Q&A: Vietnam Public Procurement Legislations

In 2012, Baker & McKenzie released the Global Public Procurement Handbook, which summarized major regulations of procurement legislations worldwide. This information may be useful if you are about to enter Vietnam market and do business with the government.

As an emerging market, Vietnam is investing heavily in infrastructure to ensure the high economic growth rate annually. In addition, development projects funded by international donors in the field of power and energy, transportation, waste water treatment and supply have increased steadily over the years. These offers great numbers of opportunities for local and foreign firms to do business with government agencies and State enterprises. Be well-prepared to seize one of them.

 1. The Laws

a. What is the applicable legislation?

Key legal documents forming the legal framework for public procurement bidding activities in Vietnam include:

Law No. 61/2005/QH11 on Bidding, adopted by the National Assembly on 29 November 2005, which took effect 1 April 2006, as amended by Law No. 38/2009/QH12 on amendment to a number of articles of laws concerning investment in capital construction (the “Bidding Law”);

Decree No. 85/2009/ND-CP providing guidelines for the implementation of the Bidding Law and for the selection of construction contractors pursuant to the Law on Construction issued by the Government on 15 October 2009 (“Decree No. 85”); and

Circular No. 17/2010/TT-BKH providing details for pilot online bidding issued by the Ministry of Planning and Investment on 22 July 2010 (“Circular No. 17”).

b. Does the legislation relate to or interact with any applicable trade agreement, such as the European Union procurement rules or the procurement requirements of the North American Free Trade Agreement (“NAFTA”)?

Although Vietnam has become a member of several international organizations, including the World Trade Organization (“WTO”) and the Association of Southeast Asian Nations (“ASEAN”), Vietnam has not made any commitments to any agreement on government procurement under such organization (for example, the WTO Government Procurement Agreement (“WTO GPA”)). However, the WTO GPA is being studied by the Ministry of Planning and Investment and the National Committee for International Economic Cooperation in Hanoi in order to introduce WTO GPA to Vietnamese enterprises over time and to make initial preparations for eventual WTO GPA accession.

c. What are the basic underlying principles of the legal framework (such as value for money, transparency and equal treatment)?

Basic principles underlying Vietnam’s bidding legal framework are fairness and transparency. These principles, which can be found in provisions on bidding information (which requires certain kinds of information to be published in a bidding newsletter and on the bidding website of the State bidding administrative body), include: assurance of competitiveness in bidding process; prohibited acts in bidding; provision on currency to be used in bidding (in Vietnam, the currency to be used in bidding should be stipulated in the bidding invitation documents on the principle of one currency for one specific volume); and all domestic costs must be quoted in Vietnamese dong.

d. Is aerospace and defence procurement treated differently from other types of procurement?

Pursuant to Art. 1.2 of the Bidding Law, its scope covers projects financed by the State for procurement of assets for the purpose of maintaining regular activities of State bodies, political organizations, socio-political organizations, socio-political-occupational organizations, social organizations, socio-occupational organizations and units of the armed forces. Moreover, up to now, there have been no specific regulations issued by the relevant ministries or agencies regarding aerospace and defence procurement. Thus, in principle, we understand that there should be no difference in treatment between aerospace and defence procurement and other types of procurement.

2. Application of the Statutory Procurement Laws

 a. Which public agencies are covered by the laws?

The Bidding Law does not categorize its subjects into public or private agencies. According to Art. 2 of the Bidding Law, its subjects are:

  • domestic and foreign organizations and individuals participating in tendering activities for tender packages belonging to the projects stipulated in Article 1 of the Law;
  • organizations and individuals involved in tendering activities for tender packages belonging to the projects stipulated in Article 1 of the Law; and organizations and individuals with projects not within the governing scope of this Law may choose to apply this Law.

Projects stipulated in Article 1 of the Bidding Law are:

  • investment and development projects using State funding of 30% or more;
  • projects using State funding for procurement of goods for the purpose of maintaining regular activities of State bodies, political organizations, socio-political organizations, socio-political occupational organizations, social organizations, socio-occupational organizations, and units of the armed forces; and
  • projects using State funding for procurement of goods for the purpose of renovation or major repairs to equipment, production lines, building works and factories of State owned enterprises in which investment has already been made.

b. Which private entities are covered by the laws?

