DRAFT LAW ON PROCUREMENT

LEGAL UPDATE

After nearly eight years of applying the Law on Procurement No. 43/2013/QH13 dated 26 November 2013 and coming into effect on 01 July 2014 (Current Law on Procurement), the Ministry of Planning and Investment (MPI) issued the revised Draft Law on Procurement (Draft Law) together with official letter No. 3975/BKHĐT-QLĐT on 15 June 2022 for public comments. The draft aims to achieve better competitiveness, fairness, transparency, and economic efficiency in the management of the State budget.

In this update, we set out the core points in relation to the above-mentioned Draft Law.

1. Scope

Under the Draft Law, the scope of application has been expanded to add the selection of investors to implement business investment projects, including:

• Construction investment projects: urban areas; civil works with one or more functions such as commercial houses, headquarters, working office; commercial and service works; and

• Other investment projects must organise bidding sessions as stipulated by law.

Besides, for ease of application, the Draft Law also sets out a list of procurement activities that are not subject to the Draft Law.

2. Subjects and Principles of Application of the Law

If organisations or individuals, whose procurement activities are not subject to the Law on Procurement, choose to apply this Draft Law, they must specify the specific articles, clauses and points that shall comply with the provisions of the Draft Law.

The principle of the Draft Law lies in prioritising the application of the provisions of the Law on Procurement over other laws for the selection of bidders and investors.

3. Selection Methods of Bidders and Investors

In general, some adjustments will be made to most forms of bidder and investor selection. However, this update only elaborates on those that will be significantly modified.

3.1 Selection of Bidders or Investors in Special Cases

The Draft Law provides the general principle for applying the procedure for the selection of bidders or investors in special cases. These are the cases where the Prime Minister will decide to apply this procedure, and the application dossier to submit to the Prime Minister for such decision.

3.2 Direct Procurement

To prevent investors’ abuse of the regulations on direct procurement under the Current Law on Procurement imposing high prices in direct procurement [1] causing losses and waste, the Draft Law proposes the following: (i) remove the regulations on direct procurement, or (ii) amend such regulations to avoid the disadvantages of the same. In the latter option, the Draft Law proposes to add more conditions for direct procurement, one of which is that the plan for the previous bidding package must have an additional purchase option and specify the value of the additional purchase option. The provision on the additional purchase option aims to make the procurement process more efficient from a time and financial point of view as well as more competitive. The content of the additional purchase option is also specified in several Free Trade Agreements such as the CPTPP[2] the EVFTA[3], and the UKVFTA[4] and some Government Decrees[5] guiding the implementation of procurement according to the provisions of the Free Trade Agreements.

3.3 International and Intra-regional Bidding

For international and intra-regional bidding, the Draft Law maintains the provisions of the Current Law on Procurement and supplements regulations on international bidding and intra-regional bidding in accordance with the provisions of the Free Trade Agreements to which Vietnam is a party. Accordingly, international bidding and intra-regional bidding are applied when

• Vietnamese bidders cannot implement contracts;

• The relevant sponsors of the bidding package require international and intra-regional bidding,

• The bidding package is only interesting for foreign bidders through a market survey; or

• The bidding package is for the provision of consulting services where the competent person deems it necessary to involve foreign bidders.

3.4 Centralised Procurement

The Draft Law proposes to amend and supplement the regulations on centralised procurement to allow the application of other forms than open bidding of bidder selection to take advantage of large-scale procurement. The Draft Law also adds the regulations on open framework agreements allowing the selection of more than one winning bidder, which increases the competition and economic efficiency in procurement.

4. Bidding Process and Procedures to Select Bidders and Investors

4.1 Eligibility of Bidders and Investors

One of the conditions for an organisation bidder or investor to be eligible under the Current Law on Procurement is that the bidder or investor must be an independent accounting organisation. The Draft Law proposes to abolish such regulation and stipulate the types of organisations that are eligible to participate in the procurement process.

4.2 Guarantee Competition in Procurement

To guarantee competition in procurement, the Draft Law maintains the principle that the subjects who directly participate in procurement activities for each specific bidding package and project must be legally and financially independent as per the Current Law on Procurement. However, in order to enhance the competition and fairness in procurement, the Draft Law proposes two options to identify the subjects with conflicts of interest when participating in bidding activities, including (i) amendment of the method provided in the Current Law on Procurement and (ii) another option as specified in the Draft Law.

4.3   Content of Bidding Documents

The Draft Law supplements the regulations on content and principles for preparing bidding documents based on Directive No. 47/CT-TTg dated 27 December 2017 of the Prime Minister. This serves to limit the situation of implantation of evaluation criteria in the bidding documents and contributes to the increase of competitiveness, fairness, transparency, and economic efficiency.

4.4 Procedure for Bidding

The Draft Law eliminates the stage of appraisal and approval of the list of bidders meeting technical requirements, approval of the list of contractor ratings, and contract negotiation before approving the bidder selection results to shorten the timeline in procurement.

4.5 Pre-bidding

The Draft Law provides a new regulation on pre-bidding. Accordingly, it is allowed to implement the pre-bidding procedures for cases where the scope and scale of the bidding package have been clearly defined during the project formulation process (before the issuance of the project investment approval decision) to save the time of organising bidder selection and speed up capital disbursement.

5. Prohibited Acts

The most obvious amendment to the prohibited acts for the bidder in procurement procedures is the bid transfer. In particular, the bidder is in violation of this act when the work in the bidding package beyond the maximum value for sub-bidders stated in the contract is transferred to another bidder.

For more information, please contact:

Phuong Huynh / Senior Associate

phuong.huynh@acsvlegal.com

Ly Nguyen / Associate

ly.nguyen@acsvlegal.com

© 2022 ACS Legal Vietnam Company Limited – All rights reserved

This legal update is not an advice and should not be treated as such.

Download pdf: Draft Law on Procurement

[1] Direct procurement can generally be understood as the activity where the investor enters into another contract with the bidder who has won and performed the previous bidding package, to perform another bidding package having content and nature similar to the previous bidding package.

[2] Read our update on the CPTPP: CPTPP adding legal layers to foreign investment protection.

[3] Read our updates on the EVFTA: Impact of the free trade agreement between Vietnam and the EU and the EVFTA implementing documents issued.

[4] Read our update on the UKVFTA: Highlights of United Kingdom-Vietnam Free Trade Agreement.

[5] Decree 95/2020/ND-CP and Decree 09/2022/NĐ-CP.

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