Some studies comparing EPC contract according to the regulations of FIDIC and those of vietnamese law

HANOI LAW UNIVERSITY LUND UNIVERSITY FACULTY OF LAW SOME STUDIES COMPARỈNG EPC CONTRACT ACCORDING TO THE REGULATIONS OF FIDIC AND THOSE OF VIETNAMESE LAW SPECIALITY: INTERNATIONAL AND COMPARATIVE LAW CODE: 60 38 60 THỮVIỀN TRirỊNGUAiHOCLỤÂT HÀ NƠI PHONG GV MASTER OF LAW THESIS STUDENT: DANG HOANG MAI SUPERVISORS: PROF.DR LE HONG HANH HA NOI - 2004 PROF.DR LARS GORTON Contents ACKNOVVLEDGEMENTS ABBREVIATIONS INTRODUCTION 1.1 The necessity of the study 1.2 The object and purpose of the study 1.3 The studying scope of the thesis 1.4 The studying methods CONTRACT IN CONSTRUCTION ACTIVITIES 2.1 Construction activities and their characteristics affecting legal adjustment in construction activities 2.2 Roles of contract in construction activities 2.2.1 Contract as a State's management tool for construction activities 10 10 2.2.1.1 Requirements for subjects of construction contract 11 2.2.1.2 Requirements for content and form of construction contract 14 2.2.1.3 Requirements for bases and procedures to sign and implement construction contract 15 Mechanism dispute settlement 17 2.2.1.4 2.2.2 2.3 Contract as a legal form to establish economic relationships in the field o f construction investment EPC Contract - A new approach of construction contracting method 2.3.1 The advantages of EPC Contract 17 18 20 2.3.1.1 Single source responsibility 20 2.3.1.2 It enables users to control costs and work progress and helps to make íinancial support easier 22 The implementing speed is faster and the efficiency is higher 23 2.3.1.3 2.3.2 2.3.2.1 2.3.2.2 The disadvantages of EPC Contract 23 The Employer's role of controlling activities of the project no longer exists 23 The costs spent on project under EPC contract is often higher than that of project implemented in traditional construction contract 24 EPC CONTRACT UNDER THE FIDIC CONDITIONS OF CONTRACT FOR EPC/TURNKEY PROJECTS AND VIETNAMESE LEGAL REGULATIONS 3.1 3.2 25 FIDIC and The FIDIC Conditions of Contract for EPC/Turnkey Projects 25 Some main content in The FIDIC Conditions of Contract for EPC/Turnkey Projects 28 3.2.1 Application scope and requirement for contract signature procedure o f The FIDIC Conditions o f Contract for EPC/Turnkey Projects 28 3.2.2 Key obligations o f the Employer and the Contractor according to the FIDIC Conditions o f Contract for EPC/Turnkey Projects 31 3.2.2.1 Key obligations of the Employer according to the FIDIC Conditions of Contract for EPC/Turnkey Projects 31 3.2.2.2 Keỵ obligations of the Contractor according to the FIDIC Conditions of Contract for EPC/Turnkey Projects 34 EPC Contract according to Vietnamese Legal Regulations 39 3.3 3.3.1 3.3.2 Deíinition and the application scope of EPC Contract according to Vietnamese Legal Regualations 39 Content o f EPC Contract according to Vietnamese Legal Rcgulations 41 3.3.2.1 Design document for assignment of bid in EPC Contract 3.3.2.2 Contract price, contract price adjustment and contract payment 3.3.2.3 Taking- over and handing-over the completed construction works 44 3.3.2.4 Responsibilities of the employer and contractor for the management of project performance 44 Selection of sub-contractor and re-assignment of bid to the subcontractor 45 3.3.2.5 3.3.3 l Some regulations on selecting EPC Contractor 41 42 46 3.3.3.1 The forms of selecting EPC Contractor 46 3.3.3.2 Methods to conduct bidding 47 3.3.3.3 Criteria to appraise and rank EPC Contractor 47 SUGGESTIONS TO ENHANCE THE POSSIBILITY OF APPLYING EPC CONTRACT IN CONSTRUCTION ACTIVITIES IN VIETNAM 49 4.1 EPC contract in construction projec.ts in Vietnam 49 4.2 Directions to enhance the posibility of applying EPC Contract in Vietnam 53 Some suggestions to enhance the implementation ability of EPC Contracts in construction activities in Vietnam 56 4.3 4.3.1 4.3.2 It needs to form Standard sample contracts for construction activities in VietNam 56 Suggestions involving in EPC Contraci regulations 57 4.3.3 4.3.4 Suggestions related to regulations on bidding to select EPC Contractor 61 Suggestions o f other measures related to the application o f EPC contract in Vietnam 61 4.3.4.1 For the Government's mechanism and policies 61 4.3.4.2 Forthe Employer 62 4.3.4.3 Improving the Vietnamese Contractors' capacity of conducting EPC projects 63 CONCLUSION 64 REFERENCES 65 APPENDIXES 68 Appendix No.1: Some the FIDIC’s Standard Form of Contracts 68 Appendix No 2: Extensions of the time for completion under the FIDIC Silver Book 70 Appendix No 3: Potential price increases underthe FIDIC Silver Book (exception to the lump-sum contract price) 71 Appendix No 4: Some projects in Vietnam under the EPC Contract 73 Appendix No 5: Comparison some Clauses of EPC Contract under the FIDIC Conditions of Contract for EPC/Turnkey Projects and those of EPC Projects in Vietnam 74 Acknovvledgements I would like to express my heartfelt gratitude to SIDA Prọịect, Lund University and Ha Noi Law University for affording and organizing The Swedish/Vietnamese Master Programme in International and Comparative Law I would like to register my special immeasurable thanks and appreciation to my supervisors Professor Lars Gorton of Lund ưniversity and Proíessor Le Hong Hanh o f The Hanoi Law University, who at every step encouraged me and guided me with valuable instructions and research tips My thanks are due to all Professors of the prọịect who helped and gave me invaluable knowledge I would like to extend my words of appreciation to Librarians of Lund University and Ha Noi Law University for their cooperation And lastly, to my family and friends whose love and comíịrt encouraged me to complete this thesis Dang Hoang Mai Ha Noi, November 2004 Abbreviations AIA The American Institute of Architects EPC Engineering-Procurement-Construction ENAA The Engineering