See Section 2(a) above.

c. Which types of contracts are covered?

There are four types of contracts covered by the Bidding Law, including lump-sum contracts, unit price contracts, time-based contracts and percentage-based contracts.

d. Are there anti-avoidance rules (including laws on bid rigging)?

Yes, it is prohibited to give, offer, receive or request anything of value resulting in impartial behaviour, or to exert personal influence to distort the bidder selection process. Collusion to alter bids or to arrange winning a bid award is also prohibited. Other acts are also prohibited which distort competition. More information on specific prohibited cases in bidding activities are provided in Art. 12 of the Bidding Law.

3. Procurement Procedures

What procurement procedures can be followed?

Depending on the specific forms and methods of bidding and specific contents of a bidding package, the process may vary. Under the bidding regulations, the bidding process may be generalized as follows:

  • Bidding plan. The bidding plan will itemize the names of the bidding packages in a certain project, and information about price, financing source, bidding method, schedule, form of contract and schedule for contract performance of each bidding package. Such a bidding plan must be approved by the “Authorized Person”, which is defined, under the Bidding Law, as the person with the right to decide on the bidding project.
  • Bid invitation documents. The bid documents must be prepared in accordance with prescribed rules and approved by an Authorized Person. The notices inviting bidders must be advertised at least 10 days prior to the issuance of the bid documents.
  • Preparation of bids. Bidders have at least 15 days (for domestic bidding) or 30 days (for international bidding) to prepare and submit their bids. This deadline is call “bid closing time”. Before the bid closing time, bidders may also need to provide the bid guarantee as indicated in the bid documents, which must not exceed 3% of the approved bidding package price.
  • Bid opening. The submitted bids must be opened immediately after the bid closing time, on the date and at the location stated in the bid invitation documents. In this step, the main information about each of the bids will be disclosed.
  • Bid evaluation. The party calling for bids will review and evaluate the opened bids on the basis of the requirements of the bid invitation documents and evaluation criteria. During this process, the bid evaluators will, based on the bidding price offered by the bidders, make necessary corrections and adjustments to determine the “evaluation price” of the bids. The evaluation price is defined, under the Bidding Law, as the bid price proposed by a contractor after correcting errors and necessary expenses for operation and maintenance. The bid having the lowest “evaluation price” will rank first.
  • Bid results. The bid result must be approved and then announced (e.g., winning bidder, winning price, form of contract, etc.) by the Authorized Person. The contract will be finalized and entered into between the investor and the winning bidder. If the parties fail to negotiate and finalize the contract, the investor will invite the next ranking bidder to negotiate and sign the contract.

Circular No. 17 provides details on a pilot program of bidding on the internet. According to this regulation, once the method of bidding on the internet is applied to a bidding package, a number of steps during the bidding process will be conducted over the internet, including the announcement of the bidding plan, announcement of invitation for bids, issuance of bid invitation dossiers, submission of bids, bid opening, announcement of the bidding result, and announcement of contractors committing a violation of the Bidding Law.

b. Are there any rules on the specifications/criteria?

Yes, most bid invitation documents include prerequisite requirements, which bids submitted must satisfy. Any bid that fails to meet a single mandatory

requirement is regarded as non-compliant (Art. 15.2(b), Decree No. 85).

Only the criteria that were published in the bid invitation document can be used to evaluate the bids submitted. If there needs to be an amendment to the bid invitation documents after they have been issued, a notice must be sent to all bidders who received the bid invitation documents at least 10 days prior to the deadline for bid closing.

c. Can certain prospective bidders be excluded from the competition?

Yes, certain prospective bidders can be excluded from the competition if they do not meet certain provisions on their eligibility as organizations or individuals as well as bidding conditions.

