Vietnam: The World Bank Is Asking Duane Morris About Doing Business And Government Contracting – What You Must Know:

Last Updated: 26 April 2019
Article by Oliver Massmann

Case Study Assumptions

BidCo

  • Is one of the companies participating in the call for tender and meets all solvency, technical and administrative requirements to compete;
  • Is a privately and domestically-owned medium-sized Limited Liability Company (or its most common legal equivalent);
  • Operates in Ho Chi Minh City;
  • Is up to date with all regulations and is in good standing with all relevant authorities, including those related to taxes;
  • Has all licenses and permits needed to operate in this technical area;
  • Has already responded to a public call for tender and is already registered with the procuring entity defined below.

Contract

  • Entails resurfacing 20 km of a flat two-lane road (not a highway and not under concession), connecting Ho Chi Minh City to another city within Vietnam (and within the same state, region or province as Ho Chi Minh City, if applicable), with an asphalt overlay of 40 to 59 mm (or its most common equivalent in Vietnam);
  • Value: USD 2.5 Million (equivalent to VND 57,641,204,415);
  • Does not include any other work (such as site clearance, subsoil drainage, bridgework or further routine maintenance).

Procuring Entity

  • Is the agency in charge of procuring construction works for the authority that owns the road described above;
  • Is the sole funder of the works, has budget for the works and is solvent.

Procurement Process

  • Is an open, unrestricted, and competitive public call for tender for resurfacing a road like the one described above;
  • Is completed without complaints/challenges/protests from interested parties;
  • Ends with the awarding of the contract to BidCo, whose bid satisfied all technical and administrative criteria and offered the best value for money.

1. What is the entity that conducts procurement for the authority that owns the majority of roads comparable to the one described above?
Directorate for Roads of Vietnam within the Transport Ministry ("Procuring Entity")
2. Please provide a list of the laws, regulations and other binding materials (including guidelines and manuals) that regulate public procurement in Vietnam. Please include legislation or other binding materials promulgated at the national/federal level as well as any additional legislation that is applicable to the Procuring Entity.

  • Civil Code of Vietnam no. 91/2015/QH13 by the National Assembly of Vietnam dated 24 November 2015 18 June 2014
  • Construction Law no. 50/2014/QH13 by the National Assembly dated 18 June 2014
  • Law on Bidding no. 43/2013/QH13 dated 26 November 2013
  • Commercial Law no. 36/2005/QH11 dated 14 June 2005
  • Decree no. 63/2014/ND-CP dated 26 June 2014
  • Decree no. 37/2015/ND-CP dated 22 April 2015
  • Decree no. 46/2015/ND-CP dated 17 March 2015
  • Decree no. 30/2015/ND-CP dated 17 March 2015
  • Decree no. 63/2018/ND-CP dated 4 May 2018
  • Circular no. 04/2017/TT-BKHDT dated 15 November 2017
  • Circular no. 26/2016/TT-BXD dated 26 October 2016
  • Circular no. 10/2016/TT-BKHDT dated 22 July 2016
  • Circular no. 23/2015/TT-BKHDT dated 21 December 2015
  • Circular no. 10/2015/TT-BKHDT dated 31 October 2015
  • Circular no. 01/2015/TT-BKHDT dated 15 April 2015
  • Circular no. 07/2015/TTLT-BKHDT-BTC dated 8 September 2015

3. Please list any mandatory standard tender documents and/or standard contract terms that the Procuring Entity must use for a contract like the one described above
Contract terms must specify:

  • 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; o/ Settlement and liquidation of the contract;
  • Other contents.