Advancement Association of Japan FIDIC International Federation Consulting Engineers FDI Foreign Directed Investment FIEC The International European Construction Federation GDP Gross Domestic Product ICE The British Institution of Civil Engineers ICC Intemal onal Chambcr o f Commerce LILAMA Viet Nam Machinery Installation Corporation ODA Official Development Assistant USD United State Dollar VND Vietnamese Dong WB World Bank Introduction 1.1 The necessity of the study In the market economy, economic relations in general and construction assigning and undertaking relations in particular betvveen subjects are all established and performed on the basis of the contract Construction contract is one of the specialized and rather complicated kinds o f contract The reason for this is that both technical element and liabilities of the participants are included in this contract In recently years, there has been a new kind of conừact in construction investment activities in Vietnam, Engineering- Procurement- Construction Contract (abbreviated in English as EPC Contract) According to the current most widely accepted deíinition, EPC Conừact 'í the one in which a Contractor, considered as the General Contractor, bears all responsibilities for engũieering, materials and equipment supply and construction in a consortium of Contractors.1 This is an advanced, advantageous and extensively applied in the world In Viet Nam, EPC Contract has been put into eíĩect in the field of investment and construction but only in low volume and mainly applied to the projects with Capital sources from íoreign dừect investment (FDI) or oíĩĩcial development assistance of intemational govemments and organizations What matters is most EPC Contractors in those projects are íịreign Contractors or a Consortium of Contractors However, some powerful General Construction Corporations of Vietnam have recently won several tender packages in intemational biddings, including the ones implemented in EPC Contract form in Viet Nain At the same time, the Prime Minister has also decided to make a few mạịor General Construction Corporations like the Song Da General Construction Corporation and LELAMA Contractors to conduct some big construction investment prọịects specialized in electricity, petrol in EPC Contract form This really paves the way for enterprises of Vietnam to get used to the EPC Contract and improve theữ comprehensive capacity and step by step meet the demands of socio-economic development strategy in the period of 2001-2010 with regard to the construction industry proposed by the Ninứi National Party Congress What this strategy wants to is “ to develop the construction industry so that it can attain the advanced level in the region and satisíy the demands for construction of the whole countrỵ as well as to have sĩìcient capacity to bid for foreign construction projects” Nevertheless, because EPC Conừact is a new one in the construction activities in Vietnam, the process of putting it into practice now has to deal with some problems that need solving by not only the legislation but also ứie policies In addition, our process of integrating tìie economy into the regional and global economy is posing urgent requirements for the approach to the mtemational norms and practice in investment and constructìon in general and the regulations on construction contracts, mcluđing the ones on EPC Conừact in particular ICCA S to ck h olm Arbitration Congress, W orking Group II, (1 9 ), p 37 Ninth P arty C o n g re ss’s D ocum ents, (N ational Politics Publishing H ou se, Ha Noi 0 ) FIDIC - is the most prestigious organization in the world for drawing and developing Standard íịrms o f contract used in intemational construction activities In construction activities in Vietnam, conditions of specimen contract published by FIDIC have also been used for reference by the participants when negotiating the contract Yet, the FIDIC’s íịrms of conừact are dravvn just to apply to the intemational construction activities so each country has to take some changes so as to fit its speciĩic conditions when putting it into practice For the time being, the FIDIC’s Conditions of Conừact for EPC/Tumkey Prọịects, published in 1999, are also being brought into effect in prcỹects implemented in EPC Contract form in Vietnam In fact, however, there have been a lot of diữềrent regulations betvveen the EPC Conừact of FIDIC and that of Vietnamese law which must be investigated and assessed to offer suggestions to help sữengthen the capacity of applying EPC Contract to the construction activities in Vietnam in accordance with the current conditions of Vietnam and gradually integrate with intemational practice For all reasons above, I venture to select the subject entitled “ Some studies comparing EPC contract according to the regulatious o f riD IC and those o f Victnam ese Iaw” for my master thesis 1.2 The object and purpose of the study The object o f the study is some contents of The FIDIC Conditions of Contract for EPC/Tumkey Projects and regulations of Vietnamese law on EPC Contract as well as the current application reality in Vietnam This theme is made with ứie intention of pointing out the differences and similarities between regulations on EPC Contract of FIDIC and those of Vietnamese law ITiencịrth, the author nuts forward some suggestions aimed at enhancing the possibility of bringing EPC Contract into the íìeld of construction investment in Vietnam in such a way that dance the same tune with the ciHTent conditions of Vietnam and little by little integrate into intemational practice 1.3 The studying scope of the thesis The studying scope of this thesis is some regulations on EPC Contract according to The FIDIC Conditions of Contract for EPC/Tumkey Projects published in the year 1999 and Vietnamese law which are related to the application scope, requirements