted under the provisions at Point d of this Clause), and must not exceed the investment capital amount reserved for the EPC projects or bidding packages within the approved total investment level c/The prices of general EPC contracts are inclusive of all necessary expenses for the general contractors to the jobs under the signed contracts The expense items constituting the contractual prices shall be determined under the Construction Ministry's Circular No 07/2003/TT-BXD of June 17,2003 amending and supplementing a number of points in Circular No 09/ 2000/TT-BXD of July 17,2000 guiding the elaboration and management of expenses for the construction of works belonging to investment projects; d/ The adjustment of the prices of general EPC contracts shall be effected in the follo wing cases: - The signed contracts clearly prescribe the price- adjusting scope, extent and methods; - With regard to the volumes arising beyond the contracts not due to the general contrac tor's faults and approved by competent persons, the contractual prices shall be adjusted accordingly on the principle that if the jobs are already listed as contractual jobs, the prices of such arising volumes shall be calculated according to the contract's unit prices; if the jobs are not listed as contractual jobs, the prices of such arising volumes shall be calculated according to the unit prices prescribed by the State for similar jobs; if the State's unit prices are unavailable, the investor and the general contractor must reach agreement on the applicable unit prices for submission to competent authorities for approval (for cases subject to submission and approval) according to the regulations on the management of expenses for construction of works belonging to investment projects; - For projects or bidding packages to be executed for over 12 months, from the 13th month on, if there are major changes in the State's policies applicable to investment and construc - tion, the contractual prices shall be adjusted to suit such changes The general contractors shall have to calculate, justify and reach agreement with the investors on the adjustments of the contractual prices for submission to competent authorities for consideration and approval 7 Advance and payment of capital for contracts The advance and payment of capital for general EPC contracts shall be effected on the following principles: a/ The general EPC contract payment price is the contractual price and the conditions stated in the contract, which must conform with the provisions in Clause of this Part b/ When deploying the contract performance, the investor shall advance capital to the general EPC contractor (except for cases otherwise agreed upon by the two parties) The amounts of advance capital and the recovery thereof are prescribed as follows: - The advance of capital for the general contractor shall comply with the provisions at Point 13, Clause 17, Article of the Government's Decree No 07/2003/ ND-CP of January 30, 2003; - The advance of capital by the general contractor for subcontractors shall comply with the current regulations on investment and construction management; - The advanced capital shall be recovered gradually in each period of payment for the completed volume according to the corresponding percentages and fully recovered when the payment reaches 80% of the value of the completed volume c/ The investor shall make payment to the general contractor according to the performance progress, the value and conditions of the already signed contract on the basis of the work volume already completed and tested before acceptance in each execution phase or according to the completed project or project item suitable to the contract's payment plan - With regard to the procurement and provision of supplies and/or equipment, the payment shall be made upon each delivery of goods and payment invoices for the value of the procured supplies and/or equipment; - With regard to the construction and installation volume, the payment shall be based on the completed work volume of each execution phase or the completed project items, the payment plan and the payment bills of the general contractor; - With regard to other jobs and services (such as designing, supervising consultancy and management undertaken by the general contractor, inland transportation, training, techno logy transfer ), the payment shall be based on the completed work volume of each execution phase or the job performance duration Subcontracts a/ The general contractors shall select subcontractors through bidding or contrac - tor designation The general contractors must draw up a list of subcontractors in their bid dossiers (bid offer dossiers), which must be approved by the investors The conclusion of subcon tracts between the general contractors and subcontractors must accord with the contents of the general EPC contracts and the law provisions on economic contracts Within the scope of perfor mance of the jobs of the general EPC contracts, subcontractors shall not have direct contractual ties with the investors and shall be responsible only to the general contractors for the jobs assigned under the subcontracts The general contractors shall be responsible to the investors for all jobs done under the general EPC contracts, including the jobs done by subcontractors b/ In principle, the general contractors must not subcontract major jobs of the projects or bidding packages, which are decisive to the quality and time limit for completion of the projects In special cases, the investor's consent is required The subcontracting to subcontractors not on the list in the bid dossiers (bid offer dossiers) must be approved in writing by the investors, which the investors must not reject in writing without plausible reasons IV MANAGEMENT OF THE PERFORMANCE OF GENERAL EPC CONTRACTS On the basis of the provisions of the Regulation on Investment and Construction Management, promulgated together with the Government's Decree No 52/1999/ND-CP, Decree No 12/2000/ND-CP and Decree No 07/2003/ND-CP, the management of the performance of general EPC contracts must be effected on the principle of enhancing the autonomy and responsibility of the general contractors in combination with ensuring the strict control by the investors while creating flexibility in the assignment of jobs in the execution of projects or bidding packages The management of the contract performance covers the following contents: a/ Managing the scope of doing the jobs according to the projects objectives and the list of jobs in the signed contract; inspecting the accuracy, completeness and appropriateness of the applied survey and designing as well as technical documents b/ Controlling the performance progress of the jobs, ensuring that it accords with the general schedule of the project or bidding package and the signed contract c/ Inspecting and managing the quality of jobs according to the State's regulations on the quality management of construction works d/ Managing the expenses for the contractual jobs: controlling, paying and adjusting the contractual price (when necessary) in accordance with the regulations on elaboration and manage ment of expenses for construction of works belonging to investment projects Responsibilities and powers of the investors and general contractors: + In the process of contract performance, the investors shall have the responsibilities: - To apply for construction permits according to regulations; - To pay compensation, clear the ground and hand over the whole construction ground to the general contractors for management and use In case of necessity, the investors may agree to assign the general contractors to undertake the compensation and ground clearance so as to ensure the execution schedule and the project's efficiency; - To hire supervising consultants throughout the process of contract performance Depen ding on the