BASIS OF DEBT RECOVERY FROM CONSTRUCTION CONTRACTS

Disputes between principals and contractors over construction contract payments are a common type of dispute and are currently increasing. To ensure legal rights and interests as well as prevent risks, the parties should know some contents that can serve as a basis for debt recovery from construction contracts as presented in the article below.

1. Bill of Quantities in debt recovery from construction contracts

Construction cost estimate is the necessary cost to construct the work, perform the package, the construction is determined on the basis of the calculated volume from the technical design, construction drawing design, construction requirements of work to be done and construction norms and prices. Contents of a construction cost estimate include costs of construction, equipment, project management, construction investment consultation, other costs and contingencies.

On the other hand, in fact, for large projects, especially projects with foreign elements, BOQ (Bill of Quantities) is often used and acts as a construction estimate. The BOQ is a detailed sheet of jobs, volumes and types of material and is a document used for bidding in the industrial construction industry. BOQ is estimated by the engineers based on the construction drawings and technical requirements of the project.

A construction cost estimate or BOQ that wants to be used must be approved and assessed in accordance with construction law. When a dispute over construction fees, materials or other costs related to a construction contract between the investor and the contractor occurs, the construction cost estimate or the BOQ is one of the most important evidence. to determine the parties’ financial obligations.

2. Construction unit price in debt recovery from construction contracts

The construction unit price is determined on the basis of the market price or construction norm and the price of materials, labor, constructional machines, and other necessary cost factors consistent with the market price level in the area.

The system of construction norms and prices announced by competent state agencies is the basis for investors to use and refer to in determining and managing construction investment costs.

In order to correctly determine the price of construction materials, equipment, labor, … to clarify the financial obligations of the parties, the investor or the contractor should pay special attention to the unit price that has been properly calculated whether it is compatible with the system of construction norms and prices announced by the competent state agency.

>> RIGHTS OF DEBT COLLECTOR https://linconlaw.vn/rights-of-debt-collector/

>> A LAWFUL WILL, HOW TO DETERMINE? https://linconlaw.vn/a-lawful-will-how-to-determine/

3. Terms of payment  

The parties should also pay special attention to the terms of payment in a construction contract regarding the method of payment, time of payment, payment profile and payment conditions, as well as regulations on payment for construction contracts according to law of Vietnam. The payment for a construction contract must be consistent with the type of contract, contract price and conditions in the contract signed by the parties and construction law, specifically:

– For package contracts, payment shall be made according to a percentage of the contract price or the price of the work, work items or volume of work corresponding to the payment period agreed upon by the parties in the contract.

– For fixed unit price-based and adjustable unit price-based contracts, payment shall be made based on actually completed and tested volumes and unit prices or adjusted unit prices as agreed upon in the contracts.

– For time-based contracts, payment of expenses for consultants shall be determined by multiplying the consultants’ salary levels and expenses related to their activities by their actual working time already pre-acceptance tested (on a monthly, weekly, daily or hourly basis).

– For charge-plus cost-based contracts, payment shall be made based on direct expenses for their performance of contractual work and management expenses and profits of the contractor as agreed upon.