on EPC Contract signing procedures, several main responsibilities of the Employer and Contractor and the bidding to select EPC Contractor The application practice is limited to only a few construction prọịects implemented in EPC Contract form with Capital sources from the State budget in Vietnam 1.4 The studying methods In order to perform the task of this study, the author has used concrete scientiíic studying methods, such as comparing, analyzing and synthesizing In each matter and each speciíìc studying content, the theme may use certain method separately or put the methods together to clariíy studying results as well as the author’s scientiíic viewpoints of the mentioned matters Contract in construction activities 2.1 Construction activities and their characteristics affecting legal adịustment in construction activities Construction is a technical - economic activity which plays a vital role in the economy It helps to create the face of the nation’s economy and simultaneously set up the initial basis of material and technology for the development o f other production industries Construction works is a special product of construction activities It is the íruit of many specialized and qualifíed people and has various uses, including having iníluence on the environment and cxpressing people’s sentiments, desires as well as aesthetics Moreover, it is a long-lasting product which may exist through centuries Being aware of these roles and signiíicance, every legal system pays special attention to the adjustment in construction activities In the past few years, in Vietnam, construction activities have greatly contributed to the implementation o f industrialization and modemization of country Many ílelds of construction, including work construction convey, designing and operation, have becn satisíying the construction demand of the country In order to create favorable conditions for management of investment and bidding in construction activities, the Government and Ministries issued legal documents to regulate these fields to encourage the economic sectors investing in production and eữĩciently using the investment Capital which are managed by State; to ensure work construction in compliance with the planning and designs; to select the Contractors who fully meet the conditions on appropriate capability for construction operation efficiently and economically; to create the climate for fair competition as well as satisíy the requirements on stable development, artistic appearance of works and the protection of environment On November 26, 2003, the 4th Session of the IX National Assembly has passed the Construction Law to create clearly legal basis for combating wastefulness, unreasonable loss in construction activities and ensuring work quality This Law prescribes construction activities; and rights and obligations of organizations and individuals that invest in the construction of works and conduct construction activities Article - Law of Construction issued on July, l st, 2004 defines construction activities as follows: construction activities consist of setting up construction scheme, íịrmulating investment and construction project, carrying out surveys of construction, designing, executing construction project, supervising the implementation of the construction works, managing investment, construction projects, selecting Contractors in (tendering price) So-established price will be more suilable for the characteristics of both the contractor and tender package With regard to EPC contract, it is necessary to have more ílexible regulations on contract price identiíĩcation and adịustment In principle EPC contract price is fĩxed lurap-sum price and stays the same during the contract implementation period The FIDIC’s Silver Book takes great care of ensuring that the EPC contract price will not be overcharged Although the Iump-sum price has many advantages because it íịrces the contractor to take maximum responsibilities for the performance of contract the process of applymg Ít to the case of Vietnam is now coping with several diffĩculties such as íĩxing contract price basis, contents of expenditure item putting into the contract price, the high risk factors when conducting contracts, etc As a result, only sm all-scale projects w ith the im plem entation period o f less than 12 months can make best use of lump-sum price vvhereas the complicaíed projects or tender packages implemented in long time had better apply the price that can be adjusted This matter is also stated the same in biddina ordinance draíit for EPC contract In terais of contract payment, the parties should be allowed to make their own decisions on the construction contract payment and balance method according to the contract agreement as long as that method is suitable to the enterprise’s ĩinancial ability and the parties truly comply with ílnancial managing as well as invoice and document regulations Fifthly, there must be more specific stipulations related to subconlractor and the hand over It is also of the same importance to lay dow n measures to restrict the contractor from “selling” the contract to one ấnother in the form of handing over In order to ensure the quality of provided materials and implemented work, there is a need for speciíĩc regulations on restricting handed over work rate and the sub-contractor’s capacity as well as the employer certain controlling level ovor the sub-contractor despite the fact that the sub-contractor bears no direci liabilities to the employer According to the stipulations of the Govemment’s Decree Draft on investment project and construction management dated 16 March 2004 the restriction of the amount handed over to the sub-contractor is no more than 30% o f the contract value for construction contractor (Art 68) and no more than 30% of the value of each designing and constructing