I. Legal basis
Legal matters related to amendment to the price in construction contract including principles of price amendment, cases eligible for price amendment, order and procedures for, and contents and methods of, adjusting construction contract prices are stipulated in Circular 07/2016/TT-BXD.
The Circular is only required to apply to construction investment projects of state agencies, political organizations, socio-political organizations, socio-political organizations – professional organizations, social organizations. society – profession, social organization, units of the people’s armed forces, public non-business units; State-owned enterprises’ construction investment projects; projects using state capital, capital of state-owned enterprises from 30% or more or less than 30% but over 500 billion VND in the total investment of the project. The other construction investment projects are not required but encouraged to apply such document.
Ii. Principles of amendment to the price in construction contract
1. Construction contract price amendment shall only be made during the period of contract performance, including also extended periods as agreed upon in the contract.
2. In case a post-amendment contract price (covering also additional work volumes reasonably arising outside the signed contract) does not exceed the approved bidding package price (including also the contingency of such bidding package), the project owner may decide on the amendment. In case it exceeds the approved bidding package price, the amendment shall be approved by a person competent to decide on the investment.
3. When signing the contract’s annexes, the parties should clearly identify additional work volumes and applicable unit prices. The additional work volumes shall be agreed upon by the parties before performing the contract.
4. For additional work volumes arising due to the contractor’s subjective fault, the contract value corresponding to the advance payment level exceeding the minimum advance level (specified in Clause 5, Article 18 of Decree No. 37/2015/ND-CP) may not be adjusted in price from the time of advance payment.
5. Those of the compensation responsibility of insurers are not subject to contract price amendment under Circular 07/2016/TT-BXD.
6. The contract price amendment shall be agreed upon by the parties and specified in the contract regarding cases eligible for price amendment; amendment procedures, order, time, scope and conditions; and methods and grounds for contract price amendment. The methods for contract price amendment must conform to contract price types and characteristics of contractual works. Other amendments (if any) agreed upon by the parties in the contract must not contravene the provisions of Circular 07/2016/TT-BXD and other relevant legal documents on construction contracts.
Iii. Cases eligible for amendment to the price in construction contract
Construction contract price amendment may only be made in the cases specified in Clauses 2 and 3, Article 143 of Construction Law No. 50/2014/QH13 of June 18, 2014. The specific cases eligible for construction contract price amendment are as follows:
Amendment to the price in construction contract may only be made for reasonable additional work volumes, reduced work volumes compared to work to be performed under the signed contract, and force majeure events, specifically as follows:
a) Reasonable additional work volumes or reduced work volumes:
– For a consultancy contract, they are additional work volumes other than consultancy tasks to be performed, or contractual works which remain unperformed.
– For a construction performance contract, they are additional work volumes other than works to be performed according to the contract’s design; or works, work items and jobs not to be performed under the contract’s design.
– For an equipment provision contract, they are additional equipment outside the list of equipment under the initially signed contract.
b) Force majeure events specified in Clause 2, Article 51 of Decree No. 37/2015/ND-CP, and other force majeure circumstances (such as karst caves, mud layers, antiques, archaeological relics encountered or found in the construction process) which cannot be anticipated by the parties when entering into the contract and are accepted by investment deciders.
2. For a fixed unit price-based contract:
a) Reasonable additional work volumes without unit prices in the contract.
b) Force majeure events and other force majeure circumstances specified at Point b, Clause 1 of Circular 07/2016/TT-BXD.
a) The actual period of performance of works already tested and accepted which is more than 20% longer or shorter than that specified in the signed contract.
b) Reasonably additional experts without any expert wage level specified in the contract.
c) Upon a change in the state policies on taxes and wages, resulting in a change in the expert wage levels and directly affecting contract prices as agreed upon by the parties in the contract.
4. For an adjustable unit price-based contract:
a) The actually completed work volumes already tested and accepted which is more than 20% larger or smaller than those specified in the contract.
b) Reasonable additional work volumes without any unit prices specified in the contract.
c) Amendment of all or several of unit prices for work volumes which, at the time of contract signing, are agreed upon by the principal and the contractor after a specified period following the effective date of the contract.
d) Force majeure events and other force majeure circumstances specified in the Circular 07/2016/TT-BXD.
5. For a combined price-based contract:
They are cases eligible for contract price amendment specified in Circular 07/2016/TT-BXD (cases eligible for amendment corresponding to types of the contract price).
Iv. Procedures and order of contract price amendment
1. For the cases eligible for contract price amendment specified in Article 3 (except those specified at Point c, Clause 4, Article 3) of the Circular 07/2016/TT-BXD, the parties shall sign annexes to the contract to have a basis for contract price amendment.
2. A project owner shall approve or submit for approval the additional cost estimation (except the case specified at Point c, Clause 4, Article 3 of Circular 07/2016/TT-BXD) made by the contractor to serve as the basis for signing annexes to the contract. The contractor shall make an additional cost estimation based on the additional work volumes as agreed upon by the parties, regulations on management of construction investment costs and agreements in the contract.
3. Upon approval of contract price amendment, a contractor shall adjust sub-contract prices for sub-contractors under the signed contracts between them.
See more issues related to construction contracts:
– Types of construction contracts;
– A number of fundamental issues about construction contracts (part 1);
– A number of fundamental issues about construction contracts (part 2).
