General frameworki Types of public-private partnership
Under the current PPP regulations, the following seven principal public-private partnership structures are provided:
|BOT||Structure for the construction of infrastructure facility upon the completion of which the investor has the right to commercially operate such facility for a fixed term, and upon the expiry of such term, the investor transfers the facility to the state.*|
|Build–transfer–operate (BTO)||Structure for the construction of an infrastructure facility upon the completion of which the investor transfers such facility to the state and has the right to commercially operate the facility for a fixed term.†|
|Build–transfer (BT)||Structure for the construction of an infrastructure facility whereby the investor transfers such facility to the state and is rewarded by way of land use rights, working headquarters, infrastructure assets, or the right to commercially operate facilities or provide services to implement other projects to recover capital invested in such facility.‡|
|Build–own–operate (BOO)||Structure for the construction of an infrastructure facility upon the completion of which the investor owns and has the right to commercially operate the facility for a fixed term.§|
|Build–transfer–lease (BTL)||Structure for the construction of an infrastructure facility upon the completion of which the investor transfers such facility to the state and has the right to provide services on the basis of operating and exploiting the facility for a fixed term; and the state has the authority to hire such services and shall make payment to the investor periodically on the basis of the volume and quality of services.¶|
|Build–lease–transfer (BLT)||Structure for the construction of an infrastructure facility upon the completion of which the investor has the right to provide services on the basis of operating and exploiting such facility for a fixed term; the state has the right to hire such services and shall make payment to the investor periodically on the basis of the volume and quality of services; and upon the expiry of the term for provision of such services, the investor transfers the facility to the authorised state agency.#|
|Operate–manage (O&M)||Structure for an investor to commercially operate a facility partly or entirely for a fixed term.**|
|Mixed contract||Structure that is a mixture of two or more of the above types for the construction or operation of an infrastructure facility.††|
|Notes * Article 3.3 of Decree 63/2018/ND-CP. † Article 3.4 of Decree 63/2018/ND-CP. ‡ Articles 3.5, 10.4, 15.3, 33, 34, 35 and 36 of Decree 63/2018/ND-CP. § Article 3.6 of Decree 63/2018/ND-CP. ¶ Articles 3.7 and 15.2 of Decree 63/2018/ND-CP. # Articles 3.8 of Decree 63/2018/ND-CP. ** Article 3.9 of Decree 63/2018/ND-CP. †† Article 3.10 of Decree 63/2018/ND-CP|
BOT, BTO and BT are traditional structures in Vietnam. The difference between BOT and BTO is the timing of transfer of the project assets to the state. Once the project assets are transferred to the state, they are classified as 'public assets', which are subject to stricter control or management of the state. In that sense, BOT investors, under which the transfer will be made after the operation, may enjoy relatively more flexible control or management over the project assets than BTO investors. BT is recognised as a PPP structure in Vietnam, though no operational or management risk is passed to the private sector.
BOO, BTL, BLT and O&M structures were newly introduced by Decree 15/2015/ND-CP. BOO was implemented in practice even before being introduced by Decree 15/2015/ND-CP. BTL and BLT are new concepts introduced by Decree 15/2015/ND-CP. The elements that differentiate BTL and BLT from BOT or BTO structures are the payment method to the service of the investors and the payer to the service of investors (i.e., payment by the state on the basis of volume and quality of service including availability payment, not fees from end-users or off-takers).
Decree 63 adopted all types of PPP structures under its predecessor regulation and newly introduced a new concept of mixed contract.ii The authorities
In Vietnam, there is no unified service window for PPPs. A certain ministry, branch or provincial people's committee is authorised to enter into project contracts within the scope of its functions, duties and powers, and to perform rights and obligations as agreed with investors in project contracts, with certain power to delegate such authority. Investors are recommended to consult with experts such as lawyers in the early stage of project preparation for PPPs to identify which state agency will be the key counterpart for discussion and negotiation for the project to facilitate the project establishment. For example, depending on the sectors of PPP projects at the central government level, the following state agencies would be the competent contracting or regulatory agencies:
|Sectors||Competent contracting/regulatory state agency|
|Roads, railways, ports, airports||Ministry of Transportation|
|Water, wastewater||Various governmental agencies, including the Ministry of Natural Resources and Environment|
|Energy||Ministry of Industry and Trade Vietnam Electricity Corporation (EVN)|
|Information communications technology||Ministry of Information and Communications|
The State Steering Committee for PPP is an inter-Ministry specialised governmental entity that facilitates the PPP programme in Vietnam (the Committee). The Committee was established by Decision 1624/QD-TTg in 2012 and strengthened its function by Decision 2048/QD-TTg in 2016, which replaced Decision 1624/QD-TTg. The Vice Prime Minister is the chair of the Committee. The MPI is also the central Ministry among the governmental Ministries to promote PPP regime in Vietnam. The Ministroy of Finance, Ministry of Justice and SBV also play important roles in the formation of PPP projects.iii General requirements for PPP contracts
A project must satisfy all the following conditions to be eligible for making an investment policy decision in the PPP investment form:
- a conformity with development master plans for the industries and sectors and socio-economic developmental plan as approved by the competent authorities;
- being in one of the following investment sectors:
- power plants and power transmission lines;
- public lighting systems; clean water supply systems; water drainage systems; waste water and waste collection and treatment systems; parks; housing and yards for parking cars, vehicles, machinery and equipment; and cemeteries;
- headquarters or offices of state agencies; official residential housing; social housing; resettlement housing;
- health; education, training and vocational training; culture; sport; tourism; science and technology, hydrometeorology; information technology application;
- commercial infrastructure; infrastructure of urban zones, economic zones, industrial zones, industrial clusters, and centralised information technology zones; high-tech technical infrastructure; and incubation establishments, technical establishments, and common working areas supporting small and medium-sized enterprises;
- agriculture and rural development; development services for connecting production with processing and sale of agricultural products; and
- other sectors as decided by the Prime Minister of the government;
- not overlapping with other projects for which an investment policy decision or investment decision was made;
- being capable of capital recovery for the investor;
- conforming with the capability of balancing the state portion for participating in a PPP project; and
- having an environmental impact assessment report as prescribed by the law on protection of the environment.