part in the EPC contract for design and construction contractor (Art 69) Neveríheless this draft did not regulate the restricted level for EPC contract Thus, it is vital to bring out regulations on the restriction of the work handed over to the subcontractor for EPC contract, particularly for the case of handing over to the domestic sub-contractor Sixíhỉỵ, the responsibiììties o f (he empìoyer and the contractor for implementing and mcmaging EPC contract musí be identị/ìed more cỉearìy and above all, the prominence to the contractor’s responsibility for the managcmcnt of the quaỉity of the construction project should be oiven This goes very \vcll \vith the role of the contractor in EPC contract and helps to takc advantage oĩtlic contractor’s expericnce It is obvious that the FIDIC’s contract conditions íor HPC prọịects/ Turnkey projects has sct up a clcar and closc liahility structure betvvecn the employer and the conlracior and 60 correspondingly paved the way íịr all parties in fulfiỉling their duties and settling the likely dispute as well 4.3.3 Suggestỉons related to regulations bidding to select EPC Contractor on (i) lí is essential to prescribe the criteria to define technical requiremenís o f an E P C tender package Determining the project’s technical requirenients so as to put into the norms of selecting Contractor is also important to the tender package implemented in EPC contract form because this tender package is divided into highly technical required tender package and slightly technical required one For this reason, the criteria that concretely defíne the technical requirements at different levels need to be set up to enable the employer to this task easily ậi) There shouỉd be more j,ĩexible regulations on methods o f bidding by \vhich simple and popular projects, repeatedly implemented projects and the ones conducted with an organization’s consultancy not have to bid the íirst stage and then, they can reduce the expenditure and shorten the time needed when bidding to select EPC contractor (iii) There is a need fo r specifìc guidance fo r the “appraising price ” method to n k the contractors based on the com bination o f the technically appraising result and the fmancially appraising one In other words, we have to mark the technical and íìnancial average points when evaluating tender documents This way o f doing can not only ensure that enterprises have the right to select the experienced and capable contractors most satisíying conditions of the tender package but also dance the same tune with the intemational practice 4.3.4 Suggestions of other measures relateó to the applicaton of EPC contract in Vietnam 4.3.4.1 For the Government's mechanism and policies The State needs to establish a synchronic mechanism for the execution of projects in the form of EPC contract with Capital sources ííom the State budget At present, due to the lack of an United structure m anaging the performance of EPC contract, for large-scale projects, in the short term there must be participation of the employer, contractor and industry managers in constructing and submitting measures of each EPC contract for each prọiect lo the Prime Minister to get his approval This merely is an immediate solution so in the long term, the government has lo set up and United s t r u c t u r e m a n a g i n g the im plem entation o f EPC c o n t r a c l in o r d e r lo solvc several main problems like the basis of handing over EPC, reguỉations on design document and the basis of dìning contract price, the empIoyer’s as well as the contractor’s responsibilites, especially in desicning and managing the quality of the construction prọịect, paying in advance, purchasing imported technological equipment, dealiim with the troubles rising under the contract cxecution, scttling disputc and so on to cnsure Ihe eoníormit) with boíli domcstic regulations and inlemational practice The 61 shortcomings in the State’s current managing mechanism have really put enterprises to tbc test In addition, the Government should give priority to the Vietnamese contractors when they take part in the international EPC projects or tender package biddings At the same time, the State also needs to promote the development of new forms of enterprises to lay the ground for building powerful economic groups that are capable of being EPC contractor in large-scale prọịects and get a foothold in the global construction market 4.3.4.2 Forthe Employer - Enhancing the quality and effĩciency of the project management board According to the present stipulations, in case of projects with Capital sources from the State budget, the employer is required to set up the project management board which has sufficient conditions and capacity to participate in construction activities Therefore, in order to conduct the project or tender package in EPC contract form, the employer has to form a new board or strengthen the old one 10 help him such duties as hiring consultants to supervise the contract implementation, formulating the employer’s requirements or tender document, selecting EPC contractor, negotiating and signing contract, etc - In case that the employer is not capable of íorming the project, it is necessary to rent a Consulting organization that has full capacity and conditions of forming the project The contract signed between the employer and this organization m ust State clearly responsibilities and pow er o f two parties so that the Consulting organizations have to take greater responsibilities for carrying out the contract - The ]aw shoulđ stipulate more speciĩically the punitive sanctions applied to the employer and management agencies In fact, the present lega) regulations tend to deíĩne strict sanctions applied to the contractor such as punishment, compensation, rejection, contractor replacement, etc whereas those ones applied to the employer and