Specifically, bidding organizations can be excluded from the competition if they do not meet the following eligibility requirements:

  • It has a business registration certificate or investment certificate issued pursuant to law, or a decision on establishment in the case of a domestic bidder which is an organization without business registration. A foreign bidder must have registration for its operation issued by the competent authority of the country of nationality of the bidder.
  • It is an independent cost accounting entity.
  • There is no decision by a competent body concluding that the bidder has an unhealthy financial status; it is not bankrupt or insolvent, and it is not in the process of dissolution.
  • Individual bidders can be excluded from the competition if they do not meet the eligibility requirements below:
  • having full capacity for civil acts pursuant to the law of the country of which such individual is a citizen;
  • having lawful registration for operation or an appropriate professional certificate issued by the competent authority; and
  • the individual is not subject to investigation for a criminal offence.

Moreover, bidders (whether organizations or individuals) may even be excluded from competition if they do not satisfy bidding conditions for one bidding package, which are:

  • Be eligible pursuant to Articles 7 and 8 of the Bidding Law.
  • Submit only one tender, either as an independent bidder or in partnership, for each tender package. In the case of a partnership, there must be a written agreement between the partners specifying the person heading the partnership and the general and specific responsibilities of each partner with respect to the tender package works.
  • Satisfy the requirements set out in the notice inviting tenders or in the letter inviting tenders from the party calling for tenders.
  • Ensure competitiveness in tendering pursuant to the provisions in Article 11 of the Bidding Law.

d. Are there any rules on the awarding of contracts?

Yes, the negotiation and signing of a contract must be based on (i) the results of the bidding, (ii) a model contract provided in the bid invitation document, (iii) the requirements of the bid invitation document, (iv) the bid and any documents clarifying the bid provided by the selected contractor, and (iv) the contents that need to be negotiated and finalized by the parties.

A contract includes the contract body that the parties have negotiated and supplemented by relevant bidding documents used in the bidding process. The contract can be in the form of a lump-sum contract, unit price contract, time-based contract, or percentage-based contract.

The winning bidder may need to provide a performance bond of a maximum of 10% of the contract price prior to the date on which the contract takes effect. In special cases, the value of the performance bond can be higher but cannot exceed 30% of the contract price and, in such a case, the permission of the Authorized Person is required.

In certain circumstances, the price or the scope of works under a contract can be adjusted, subject to certain requirements under the law.

e. Can bidders combine to submit a bid?

Yes, under Article 10.2 of the Bidding Law, in the case of a partnership, there must be a written agreement between the partners specifying the person heading the partnership and the general and specific responsibilities of each partner with respect to the tender package works.

f. Are there any rules on alternative bids?

Bidders prepare and submit bids as required by the bidding dossier. If they wish to modify or withdraw their submitted bids, bidders must make written requests and the party calling for the bid will approve the modifications only if it receives such requests prior to bid closure.

Moreover, after the opening of bids, bidders must clarify their bids on request from the party calling for bids. The clarification of a bid must ensure that there is no change to the main substance of the submitted bid and bid price. Any item of clarification of a bid must be made in writing, and the party calling for bids must retain it as an integral part of the bid.

4. Exemptions to Competitive Bidding

a. Are there any exemptions to competitive bidding?

Yes. Under the Bidding Law, all project processes discussed in Section 2(a) above are subject to open bidding by default. The open bidding process does not limit the number of bidders nor does it contain conditions restricting the participation of bidders or favouring one or more bidders. It is prohibited to use a bidder selection process other than open bidding when the conditions are not suitable.

When certain conditions are met, the selection of a contractor can also be done in the following forms:

  • Limited bidding. This process applies to (i) a bid package financed by a foreign donor upon its request, or (ii) a bid package which has highly technical requirements or technical peculiarities or bid packages of a research or experimental nature for which only a limited number of bidders are capable of satisfying their requirements. The limited bidding procedure is required to have at least five bidders, or an approval by the Authorized Person is required for the participation of less than five bidders.
  • Direct appointment. The direct appointment of a contractor applies to: (i) an event of force majeure due to a natural disaster, war or the like; (ii) bid packages in which the foreign donor requests the direct appointment; (iii) bid packages belonging to national top secret or urgent projects in the national interest; (iv) bid packages for the procurement of any type of materials and equipment in order to restore, maintain or expand the capacity of equipment and technological production lines which were previously purchased from the one supplier, and in order to ensure compatibility of facilities and technology it is not possible to purchase such materials and equipment from other supply bidders; (v) bid packages for consultancy services with a bid package price of VND3 billion (approximately US$157,890) or less, bid packages for the procurement of goods with a bid package price of VND2 billion (approximately US$105,260) or less, bid packages for construction and installation with a bid package price of VND5 billion (approximately US$263,160) or less belonging to projects for investment and development or projects for major repair or improvement of State-owned enterprises; bid packages for the procurement of goods with a bid package price of VND100 million (approximately US$5,260) or less belonging to a project or estimated budget for recurrent procurement; and (vi) bid packages with special requirements as provided by the Government.
  • Direct procurement. The direct procurement process applies when a contract was signed for a bid package with similar contents within the previous six (6) months.
  • Competitive quotation in the procurement of goods. The form of competitive quotation applies if (i) the bid package price is less than VND2 billion (approximately US$105,260), and (ii) the items to be purchased are commonly used goods which are readily available in the market, which have standardized technical features and which are similar to each other in quality.
  • Self-implementation. The form will apply where the investor is also a contractor with sufficient capability and experience to implement the bid package belonging to the project which such an investor manages and uses.
  • Special case. In the case of a bid package with particular requirements for which the abovementioned forms of contractor selection cannot be applied, the investor will prepare a plan for selection of contractors which ensures competitiveness and economic effectiveness and will submit it to the Prime Minister for consideration and decision.

5. Remedies and Enforcement

a. Are there any remedies and enforcement mechanisms in the legislation?

Yes, anyone who breaches the Bidding Law may be warned, fined, prohibited from participating in bidding activities or dealt with in accordance with provisions of criminal law besides being listed in the Bidding Newsletter and on the bidding website depending on the type of violation.

b. Are remedies available outside the scope of the legislation?

Yes, bidding violations are handled by relevant ministries or agencies. For example, bidding violations in construction are dealt specifically under Decree No. 85/2009/ND-CP by the Government.

c. Is there a specific forum before which disputes are heard?

No, depending on the substance of the disputes (i.e., whether they are civil or criminal disputes), a specific forum will apply in accordance with provisions of law.

d. Are there any timing requirements where a party wants to enforce?

Yes, the resolution of protests about relevant matters during the bidding process should be implemented as follows.

The party calling for tenders is responsible for resolving a protest regarding tendering made by a bidder within a time-limit of a maximum five working days from the date of receipt of the written protest of the bidder. If the party calling for bidders is unable to resolve the protest or if the bidder disagrees with the resolution as made by the party calling for tenders, the bidder has the right to lodge the protest with the investor for the latter’s consideration and resolution.

In such case, the investor is responsible for resolving a protest regarding tendering made by a bidder within a time-limit of a maximum seven working days from the date of receipt of the written protest of the bidder. If the

investor is unable to resolve the protest or if the bidder disagrees with the resolution as made by the investor, the bidder has the right to lodge the protest with the Authorized Person for the latter’s consideration and resolution.

In this case, the Authorized Person must resolve the protest within a time-limit of a maximum 15 working days from the date of receipt of the written protest of the bidder. If the Authorized Person is unable to resolve the protest or if the bidder disagrees with the resolution as made by the authorized person, the bidder has the right to institute court proceedings.

e. What are the leading court decisions involving procurement disputes?

In Vietnam, court decisions are not published; thus, it is impossible to access procurement related court decisions.

6. Other Relevant Rules of Law

Are there any related bodies of law of relevance to procurement by public agencies?

See Section 2(a) above.

7. Technology Law

a. Are there any specific laws or practices that apply when procuring technology?

No. Up to now, there have been no specific laws issued by any ministries or agencies in technology procurement nor are there any practices relating to this issue in Vietnam.

8. Looking Ahead

Are there any proposals to change the law in the future?

Enterprises and agencies have proposed to change the Bidding Law in order to keep it up-to-date with changes in bidding activities in Vietnam (for example, to cover bidding activities in various areas such as purchase, services and assembling). Moreover, they have also proposed to complete the legal framework for bidding on the internet. However, to our understanding, there are still no amendments to the Bidding Law.

Baker & McKenzie’s Global Public Procurement Handbook can be downloaded here:

http://www.bakermckenzie.com/GlobalPublicProcurementHandbook/

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