Contract management for more effective development in Vietnam

 
Managing large civil works contracts can be a challenge.

In Vietnam, while most large infrastructure projects are financed by multilateral and bilateral development partners under the form of Official Development Assistance (ODA), their implementation is contracted out and often delayed by cost overruns and quality concerns.

As such, the Government of Vietnam and development partners are focusing on improving contract management and making contracting processes and systems more transparent for improved infrastructural development.
 
Addressing the disparities between national and international contracting standards is of the utmost importance to making the implementation of donor-funded projects more efficient. In spite of the considerable harmonization achieved to date, there are still some major differences and gaps between the Government’s existing regulations on contract management and FIDIC Conditions of Contract, which reflect international best practices and are used for most ODA-funded, large infrastructure projects.

These disparities, especially those on payment terms, variation order processing, price adjustment, quality control, etc., have caused many complications that affect the timeliness and cost-effectiveness of contract implementation. As such, enforcing  contract conditions that follow international best practices could result in better monetary value and faster implementation for contracts, with other significant benefits including value engineering, sectional completion, dispute resolution, and more.
 
In an effort to promote transparency, fairness, and efficiency in public investment and to accelerate development, the World Bank, the Asian Development Bank (ADB), and the Japan International Cooperation Agency (JICA) have been working with regulators from key ministries and practitioners from project implementing agencies to address the challenges in the implementation of ODA-funded large works contracts and find effective solutions.
 
As part of this effort, the first high-level workshop of its kind brought these actors together in Hanoi, Vietnam, on January 22, 2015 to discuss how to strengthen contract management regulations and practices, and improve the country’s public investment capacity. Over 100 participants attended the workshop to discuss the causes and impacts of these barriers on the cost, quality, and timeliness of infrastructure development in the country.

Finding measures to address the identified challenges on payment and non-payment issues, quality, time and cost controls, as well as quality and completeness of technical specifications and cost estimates was also high on the agenda.
 
This joint initiative has the potential to impact contract management significantly, leading to more customized and harmonized national regulations with FIDIC contract conditions, better training and capacity building for implementing agencies, contractors, and consultants, strengthened contract management practices, and improved compliance to international standards.
 
Other important steps, such as improvements to the Law on Procurement enacted in 2013 and the Law on Construction enacted in 2014 are helping to enhance contract management for improved project delivery. “Our new procurement law has considerably harmonized with good international practices and regulations of large multilateral development agencies,” said Mr. Le Van Tang, Director General of the Public Procurement Agency of the Ministry of Planning and Investment.

Ms. Elmas Arisoy, Practice Manager for the Public Integrity and Openness Department of the World Bank agreed that the “national regulations on specific contractual issues need to be consistent to facilitate implementation.”
 
Beyond harmonizing contracting standards nationally, keeping enforcement in mind is also critical, emphasized Mr. Walter Poick, Director of the Operations Services and Financial Management Department of ADB. Once a contract is signed, its conditions must be respected and implemented; therefore, the quality of contractual documents needs to be ensured.
 
Moving forward, the Bank, the ADB and the JICA are working with the Government of Vietnam on how to further strengthen contract management regulations and practices for ODA-financed projects, including a joint recommendation to the Government on specific measures and actions to be considered and adopted.