management agencies are still too vague Thus, the number of their mistakes and violations is rather large and their managing duty has not been done well, particularly in the prọịects conducted with the Capital from the State budget According to the report of the Ministry of Planning and Investment, a survey carried out in 2003 showed that the mistakes and violation were mainly made over the order procedure, bidding regulations, design and construction techniques, the checking and taking over, paying and balancing in which those made by the em ployer and management agencies made up nearly 60%.103 - The government’s management agencies and the employer need to throw away the doubtíulness o f the dom estic contractors’ ability to im plem ent EPC contract In practice, the Iarae-scale and com plicatcd proịccts undertakcn hy dom cstic contractors in the ỉast fe\v ycars havc partly provcd their ability Ilcncc, if the G overnm cnt’s manac,ement agencies and the cm ploycr belicve and assign the V ietnam cse contractors vvho h a \e sììcien l capacily to carry out EPC contract, our dom estic contractors vvill T h e M i ms t r y o f P la n n i ng and Inveslmeni , R epori on thề rcsu h o /b iđ d in I la Noi 04 62 get used to this kind of contract and then widely apply it to the case of Vietnam 4.3.4.3 Improving the Vietnamese capacity of conducting EPC projects Contractors' Today, in order that the projects/ tender package implemented in the EPC contract form are popularly and efficiently put into practice, there must be an improvement in the contractors’ capacity because it is the contractors that directly change the employer’s idea into the real work The product of the tender package/ projects executed in the fonn of EPC contract takes root from such bases as the approved Feasibility Study Report or Investment Report so the contractors’ capacity is of greater importance Meanwhile the number of Vietnamese contractors that are capable of putting EPC tender package into operation (especially large-scale and complex ones) is small As a result, the following solutions should now be taken into consideraíion to enhancing our contractors’ capacity: - The immediate measure that enables domestic contractors to take part in the bidding of EPC tender package is that they should cooperate with the international contractors in the implementation of big projects with the object of improving capacity and acquiring experience On the other hand, the Vietnamese contractors need to unite and co-ordinate with one another to develop the strengths o f each enterprise such as Capital, human sources, professional, speciality, competitive capacity, etc so that they could be able to play the role of EPC contractor, especially in large-scale and complex tender packages Let’s take an example The enterprises specialized in the fíeld of design, construction and installation and procurement can associate with one another to form a consortium of contractors to perform EPC tender packages - Formulating the management system of the quality of the construction projects A special feature of EPC contract is that the contractors directly manage the project during the implementation of study, design, procurement, construction and installation and all other jobs until the project is handed over Consequently, in order to have suffíciení capacity of conducting project in the EPC contract form, the Vietnamese construction enterprises have to establish an advanced and United management system of the quality of the construction projects that is in line with international standards In reality, major general corporations with hiph competitiveness have already studied to apply the system of ISO Standard to the quality management For instance, LILAMA has achieved the ISO 9001 certiíìcate of international quality management and some directly under enterprises vvhich have been granted the ASME certiílcate, have possessed the \vhole country technologically leading force of welders with international qualifications in the íĩeld of metal Another example is Song Da C onstruclion Corporation This Corporation a!so has a com pulsorv requircinent o f thc qualily m anagem ent in accordance with the ISO Standard ior the general Corporation itselí'and other member units The application oí' ISO Standard has b ro u g h t a b o u t great effect on b u sine ss and m a n u ía c tu r ir m ac tiv ities oi' e n tc r p ris c s , \vhich h e lp s to im p ro v e th cir re p u ta tio n o n íhe n i a r kc t 63 conclusion EPC contract is an advantageous and advanced one which is being widely applied to the international construction activities For the time being, Vietnam is in the process of industrialization and modemization with the aim of building material íacilities for socialism On the other hand, Vieínam is trying his best to speed up the process of integration into the global economy There has been rapid increase in the demands for construction investment associated with requirements of approachinR advanced project management methods as well as the constructors’ capacity Thus, a new and Progressive method cannot bring any efficiency unless it is accompany by a comprehensive mechanism to take it into full play The EPC contract implementing projects are now facing a lot of difficulties taking root from the govemment policies, legal regulations and the subjects of the contract itself However, this is a new kind of contract in Vitítnam so problems rising when we put it into practice are unavoidable Thereíbre, it is very necessary for the Government to summarize and evaluate the períbrmance of this contract for the last period of time and then we can establish a stable legal environm ent and a United and com prehensive managing mechanism for the application of EPC contract in construction investment in particular and construction activities in general Only by doing so, can