4. If such documents are in use, can the Procuring Entity modify any of their clauses without justification?
No
5. Are you aware of any change in laws/regulations/procedures) related to public procurement between May 2, 2018 and May 1, 2019? For example: amendments to applicable public procurement laws, enactment and/or implementation of new regulations, implementation or improvement of e-procurement platforms, changes to the bid security and performance guarantee framework, etc.
Yes. Issuance of Decree 63/2018/ND-CP dated 04 May 2018 to replace Decree 15/2015/ND-CP on public private partnership.
6. If one or several electronic procurement portal(s) (i.e., an official website(s) specifically and exclusively dedicated to public procurement) are in operation please mark which platform would most commonly be used bv the Procuring Entity.
http://muasamcong. mpi.gov.vn/
7. Which information about road works contracts procured by the Procuring Entity is made publicly available?
Estimated cost/length/completion time – as calculated by the Procuring Entity at the time of advertising the procurement opportunity.
8. According to the legal framework, when the Procuring Entity prepares to advertise a new procurement opportunity for a contract like the one described in Section 1, what are used to estimate the contract value and projected length of works?
Market analysis, Standardized unit cost, Project-specific technical drawings, Similar projects from previous years, and price evaluation result by authorized state agency or price evaluation enterprise for assets, goods and services subject to price evaluation under the Law on Price.
9. In practice, is the estimated contract value / budget published in the tender notice/tender documents?
Yes, contract value.
10. Is the Procuring Entity required to have already allocated budget to a specific project before tendering?
Yes, there is a specific budget allocation.
11. In an open tendering procedure, how often does the Procuring Entity award a contract without having already set aside all the necessary funds?
Rarely (between 10-25%).
12. According to the legal framework, would open tendering (i.e. the process in which any business can submit a bid) be the default method of procurement in Vietnam for a contract like the one described in Section 1?
Open tendering is not the default but remains the most common in practice.
13. In practice, how many days would be necessary for BidCo to receive a decision on its prequalification from the moment it submitted all the necessary documents?
30 days
14. According to the legal framework, after the advertisement of an open tendering procedure can the Procuring Entity require bidders to participate in a prequalification process specific to that contract before being able to submit their economic offer?
Yes. This happens occasionally for a contract like the one described in Section 1.
15. In practice, what is the most common method of procurement for a contract like the one described in Section 1?
Open tendering is not the default but remains the most common in practice.
16. Does the legal framework define the situations in which each procurement method should be used?
Yes, Section 2 of the Bidding Law.
17. Does the legal framework prohibit dividing contracts to circumvent thresholds for open tendering?
Yes, Article 89.6.k of Law on Bidding No. 43/2013/QH13.
18. What are the commonly used strategies to circumvent the rules and thresholds on open procurement?
The procuring entity sets out very high technical specifications.
19. According to the legal framework, is there a minimum time limit between the advertisement of the tender notice and the submission deadline for an open tendering procedure like the one described in Section 1?
Yes. Article 12.1.e of Law on Bidding No. 43/2013/QH13.
20. In practice, how many days would pass between the advertisement of the tender notice and the submission deadline for a contract like the one described in Section 1?
30-40 days
21. How often does the Procuring Entity modify the tender documents for any reason after advertisement, but before the submission deadline?
Occasionally (between 25-50%).
22. Does the legal framework establish the minimum content of the tender notice and tender documents?
Yes. Articles 218-219 of Commercial Law No. 36/2005/QH 11; and Circular No. 03/2015/TT-BKHDT
Tender notice must include:

  • Name and address of procuring entity
  • brief description of bidding contents
  • time limit, place and procedures for receipt of bid documents
  • time limt, place and procedures for submission of bid documents
  • guidance on seeking clarification of the tender documents

Tender documents must include:

  • tender notice
  • requirements on procuring goods or services

    • methods of evaluation, comparison, ranking and selection of bidders
    • other instructions related to bidding

23. In practice, which of the following are usually NOT included in the tender notice and/or tender documents?
Grounds for exclusion of bidders; Main terms and conditions of the contract; Payment schedule under the procurement contract.
24. Which aspects of subcontracting are regulated by the applicable legal framework?

  • Features – the legal framework regulates the administrative process to subcontract, the limits of subcontracting, the authorizations required, etc.
  • Disclosure – the legal framework regulates when and how companies should inform the Procuring Entity of their intent to subcontract
  • Liability – the legal framework regulates liability of the contractor and subcontractor in case of poor performance

25. In practice, how are clarification requests from potential bidders usually addressed?

  • The procuring entity addresses all clarifications in a public meeting;
  • The procuring entity will answer, and it is always required to communicate the answer to all other bidders too.

26. According to the legal framework, is BidCo required to provide a form of bid guarantee?
Yes. Article 11.1 of Law on Bidding No. 43/2013/QH13
27. In practice, which instrument would BidCo most commonly use as a bid guarantee?
Cash/Certified check; Bank guarantee/Letter of credit; Bid bond
28. Does the legal framework establish a timeframe for the Procuring Entity to proceed to bid opening once the deadline for bid submission has been reached?
Yes, Article 14.3(b) Decree no. 63/2014/ND-CP.
29. Selection committee – Which of the following characteristics are regulated by the applicable legal framework?

  • The education requirements of members of the committee;
  • The professional requirements of members of the committee.

30. Are employees of the Procuring Entity required to follow a mandatory code of conduct or ethics that includes topics like screening procedures, conflict of interest, training requirements, etc.?
No
31. According to the legal framework, which award criterion would be used for a contract like the one described in Section 1?