There is no pre-fixed limitation for the term of the project, and it will be agreed among the parties in the project contract considering the sector, size, characteristics and type of project. The overall outline of the procedure for solicited PPP projects is as follows:
- formulation and evaluation of the pre-feasibility study report, issuance of the investment policy decision and the announcement of the project;
- formulation, evaluation and approval of the feasibility study report;
- procurement for selection of investor;
- negotiation, establishment of the project company (if any) and signing of the project contract; and
- implementation of the project, accounting finalisation and transfer of the facility.
Within seven business days after the approval of a project proposal, the announcement of the project will be made on the national bidding network system in accordance with the Law on Bidding.
The authorities to 'evaluate' feasibility study reports are (1) the State Evaluation Committee for national important projects; and for projects using offical development assistance (ODA) capital and concessional loan capital of foreign donors as the state capital contribution portion in the sectors of national defence and security, and religion; (2) ministers, heads of ministerial equivalent agencies and chairmen of provincial people's committees assigning their PPP co-ordinating for projects other than those prescribed in (1). The authorities to 'approve' feasibility study reports are: (1) the Prime Minister for national important projects; and for projects using ODA and concessional loan capital of foreign donors as the state capital contribution portion in the sectors of national defence and security, and religion; and (2) ministers, heads of ministerial equivalent agencies and government agencies, and chairmen of provincial people's committees for projects other than those stipulated in (1).
Bidding and award procedurei Expressions of interest
Based on the approved feasibility study report for a PPP project, pre-qualification shall be conducted before preparing the plan for selection of investors to identify investors with sufficient capacity and experience to satisfy the project requirements and to invite them to participate in open bidding. Within three business days from the publication of the notice of invitation of pre-qualification applications on the national bidding network system or in the bidding newspaper, pre-qualification invitation documents must be issued. The application period is at least 30 days from the pre-qualification invitation. If investors wish to clarify pre-qualification invitation documents, they can send a written request to the inviting party until five business days prior to the bid closing date. Pre-qualification is conducted in accordance with the assessment criteria set out in the pre-qualification invitation documents. Investors will be required to prove financial-commercial capacity and ability to raise funds, implement the project and experience in similar projects, declare the preliminary method for implementing the project and commit to implementing it, and declare any dispute or litigation arising out of current or earlier contracts.ii Requests for proposals and unsolicited proposals
The selection of investors is basically made through international open bidding. Domestic open bidding is only allowed: where participation of foreign investors is restricted for the investment sectors by international treaties or laws of Vietnam; where foreign investors did not participate in or pass international pre-qualification; in Group C PPP projects; or in certain small-scale investment projects using land. Invitation of bidding will be sent to the investors who passed pre-qualification. Bidding procedures for Group C PPP projects and projects using land are provided separately from bidding procedures for other PPP projects. By the bidding application closing date, bidders need to provide bidding deposits, the amount of which is between 0.5 per cent and 1.5 per cent of the proposed total invested capital.
Direct appointment of the investor (without bidding procedure) is allowed only in quite limited circumstances, that is, if:
- only one investor registers and satisfies the requirements set out in the pre-qualification invitation documents or only one investor passes the pre-qualification;
- only one investor has the capacity to implement the project because of intellectual property, commercial secrets, technology or arranging capital funding; or
- an investor proposing a PPP project (i.e., an investor of an unsolicited proposal project, which is further discussed below) satisfies the requirements for project implementation with the highest feasibility and efficiency, considering that:
- the investor has a feasibility study report that has been approved already;
- the service prices proposed by the investor, amounts of economic assistance by the government or social benefits are reasonable; and
- there is a necessity for national security.
Unsolicited proposals of PPP projects from investors are possible in Vietnam. If the investor is a state-owned enterprise, it must form a consortium with another enterprise to propose the project. Under unsolicited projects, investors need to prepare the pre-feasibility report and the feasibility study report mentioned in the overall outline of the procedure for solicited PPP projects in Section III.iii (bullet points (a) and (b)), by their own expenses. If the feasibility study report is approved, such investor is entitled to preferential treatment (5 per cent) in the financial–commercial assessment process of the bidding.iii Evaluation and grant
The evaluation process consists of assessment of technical proposals and assessment of commercial–financial proposals. Through these assessments, investors who satisfied the requirements will be ranked in the list. The investor ranked first will be invited to negotiate an investment (preliminary) agreement, which is not a PPP contract itself, but rather a preliminary agreement on the draft PPP contract. If preliminary negotiations are unsuccessful, the next ranking bidder will be invited to negotiate the same.
Once the investment (preliminary) agreement is concluded, if necessary, the investor will proceed to the process of establishment of the project company in accordance with the general procedure provided by enterprises law. Under the new legal framework, the investor is no longer required to obtain an investment registration certificate for a PPP project.
After the project company is established, the investor may either sign the project contract then assign the rights and obligations of the investor under the project contract to the project company; or together with the project company to sign the project contract. Guarantee for contract performance must be provided prior to the date on which the PPP contract takes effect. An amount of a contract performance guarantee is stipulated in the bid invitation documents at a level between 1 per cent and 3 per cent of the total investment capital of the project.
Procedures for Group C PPP projects and projects using land are provided separately from procedures for other PPP projects.