When applying to a lump-sum contract, the bid package price used as a basis for consideration for approval for bid winning must include costs for risk factors that may happen during the contract performance and costs of provisions for price slippage.

According to the reflection of Mr. Nguyen Van Duc (Bac Ninh), Clause 1, Article 62 of Decree No. 63/2014/ND-CP dated June 26, 2014, of the Government detailing the implementation of several provisions of the Law on Bidding regarding the selection of contractors, in the bid package price, the investor shall calculate and approve the contingency cost in the bidding package price to organize the bidding.

Accordingly, in the bid package price, the investor has calculated 5% of the costs of provisions (the price of the package is 9.0 billion VND including the provisions of 0.42 billion VND, the contract execution time is 150 days) and when bidding the contractor has allocated this cost of provisions to the bid price and is contracted by the investor according to the winning bid unit price.

Mr. Duc asked, upon settlement for the completed project, how will it be settled in the following cases:

- If the contractor complies with the design, does not adjust or increase additional volume under the signed contract, will he be allowed to settle 5% of the cost of provisions that are already allocated to the bid package price?

- During the implementation process, the project is adjusted, some items are arisen and added to the ongoing bidding package. On that basis, the investor has approved an additional adjustment to the price of the bidding package (including the price of the first approved package and the adjustment, addition occurred) of which 5% of the cost of provisions is calculated on estimates of the new package (the price of the package is 14.2 billion VND including the provisions of 0.655 billion VND).

The price of the second bidding package (with a reduction according to the savings ratio in the bidding) serves as the basis for the investor to sign the contract appendix with the contractor and is the value requested for settlement by the investor.

So, in this case, is it possible to settle 5% of the cost of provisions that have already been allocated to the unit price?

The Ministry of Planning and Investment responded to this issue as follows:

Points a and b, Clause 1, Article 62 of the Law on Bidding No. 43/2013/QH13 stipulate that a lump-sum contract means a contract with a fixed price during the performance for all work contents in the contract.

Payment for a lump-sum contract shall be performed many times during implementation or once upon finishing the contract.

Total amounts paid to a contractor until finishing obligations under a contract shall be equal to the price stated in the contract; when applying to the lump-sum contract, prices of packages as the basis for consideration for recommendation as the winning bidder must include expenses associated with risk elements which may happen during implementation of the contract, reserve expenses associated with slippage in price.

For bidding packages with a short time for contract performance, no risks or price slippage, the provisioning cost is calculated at zero. The bid price must include all costs for risk factors and costs of slippage that may occur during the performance of the contract.

In the case of Mr. Duc, if the construction and installation bidding package applies to the lump-sum contract, the package price used as a basis for consideration for approval as the winning bidder, and the bid price and contract price must comply with the above regulations.