  • Price
  • Price and other qualitative elements (i.e. best value for money or the most advantageous combination of cost, time to completion, quality and sustainability, or the most economically advantageous tender)
  • The choice is left at the discretion of the Procuring Entity

32. Does the legal framework require all non-price evaluation criteria to be objective and quantifiable?
This is not mentioned in laws.
33. Does the legal framework establish a criteria to identify abnormally low bids?
No
34. Does the legal framework define what constitutes a non-substantial error?
Yes, Article 17, Decree 63/2014/ND-CP
35. When a bidder is excluded before the contract is awarded, is it provided with an explanation of the reasons for the exclusion in writing?
No, the excluded bidder will be notified directly in the contract award.
36. According to the legal framework, is BidCo required to provide a performance guarantee deposit that ensures a source of compensation in case of failure to perform its contractual obligations?
Yes, Articles 66 and 72 of Bidding Law.
37. In practice, which instrument would BidCo most commonly use as a performance guarantee?
Certificate of deposit; Bank Guarantee / Letter of Credit; Payment retention until satisfactory completion of the contract.
38. Which aspects of contract management are regulated by the applicable legal framework?
Renegotiation (Article 67 Bidding Law, Article 93 Decree no. 63/2014/ND-CP).
39. According to the legal framework, is there a percentage of price increase below which the procuring entity is not required to provide a reason for the renegotiation?
No
40. According to the legal framework, is there a percentage of price increase above which the procuring entity is not allowed to renegotiate and is always required to re-tender?
No
41. In practice, are the results of contract renegotiations made publicly available?
No.
42. In practice, how many days would pass on average from the moment one of the parties requests/initiates a renegotiation of the contract until a new contract amendment is signed?
It depends on the extent of re¬negotiation.
43. According to the legal framework, is there a limit to how much the Procuring Entity can pay upfront for the contractor to hire workers, buy materials, and start operations in a contract like the one described in Section 1?
No.
44. During the execution of the contract, does the legal framework establish a timeframe within which the Procuring Entity must process the payment once an invoice is received?
Yes. Article 19 of Decree No. 37/2015/ND-CP.
45. According to the legal framework, is the company entitled to claim interest on late payments if the Procuring Entity does not pay within the legally-established timeframe?
Yes. Article 94 of Decree No. 63/2014/ND-CP
46. Assuming that BidCo delivers works complying with the quality standards agreed-upon in the contract, within budget and on time, what strategies, if any, does the Procuring Entity use to delay or avoid payment?
Bureaucracy/paperwork Inspections/ financial difficulties
47. Does the procuring entity have guidelines or protocols regulating inspections on the quality of the works?
Yes
48. According to the legal framework, is BidCo required to provide a guarantee upon completion of the works?
Yes. Bank guarantee / Letter of credit; Payment retention.
49. If a post-completion guarantee is not required bv law would it usually be requested by the Procuring Entity for a contract like the one described in Section 1?
No.
50. In practice, which instrument of post-completion guarantee would the Procuring Entity most commonly request?
Bank guarantee / Letter of credit; Payment retention.
51. In practice, what are the main reasons for works delivered over the original budget?
Market conditions (changes in input prices, fluctuations in exchange rate, etc.); burdensome administrative processes within the procuring entity; Capacity of the contractor (technical/financial/managerial/human capital constraints); Poor planning on the procuring entity's side (poorly designed project specifications, etc.); Poor planning on the contractor's side.
Formal Challenges throughout the Procurement Process
Assume that:

  • The Procuring Entity publishes tender documents for a road works contract.
  • Before the deadline to submit the bids, 3 companies challenge the tender documents on the following grounds:

 Company 1 argues that the tender documents favor one specific bidder.
 Company 2 argues that one of the evaluation criteria establishing that the Project Manager assigned to the project has at least 20 years of experience is arbitrary and should not be used.
 Company 3 argues that requiring a 10% performance guarantee hinders access to SMEs.

Assume all challengers submit their claims within the legal deadlines, free of mistakes, pay the fees associated with their challenges, and pursue their claims until no further legal remedy is available.
52. According to the legal framework, can tender documents be challenged prior to the deadline to submit bids?
Yes.
53. According to the legal framework, who has legal standing to challenge tender documents?
Potential bidders.
First instance
Which authority would hear the challenge?
Investor of the project
Would the challenge suspend the procurement process?
No, the procurement process would continue
Second instance
To which authority would the first instance decision be appealed?
Procuring entity, investor of the project
Would the appeal suspend the procurement process?
No, the procurement process would continue
Assume that:

  • The Procuring Entity has awarded a works contract to BidCo.
  • Three companies challenge the award on the following grounds:

 Company 1 argues that BidCo submitted a recklessly low bid that should have been excluded.
 Company 2 argues that one of the evaluation criteria was used arbitrarily by the Procuring Entity to reduce the Company's final score.
 Company 3 argues that the technical project they submitted met the minimum standards established by the tender documents and should not have been excluded.
Assume all challengers submit their claims within the legal deadlines, free of mistakes, pay the fees associated with their challenges, and pursue their claims until no further legal remedy is available.
54. According to the legal framework, who has legal standing to challenge the contract award?
Bidders.
First instance
Which authority would hear the challenge?
Procuring entity
Would the challenge suspend the procurement process?
No, the procurement process would continue
Second instance
To which authority would the first instance decision be appealed?
Responsible persons in the bidder/ investor selection process, Advisory Committee
Would the challenge suspend the procurement process?
No, suspension is discretionary but not common in practice for similar cases.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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