this kind of contract make full use of its advantages and then contribute to the improvement of all-sided capacity of the Vietnamese construction enterprises At that time no one can doubt that Vietnam will become the owner of domestic construction market and be strong enough to compete in the global one Due to the limits of time and research conditions, this thesis has only looked into some most common stipulations of applying scope, main responsibilities of the employer and contractor in EPC contract and the selection of EPC contractor according to regulations of FIDIC and Vietnamese law limited in a few EPC contract implementing projects in Vietnam Therefore, the following study should extent into conditions of specimen contract of other proiessional organizations and especially the legal stipulations and EPC conlract applying practice in some countries’ construction activities, including both developing and developed ones, so as to havc thc ovcrall view and make more appropriate appraisal 64 Reĩerences I/ Legal Documents Civil Code o f Socialist Republic ofVietnam (1995) The Law on Construction of Socialist Republic of Viet Nam (2003) The Ordinance on Economic Contract dated 25 September 1989 of National Assembly Standing Commitee The Decree No 52/1999/ND-CP dated July 1999 of the Government promulgating the Regulation on Investment and Construction Management The Decree No 12/2000/ND-CP dated May 2000 and The Decree No 07/2003/ND-CP dated 30 January 2003 of the Government amending and supplementing The Decree No 52/ND-CP The Decree No 88/1999/ND-CP dated 19 September 1999 of the Government promulgating the Regulation on Bidding The Decree No 14/2000/ND-CP dated May 2000 and The Decree No 66/2003/ND-CP dated 12 June 2003 of the Government amending and supplementing Decree No 88/1999/ND-CP The Decision No 19/2003/QD-BXD dated 03 July 2003 of the Minister of Construction on the promulgation of statute on construction operation capability conditions The Decision No 18/2003/QD-BXD dated 27 June 2003 of the Minister of Construction promulgating the Regulations on the management of the quality of the construction projects 10 The Decision No 87/2004/QD-TTG dated 19 May 2004 of Prime Minister promulgating the Regulation on the management of foreign contractors undertaking the construction or consultancy on construction projects in Viet Nam 11 The Circular No 08/2003/TT-BXD dated 09 July 2003 of the Ministry of Construction on guidance for the contents and EPC Contract management 12 The Circular No 01/2004/TT-BKH dated 02 February 2004 of the Ministry of Planning and Investment guiding the implementation of the Governmenl’s Decree No 66/2003/ND-CP 13 The Government’s Decree Draft dated 16 March 2004 on the Regulation 011 Investmení and Construction Management 14 The B idding O rdinance D raít o f the N ational A ssem bly Standing Committee on Bidding dated 31 August 2001 ĩ ĩ/ A rticles a n d B ooks YMetnamesc M i n i s t r y o f C o n s l r u c t i o n R e p o rl on t h e ị ì r s t s ix m o n th s o f í h e y e a r 0 q j th e p e r /o r m a n c c o f 'cnlerpri.se,s a n d u n ils d ir c c tỉy d e p c n c k n t on the M in is tr y 0 I la N oi 65 Ministry of Planning and Investment, Reporí on the result o f bidding 2004, Ha Noi Le Quang Bau,"Construction quaỉity and concerned m atters”, Builder -ỉournal, 2001 (11), p 9,13 Thai Ba Can, Finance Management in Construction and Inveslment Field, Finance Publishing House, 2003, Ha Noi Nguyen Van Chon, State Management 0)1 Economy and 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Minh City Publishing House, 2000 14 Hanoi Law University, Economic Law’ Teaching Materiaỉ, Security Publishing House, 2003 15 Dinh Dang Quang, “Researching to improve method o f bidding and selecting the coníractor”, Subject of Scientiíic Research, University o f Civil Engineering, Ha Noi, 2002 16 Nguy en Hong Quan, “Improving State Management on Construction”, Construction Joumal, 2003 (11), p 1-4 17 c Maxell Stanley, Consultaní Engineer, Construction Publishing House, Ha Noi, 1995 18 Iran Trinh Iuong, “Appìying EPC Contrací Form in accordance \vith the currení conditions o f Viet N am ”, Builder Journal, 2002 (3), p ] 1- 19 Nguyen Anh I uan, “EPC Contract - A new management form in invưsímení a n d consữuction f ì e l đ \ Econom ic C onstruction Iníbrm ation lournal, the M inistry o f Construction 2003 (2), p 9-15 20 Nguven Ọuoc I hong, “The Law 011 Construction is motivion im p u ìsìn g the d e v d o p m e n l o f the C tìu ìitìỳ \ C o n s t r u c t i o n í o u r n a l, 2004 (6), p 10-11 N g u y e n s c h T l u i y , ‘7 ?o r the cìevcìopm ent o f co n stru cíio n b n m c h in Vicl N a m '\ Conslruction iournal 2003 (§), p 13- 15 66 22 Vietnamese Communist Party, the Niníh National Party Congress Documents, National Politics Publishing House, Ha Noi, 2001 23 Viet Nam Development Iníịrmation Center, Report o f Worìd Bank on Evalncition State Procuring Bidding System in Viet Nam, Ha Noi 2002 English 24 The Ministry of Construction and Cooperation Committee Viet Nam Quebec (Canada), Training Course on EPC Contract, Ha Noi, 2002 25 A Sandberg, “A Contractor’s View on FIDIC Conditions o f Conlract fo r EPC/Turnkey Projecls'\ I.C.L.R (47), 1999 26 A H Gaede, “The Silver Book: An Unfortnnate Shift from FID IC ’s Tradiíion o f being Evenhanded and Focusìng on the Best interests o f the Prọịecí , I.C.L.R (17), 2002 28 Brown, “Opportimiíies and Risks o f Design-Build Prọịecís”, The Construction Superconference, San Krancisco, u s , 1^95 29 Christopher Wade, “History and Scope o f the Three Major New Books” I.C.L.R., 1998 30 Christopher Wade, “FID IC’s Standard Forms o f Contract - Princỉples and Scope o f the Four New Books”, I.C.L.R., 2000 31 Christopher Wade, “The Silver Book - The R ealitý\ I.C.L.R., 2001 32 FIDIC, The FIDIC Conditions o f Contract fo r EPC/Turnkey Projects, 1999 33 FIDIC, The FIDIC Contracts Guide, 2000 34 ICCA Stockholm Arbitration Congress, Working Group II, 1990 p 370-371 35 ICC, Extracts o f ICC Arbitrial Awards on Construction Contracís Refeirùig to the FIDIC Conditions, 1991 36 IEEE, Panel dỉscussion construction contract trends fo r the 90s, 1992 37 I.N.D Wallace, Construcíion Conlracts: Principles and Poỉicies in Tort and Contract, Sweet and Maxell, London, 198b 38 John Bowcock, “The Four New Form o f Contract - Iníroductiorí\ The FIDIC New Contracts Launch Seminar Series, 1998 39 .