practical conditions of the projects or bidding packages, the supervising consultants may be authorized to exercise some functions and powers of the investors, such as directly meeting with the general contractors' representatives on the construction site in order to deal with the jobs assigned by the investors, inspecting and supervising all or some of the contract management contents mentioned in Clause of this Part, representing the investors in a number of other necessary cases; - To organize pre-acceptance test, evaluation and approval or submit to competent authorities for approval (according to the decentralization prescribed in the Regulation on Investment and Construction Management) for evaluation and approval of the technical design-total cost estimates, the construction- drawing designs of key construction items or constructiontechnique designs, and carry out the approval procedures or reach other agreements - To report the general contractors' proposals for design supplementation to competent authorities for consideration and decision; - To suggest, propose the competent authorities to permit the application of the project's preferential regimes and policies (if any) to the general contractors; - To manage the projects' or bidding packages' capital and advance capital and make timely payment to the general contractors according to the payment plan and the contract performance progress; - To confirm the completed work volumes under the contracts and the volumes arising beyond the contracts for submission to competent authorities for consideration and decision, or to make decisions thereon as decentralized; - To purchase insurance for construction works according to the current regulations; - To prepare personnel and coordinate with the general contractors in training the contingent of managers and operation and maintenance workers; - To organize the pre-acceptance tests and receive the completed projects as agreed upon in the contracts and according to the State's regulations on the pre- acceptance tests and hand-over of completed construction works; The investors shall bear overall responsibility before law for implementing the regulations on investment and construction management, for the quality, progress and execution expenses as well as the efficient use of investment capital + Powers of the investors in the process of contract performance include: - To approve the list of subcontractors not on the list of subcontractors in the general EPC contracts as proposed by the general contractors; - To reach agreement with the general contractors on the bidding dossiers for the procure ment of main technological equipment and the expenses for the procurement of equipment within the total contractual prices on the basis of the results of bidding for equipment procurement; - To supervise the contract performance by the general contractors ranging from the organization of the quality control system to the designing, provision of supplies and equipment, construction and installation, pre-acceptance test to the trial operation of the whole completed projects; - To decide on the cessation, suspension or cancellation of the contract performance according to law provisions and the agreements between the contract signatories 10 - To decline or temporarily cease the payment as contracted when the general contractors fail to fulfill the obligations committed in the contracts; - Other powers as prescribed by law b/ Responsibilities and powers of the general contractors in the contract performance + The general contractors shall have the following responsibilities: - To receive and manage the whole construction ground, protect the project's construc tion center, framework and landmarks or to clear the ground according to the investor's assign ment as agreed upon by involved parties; - To make the technical designs or construction- technique designs and construction drawing designs of the major construction items compatible with the approved preliminary designs, then submit them to the investors for evaluation and approval or further submission for approval; - To elaborate and reach agreement with the investors on the plan for execution of various construction phases and construction of major construction items, and the contract's payment plan; - To organize the procurement, manufacture and provision of supplies and equipment accor - ding to the general EPC contracts' performance requirements and progress; to reach agreement with the investors on the contents of the bidding dossiers for the procurement of main technological equip -ment and on the expenses for the equipment procurement within the total contractual prices on the basis of the result of bidding for the equipment procurement; - To construct the projects according to the approved designs; - To organize the system of quality management and assurance of the jobs under the regu - lations on the quality management of construction works and the agreements reached in the contracts; - To organize, coordinate and manage activities on the construction site; to take measures to ensure environmental sanitation, fire and explosion prevention and fight, labor safety and security on the construction site; - To take initiative in coordinating with the investors in organizing the training of mana gers as well as workers for operation and maintenance of the projects; to transfer technologies, hand over drawings and technical documents related to the operation, use and maintenance of the projects to the investors; - To conduct the experimentation and adjustment as well as trial operation of the whole projects; to compile construction completion dossiers and hand over the completed projects to the investors as agreed upon in the contracts and according to the State's regulations; - To purchase insurance for construction supplies and equipment and workshops in service of the construction, accident insurance for laborers and civil liability insurance for the third parties as prescribed; 11 - To provide the project warranty according to the State's regulations - To take responsibility before law and the investors for the quality and the progress of the performance of jobs under the signed contracts, including the jobs done by the subcontractors, and to pay material compensation for damage caused due to their faults + In performing the contracts, the general contractors shall have the following powers: - To propose additional supplementation and/or adjustment of the designs, alternative solutions and measures in the execution organization to suit the practical conditions while still ensuring the projects' or bidding packages' requirements and efficiency; - To control all construction means and measures within the area of the construction site; - To select subcontractors through bidding or contractor designation; to supplement or replace subcontractors (if necessary) so as to ensure the quality, prices and progress of the erformance of contractual jobs; - To suspend or cancel the contracts according to the law provisions on contracts and the agreements between the contract signatories; - Other rights as prescribed by law V ORGANIZATION OF IMPLEMENTATION This Circular replaces the Construction Ministry's Circular No 01/2002/TT-BXD of January 7, 2002 and takes effect 15 days after its publication in the Official Gazette For projects and bidding packages already executed in the form of general EPC contract before the effective time of this Circular, the management and execution thereof shall be based on the agreements in the signed contracts The ministers, the heads of the ministerial-level agencies, the presidents of the People's Committees of the provinces and centrally-run cities, the Managing Boards of the State corpora tions and the heads of relevant units shall have to organize the implementation of this Circular MINISTER OF CONSTRUCTION NGUYEN HONG QUAN