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Official Gazette

Thursday, August 13, 2020

Revising the Bidding Law

Updated: 09:19’ - 27/06/2013

The Bidding Law was enacted in 2005 and once amended under the 2009 Law Amending a Number of Articles of Laws Concerning Capital Construction Investment. The Law, together with its 2009 amendments and sub-law provisions, have laid a relatively complete legal foundation for management of bidding and public procurement activities nationwide. However, over the past years, several difficulties have been encountered in the implementation of the Bidding Law.

First, current bidding regulations are scattered in many legal documents, leading to numerous overlaps and inconsistencies. Although the 2005 Bidding Law was designed to be the principal law governing bidding activities, it covers only bidding and procurement activities under some types of state budget-funded projects, including development investment projects, projects to procure assets serving regular operations of state agencies and projects to renovate or overhaul equipment, production chains and workshops of state enterprises. Bidding for selection of construction contractors is governed by the Construction Law while bidding for selection of investors to implement land-occupying projects or BOT, BTO or BT projects is regulated by the Investment Law. 

Second, some contents of the Law are too general and unclear, so difficult to implement. For example, the lack of specific criteria to distinguish between goods and consultancy services makes project owners confused in selecting the proper procurement process to be applied in such sectors as insurance, communications, advertising and information technology.

Third, some current bidding regulations are no longer relevant in the present context of deeper integration into the world economy. Vietnam officially joined the World Trade Organization in 2007, two years after the promulgation of the Bidding Law, and is now entering into negotiations for the Trans-Pacific Strategic Economic Partnership Agreement and the Free Trade Agreement with the European Union. In order to implement the country’s international commitments, domestic laws, including the Bidding Law, should be revised. 

Finally, processes and procedures for selecting contractors prescribed in the Bidding Law are relatively complicated and need to be simplified so as to promote competitive bidding and encourage domestic businesses, especially small- and medium-sized ones, to participate in public procurement bidding.   

For the above reasons, a new law has been prepared by the Ministry of Planning and Investment to replace to the 2005 Bidding Law and its 2009 amendments. The draft law has been submitted to the National Assembly for comment at its fifth session.

Proposed amendments to the Bidding Law

Extending the governing scope of the Law

According to the Ministry of Planning Investment, since the promulgation of the Bidding Law seven years ago, several new types of bidding and public procurement have been implemented such as the spending of state funds to invest in offshore projects and bidding to select contractors for public-private partnership projects. The Ministry of Planning and Investment therefore recommended expanding the Bidding Law’s governing scope to cover all bidding activities to select contractors to provide consultancy or non-consultancy services, supply goods or carry out construction and installation work under development investment projects with a state capital amount of VND 500 billion or more or with the state capital portion accounting for 30 percent or more of the total investment funds. The draft law would also apply to bidding to select investors to carry out land-occupying projects or public-private partnership projects or to select contractors to undertake bid packages under projects funded by Vietnam’s official development assistance for other countries and offshore investment projects with the state capital portion accounting for 30 percent or more of the total investment funds. It would additionally govern public procurement to serve the provision of public services and procurement made by state enterprises with state capital, except the purchase of materials, fuels, supplies and services to maintain regular production and business activities.

At present, expert opinions remain divergent on whether or not the draft law should govern state enterprises’ purchase of production materials.  According to some experts, as money amounts spent by state enterprises to purchase production materials are huge, such purchase must be strictly controlled so as to avoid possible loss of state funds. Others propose that state enterprises should be required to comply with the Bidding Law only when they implement investment projects or renovation or overhaul projects. As for regular procurement such as purchase of production materials, they should be allowed to select suppliers by themselves and take responsibility before law for their selection.

Introducing new bid evaluation criteria and methods

Under the 2005 Bidding Law, contractors that offer the lowest price will be selected. But experts argue that weighing the price as the decisive factor is synonymous with overlooking some vital elements such as contractor capacity, qualifications and experience. To address this issue, the draft law adds several new bid evaluation criteria and methods.

Accordingly, bidders would be evaluated based on not only their technical and price proposals but also their performance records. Bidders that have been blacklisted due to poor quality of and delay in previously undertaken bid packages would be eliminated despite of their splendid bids.

In addition to the bid evaluation methods prescribed in the 2005 Bidding Law, the draft law introduces a new method of selecting contractors based on both technical and price proposals to be applied exclusively to goods procurement bid packages involving information technology or telecommunications systems. Under current regulations, project owners who cannot assess an evaluation price or devise a formula to determine the evaluation price have no choice but select the bidder offering the lowest price. The new method now offers them another option, i.e. judging bidders based on both technical and price proposals. The bidder gaining the highest aggregate point would win the bid but bidders with higher technical points would have the advantage over those with lower technical points.

Facilitating online procurement

Online bidding and procurement have become a common trend around the world. Undeniably, the online bidding process generates healthy competition between bidders while saving money and time. This advanced method also improves information publicity and transparency, thus enhancing public supervision of bidding activities which involve high risks of corruption. 

Over the past years, the mode of online bidding has been successfully piloted in Vietnam. At the fifth session of the National Assembly, most lawmakers agreed to the proposed new regulations concerning the online bidding process, saying that it was the right time to legalize online bidding.

The draft law devotes a separate chapter to provide the online process to select contractors and investors. Accordingly, almost all steps of an open or a restricted bidding can be implemented online through the National Procurement Network. These steps include: publishing bid invitations; issuing bidding documents or prequalification documents; paying bid security or contract performance security;  receiving, opening and assessing bids; announcing bidding results; and concluding contracts. Particularly, bids would be opened online immediately after the bid closure. The National Procurement Network would automatically extract crucial information stated in each bid dossier and put such information into a publically accessible bid-opening record.

Prioritizing the use of domestic resources

 Under the draft law, foreign bidders are welcome to take part in international bidding in Vietnam. However, they must join partnerships with local companies or sign with domestic contractors sub-contracts valued at no less than 30 percent of their bid prices. Furthermore, foreign contractors would be allowed to employ foreign workers only when there are no qualified Vietnamese workers available for their projects. As explained by Minister of Planning and Investment Bui Quang Vinh, these regulations were designed in line with the policy of prioritizing the development of domestic resources, thus creating jobs for local workers and helping domestic contractors get access to advanced technologies and managerial experiences so as to improve their competitiveness.

When taking part in international bidding, domestic bidders, partnerships between foreign and domestic contractors in which domestic contractors perform 50 percent or more of the packages, and suppliers of goods of which domestic production accounting for at least 30 percent would receive preference. Bidders being small-sized enterprises or having war invalids or disabled persons accounting for over 50 percent of their total employees would be also prioritized.

Under the draft law, the mode of domestic bidding would be applied in case qualified domestic contractors are available, except for ODA bid packages which are subject to donors’ requirements. Domestic bidding would be also organized to select suppliers of domestically available goods or goods which cannot be produced at home but have been imported and offered for sale in Vietnam.

These regulations would help domestic contractors, said the Minister of Planning and Investment.

The draft law also proposes further decentralizing bidding activities, restricting the application of the mode of contractor appointment, enhancing supervision and more strictly handling violations of bidding regulations.-


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