ỉoseph A.Huce, Understanding and Negotiatùĩg Tnrnkey and EPC Contract, Sweet and Maxwell, London, 2002 40 M.E Schneider, “Turnkey Conlracís, Concepís, Lìabilities and Claims”, I.C.L.R., 1986 41 Oren Perez, “Usiĩig Private-Public Linkages lo Regulate Environmental Conịlicts: The Case o f International Construction Contract”, Journal of Law and Society, Volume 29, Number 1, 2002 42 Peter Boen “C o m litio m o f C oníract for the Nexl C entiuy: F JD IC ’s 1998 Test Editons'\ The FIDIC New Contracts Launch Seminar Scries, 1998 43 UNC1TRAL, Lagaì Guide on Drciwing ưp International Contract for the Construction ()f lmìustrial IVorks■ Nc\v York, 1998 67 Appendixes Appendix No.1: Some the FIDIC’s Standard Form of Contracts No S t a n d a r d F o rm o f C ontract P u b lish ed Ycar A p p ly in g S it u a tio n 1987 Fourth edition) he Employer is g o in g to m ost o f the design A s in traditional projects, e.g., inírastructure hydropower, etc, the E m ployer did nearly all thè design (perhaps not construction details reinforcement, etc.) And the Engineer administered the contract, m onitored the construction work and certiíied payment' the E m ployer w as kept íìilly infoirned, could make variations etc; *yith pa>ment accord in g to bills o f quantities or lump-sum for approved work done I C on d ition s o f Contract for W orks o f Civil E ngineering Construction (R ed B o o k ) C onditions o f Contract for Electrical and M ech an ical W orks including Erection on Site (Y e ll o w B o ok ) 19 87 (Third edition) j Conditions o f Contract for D esign -B u ild and T u m k e y (O range B ook) X C onđitions of Contract for Construction (for Building and E ngineering Works D esig n by the Employer) ( N e w Red B o o k ) The Contractor is g o in g to m ost o f design A s in traditional projects, e.g electrical and mechanical works-including erection on site-tlie Contractor (or supplier) did the majority o f the design, e.g the detail design o f the plant or eqưipment 1995 In the relatively m ore recent design-bưild and tu m key type prọjects the Contractor did the majority o f the design, not on ly o f plant projects but also o f various iníìastructure and other types o f project, and the project w as required to fu]fill the E m p lo y er ’s Requirements, i.e., an outline for p erío n n an c e speciíication prepared by the Employer A n d the E m p lo y e r’s Representative administered the contracl, m onitored the manu acture and erection on site or construction work and certiíled payment; vvith payment according to achieved m ilestones generally on a lump-sum basis 19 9 As in T he Red B o ok C onditions of Contract for Plant and D csig n -B u ild (for Electrical and Mechanical Planl and for Buildiim ;ind ĩiim inceriiií; Works Desimi bv Ihc Conlraclor) 199 As Book 68 in The Y d l o w B o o k and Oranne (Nevv Book) Yellovv 1999 The Contractor takes total responsibility for tlie design and construction o f the infrastructure or other facility The Em ployer d o es not w ish to be involved in the day-to-day progress o f tlie \vork T he Contractor paid more for the construction project in return for the Contractor bearing the extra risks associated with enhanced certainty o f íinal price and time 1999 The price for the contract is relatively smal!, say under U S D 0 ,0 0 , or the construction time is short, say less than six months, or the work involved is relatively sim p le or repetitive It d o es not matter vvhether the d esign is provided by the Employer or by the Contractor, whether the project in vo lv es construction, electrical, mechanical, or other engin eering work Condition of Contract for EPC/Turnkey Projects (Silver Book) Short Form of Contracl (Green Book) 19 Appendix No 2: Extensions of the time for compỉetion underthe FIDỈC Silver Book Clausc 2.1 4.24 5.4 7.4 8.4 (a) 8.4(c) 8.5 8.9 9.2 10.3 13.7 16.1 17.4 19.4 Reason for extension of time Delays caused by Employer’s failure to give Contractor access to or possession of ihe site within the time stated in the Particular Conditions Delays caused by the Employer’s instructions to Contractor regarding archaeological remains discovered on the site Changes in the host country’s technical standards and rcgulations for which Contractor’s compliance causes delay Delay caused by Employer’s instructions to vary the location or details o f any tests or to perform additional tests or any delay for which the Employer is responsible Variations Any delay, impediment or prevention caused by or attributable to the Employer, his personnel or his Contractors Unforeseeable delays or disruptions by the public authorities of the host country Delays caused by Contractor’s compliance with Employer’s instruction to suspend work to the extent the suspension was not due to Contractor’s fault Test on completion being unduly delayed by the Employer Prevention of the tests on completion due to a cause for which the Employer’s responsible Delays caused by a change in the laws of the host country Delays resulting from Contractor’s suspension oi'work for nonpayment by the Employer or Employer’s failure to providc evidence of his ability to pay Delays caused by the occurrence of an Employer’s risk Delays caused by the occurrence of a force maieure event 70 Appendix No 3: Potential price increases under the FIDIC Silver Book (exceptíon