Export Knowhow

Public Procurement in Vietnam

What Swiss companies need to know

Vietnam is one of the countries with the highest ratios of public investment to GDP in the world. Public procurement, therefore, is a potential business area in Vietnam market for Swiss companies to sell their products and services.

Public Procurement

The Vietnamese government is the leading purchaser of goods and services in Vietnam. Data showed, Vietnam is one of the countries with the highest ratios of public investment to GDP in the world. Since 1995, this ratio has remained at over 39% annually, with a large part invested in infrastructure projects. Last year (2018), the ratio was 35.7%, or US$26.45 billion, of the total capital expenditure. Contributing to this amount include procurement implemented by provincial and municipal governments and state-owned enterprises.

Infrastructure as principal development priority

Beside the state budget allocations, Vietnam is also the recipient of significant levels of Official Development Assistance (ODA) from International Financial Institutions (IFIs) such as Asian Development Bank (ADB), World Bank Group (WBG), and donor countries. Infrastructure is the principal development priority for ODA, but other key sectors include transportation, telecommunications, energy, environmental/water, civil aviation, education, and financial services.

With the current signing and coming into effect of two important FTAs with EU and CPTPP, The Ministry of Planning and Investment of Vietnam is working on the completion of the Guidance on implementation of the international treaty on bidding, which is expected to be submitted to the Government in November 2019.  This is considered a turning point in the history of public procurement activities for a long time.

Characteristics

Public procurement in Vietnam is normally implemented through bidding. Currently, ministries and agencies have different rules on minimum values for the purchase of material or equipment, which must be subject to competitive bidding. High value or important contracts, such as infrastructure, require bid evaluation and selection and are awarded by the Prime Minister’s office or other competent body.

In general, there are two models of public procurement, which are applied in parallel in Vietnam:

1. Decentralized procurement model (the most popular model currently): In this model, agencies, organizations and units, who are the end-users of the assets will directly conduct the procurement.

2. Centralized procurement model: The centralized procurement model will have a national-level centralized procurement unit and a centralized-level procurement unit at the ministerial, branch or local level.  For example, all public procurements at the Ministry of Finance and the Ministry of Health are implemented by their ministerial centralized procurement unit. Those centralized procurement units will gather procurement needs of departments, organizations under their ministries and conducts the selection of contractors, and directly signs contracts with the selected contractors to supply goods and services.

Meanwhile, government procurement funded by ODA loans and grants is normally governed by regulations on tendering of relevant donors in accordance with loan agreements between the Vietnamese government and donors.

Procurement for public investment projects are classified (in accordance with Article 6 of the Law on Public Investment) into Group-A, Group-B, and Group-C projects. Classification criteria comprise of urgency/significance, area/location, sector, investment components or capital required.

Government procurement practices can be characterized as a multi-layered decision-making process, which, despite some recent improvements, often lacks transparency and efficiency.

Legislation

Legislation of Public Procurement in Vietnam is regulated by the following law and regulation:

  • Law on Bidding No. 43/2013/QH13 by National Assembly dated 26 November 2013;
  • Decree No. 63/2014/ND-CP by the Government dated 26 June 2014 guiding Law on Bidding;
  • Law on Public Investment No. 49/2014/QH13 of the National Assembly dated 18 June 2014;
  • Decree No. 15/2015/ND-CP by the Government dated 14 February 2015 on public-private partnership investment.

Sources of information on public tenders

Tenders are normally announced officially in the Vietnamese language newspapers such as Dau Thau, Nhan Dan, Lao Dong, and Saigon Giai Phong, and in the English language newspapers Vietnam News and Vietnam Investment Review.

Meanwhile, Swiss companies may also be able to obtain a consolidated listing of government or private tenders in Vietnam through below websites:

MPI’s public procurement website (in Vietnamese only):

English websites by service companies like Itellasia and Euclid (need to be registered)

As for projects financed by IFIs donors such as ADB, Worldbank Group (State Secretariat for Economic Affairs also contributes in certain projects through their partnership with those IFIs), Swiss companies may be able to obtain information on projects and tender procurements through below websites:

Bidding Procedures in public procurement in Vietnam

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 basic bidding process may be generalized as follows:

  • Bidding planning: The bidding plan will itemize the names of the bidding packages in a certain project, and information about budget, 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”, who is defined, under the Bidding Law, as the person with the right to decide on the bidding project.
  • Bid inviting: The Bid invitation 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.
  • Bid preparing: Bidders have at least 15 days (for domestic bidding) or 30 days (for international bidding) to prepare and submit their bids. This deadline is called “bid closing time”. Before the bid closing time, bidders may also need to provide the bid guarantee as indicated in the bid documents.
  • 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 evaluating: The procurement entity will review and evaluate the opened bids based on 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 awarding: 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 between the procurement entity and the winning bidder. If parties fail to negotiate and finalize the contract, the procurement entity will invite the next ranking bidder to negotiate and sign the contract.

How to win the public tender in Vietnam

The key to winning government contracts includes a high level of involvement and communication in a long period of time between the foreign supplier, the local distributor or representative, and relevant government entities. Interaction should begin even at the project planning stage.

Companies need to establish rapport and credibility, as well as to advise and educate the procuring entity about the advantages of the product or service, and how they meet the project target and support the project owner to achieve the best performance well before the bid is publicly announced. Facts prove that beside technical and pricing factors, consistence and patience in approaching and communication with procurement entity are essential to be successful.

Practice shows that even after bid awards are made, negotiations on price, specifications, payment terms, and collateral may continue for some time.

Export Support from S-GE

Are you advising Vietnam as a new export market? We at Switzerland Global Enterprise guide Swiss companies on their way into new markets - with concrete information, competent advice and a global network of experts. Contact Angela Di Rosa today to discuss your export project.

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