Q: Under what conditions can power projects be awarded without Government tender?

A: Power projects can be awarded directly without Government tender if the projects are not:
a. Investment projects for development using state funding by state agencies;
b. Investment projects for development of state-owned enterprises;
c. Investment projects for development other than those in a) and b) which are financed by the state; has 30% or more of total investment capital contributed by state-owned enterprises ; or less than 30% but more than VND 500 billion of the total investment capital of the project;
d. Procurement projects using state funding to provide public goods and/ or services; or
e. Investment projects using land.
Q: Under which circumstances is direct appointment of an investor applied?
A: Direct appointment of an investor applies in the following cases:
a. There is only one investor registering the project’s implementation;
b. There is only one investor being able to implement the project as the project is related to intellectual property, commercial secret, technologies or capital arrangement;
c. The investor who proposes the project satisfies requirement of implementing the project with the highest feasibility and efficiency in accordance with regulations of the Government.
However, please note that direct appointment of an investor is still a part of a Government tender, meaning that this applies only when the abovementioned cases occur in the Government tender process.

Q: Under which circumstances is direct appointment of a contractor applied?

A: Direct appointment of a contractor applies in the following cases:
a. An event of force majeure such as disasters, war, change of the state policies … which are objective, unpredictable and cannot be solved despite using all necessary measures within one’s own capacity. Vietnam is likely to face energy crisis in the coming years due to significant growth in energy demand. Thus, this is a good chance and foreign energy investors and companies should be prepared.
b. Bid packages need to be performed to ensure national secrets. National secrets are information in politics, national defence, security, foreign affairs, economics, science, technology sectors and other sectors that has not been disclosed or will not be disclosed by the state, and if disclosed, it will cause damage to the country.
c. Urgent bid packages need to be carried out to protect national sovereignty, national borders, and islands;
d. Bid packages of providing advisory services, non-advisory services, procurement of goods which must be purchased from previous contractors to ensure the compatibility of technologies and copyright which are unable to be purchased from other contractors; bid packages with research and testing nature; purchase of intellectual property right;
e. Bid packages of providing advisory services for making feasible study reports, construction designs which have been appointed to authors of designs of architectural works who won in a selection or are selected when authors have full capability in accordance with regulations; bid packages of constructing statues, reliefs, monumental paintings, art works in association with author right from the creation stage to construction stage of the works;
f. Bid packages of relocating technical infrastructure works directly managed by a specialized unit for site clearance;
g. Bid packages of providing public goods and services, bid packages with bid package price ranging from VND 500 million to VND 1 billion depending on types of projects.

Q: How is government procurement addressed under the Comprehensive and Progressive Trans-Pacific Partnership Agreement (“CPTPP”) and the EU – Vietnam Free Trade Agreement (“EVFTA”)?

A: Vietnam opens its government procurement market for suppliers from EU and CPTPP members who meet all 03 conditions on (i) Procuring entity; (ii) Value of the procurement; and (iii) Goods and services with some exceptions. These exceptions are related to (i) certain purposes; (ii) certain types of goods; (iii) certain types of services; (iv) construction services; (v) offsets; and (vi) other exceptions.

The government procurement chapters of both the CPTPP and EVFTA are based, to a large extent, on the legal texts and market access schedule structure of the Government Procurement Agreement under the WTO. The EVFTA and CPTPP differ mainly in terms of the scope of commitments. In the CPTPP, Vietnam commits to open its procurement market by 21 ministries and central branches but not by sub-central government entities and corporations. However, in the EVFTA, Vietnam commits to opening procurement for both central and sub-central government entities, namely 20 ministries, central branches and some subordinate agencies under the Ministry of Defense (except for goods and services serving the national security and defense objectives); localities in Hanoi, Ho Chi Minh City; Vietnam Electricity; Vietnam Railways; 34 hospitals belonging to the Ministry of Health; Vietnam National University – Hanoi, Vietnam National University – Ho Chi Minh City and some central institutes. The Ministry of Public Security is not included in the EVFTA, resulting in the fact that the EVFTA covers less than one central government entity compared with the CPTPP. On the whole, the market accession commitments undertaken by Vietnam under the EVFTA are broader than those undertaken under the CPTPP.

Q: How to appeal Government tender decision?

A: The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government for its tender decisions according to the dispute settlement by arbitration rules. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation) at the request of the complaining party.

Enforcement of arbitral awards
The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.

If you would like to have a legal concept for direct awards or detailed guidance on this topic please contact Dr. Oliver Massmann under: Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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