to the ỉump-sum contract price) Clause 2.1 4.6 4.24 5.4 7.4 8.9 9.2 10.3 11.6 11.8 12.2 12.4 Reason for potential price increase Costs to Contractor caused by Employer’s failure to give Contractor access to or possession of the site within the time stated in the Particular Conditions Unforeseeable work sccommodations to Employei^s p6rsonn6l or public authorities casing Contractor to incur additional cost Costs caused by Employer’s instruction to Contractor regarding archaeological remains discovered on the site Changes in the host country’s technical standards and regulations for which Contractor’s compliance causes additional costs Additiona! costs caused by Emp]oyer’s instructions to vary the location or details of any tests or to perform additional tests Additional costs caused by Contractor’s compliance with Employer’s instruction to suspend work to the extent the subsuspension was not due to Contractor’s fault ĩest delays caused by Employer Additional costs caused by Employer’s interíerence with the test on completion Additional costs of test required after the correction of any defect or damage to the vvorks to the extent the defect or damage was not attributable to the Contractor Additional costs incurred by Contractor when instructed by Employer to search for a defect in the works not attributable to the Contractor Additional costs to Contractor caused by any unreasonable delay by the Employer to the tests after complẽtion Additional costs as a result of any unreasonable delay by the Employer in permitting access to the works or plant by the C o n tr a c to r , e ith e r to in v e s tig a t e th e c a u s e s o f a fa ilu re to p a s s a test after completion or to carry out any adịustments or m odiíĩcations 13.3 13.7 13.8 14.8 15.5 16.] Variations Additional costs caused by a change in the laws of the host country Price adịustments for incrcases or decreases in the cost of labour goods and othcr inpưts to the works (if so provided in the Parlicular Conditions) Financing charties for delayed payments osl and lost prolit subsequenl to Employers termination for convenience Additional costs rcsulling from Contractor’s suspension of work 1’or Hmplo>cr’s íailurc to provide evidence of its ability lo pay 01ỉbr non-pavmcnt 71 Clause 16.4(b) (c) 17.4 18.] 19.4 19.6 19.7 Reason for potential price increase Payment to Contractor of loss of proíĩt and other loss or damage fol!owing justified termination by Contractor Cost to Contractor of rectiíying any loss or damage due to an Employer’s risk event Payment by Contractor of insurance premiums for which Employer 1S responsiblc and the amount of any Insurance payment that wou!d have been received upon the occurrence of an insurable event absent Employer failure to maintain Insurance Costs resulting from the occurrence of a force maịeure event Costs incurred in cormection with termination of the contract after a force maịeure event Costs mcurred in connection with termination of the contract due to the occurrence of an event making it impossible or unlawful for either party to fulfil its contractual obligation and which u n d e r th e la w o f th e c o n tr a c t e n title s e ith e r party to b e r e le a s e d fonn further perlbrm ance 72 Appendix No 4: Some projects in Vietnam underthe EPC Contract V a lu e o f No P roject EPC Contractor Contract A ctu Duration (U S D ) Package & 3, D u n g Q uat R e í ì n e r y P la n t 0 0 0 2002-2005 15 % 10 0 0 0 2002 -2 0 90% 7 0 2002 -2 0 90% L IL A M A 0 0 0 2003 -2 0 30% L IL A M A 0 0 0 2003 -2 0 6 2002-2006 0 -2007 N a Duong The Consortium of Therm al M aru b en i (Japan) - P o w e r P la n t L IL A M A Phu M y The Consortium of LILAMA & Russia C o m b in e C y cle P ow er P la n t al >vork The Consortium of A lsto n (F rance) L IL A M A U ong Bi E xten sion Therm al P o \ v e r P la n t Ca M au E x ten sio n Therm al % P o w e r P la n t S e San Song Da H ydropow er C on stru ctiu n P la n t Corporation Tuyen Quang Song Da Hydropow er Construction Corporation P la n t Phu M y Therm al P o w e r P la n t Mitsubisi Heavy Industry (Japan) T h e C on sortiu m o f Pha Lai S u m i t o m o (J a p a n ) - Therm al S ton e & W ebster P ovver P la n t (U S A )-H u yn d (K orea) T h e C on sortiu m o f C onstruction A q u a tic Sport Complex The N a tio n a l Sport C o in p le x P r o ịe c t Enterprise No.4 (I la N o i C onstruction Corporation) - A & 'I' l u r o p e s p a (I t a li a ) - A r c h i t e c t A sso cia tio n A & p (V iet N a m ) 73 002-2003 Appendix No 5: Comparison some Clauses of EPC Contract ũnder the FỈDIC Conditions of Contract for EPC/Turnkey Projects and those of EPC Projects in Vietnam No Clause The person taking responsibility for designing Consultant Engineer (CE) c ooperation Certiílcated payment by CE FIDIC Viet Nam EPC Contractor EPC Contractor or Employer No need for CE Should have CE EPC Contractor CE No need Should have Depend on the State’s unit price EPC Contractor performs under approvement of Employer Contract price Depend on parties agreement Procuring equipment EPC Contractor List of sub-contractor No need Employer’s approval Should have Taking-over Two parties: Employer and Contractor Two parties and the third party, such as State’s Council for taking-over construction wơrks 74 ... EPC and similar contracts 3.2.2 Key obligations of the Employer and the Contractor according to the FIDIC Conditions of Contract for EPC/ Turnkey Projects The obligations of the Employer and the. .. perform the main work of the project.12 Sub-contractor: Sub-contractor is the Contractor signing contract with the Principal Contractor or General Contractor to períịrm a part of the work o f the. .. LAW UNIVERSITY LUND UNIVERSITY FACULTY OF LAW SOME STUDIES COMPARỈNG EPC CONTRACT ACCORDING TO THE REGULATIONS OF FIDIC AND THOSE OF VIETNAMESE LAW SPECIALITY: INTERNATIONAL AND COMPARATIVE LAW