On 08 April 2026, the Ministry of Construction issued Official Letter No. 5253/BXD-KTQLXD requesting the appraisal of the Draft Decree providing detailed regulations on construction contracts. Attached to this Official Letter is the Draft Decree providing detailed regulations on construction contracts, which was developed based on the Construction Law No. 135/2025/QH15 (the “Draft Decree”) and submitted to the Ministry of Justice for appraisal.

Compared with the provisions of Decree No. 37/2015/ND-CP dated 22 April 2015 and its subsequent amendments and supplements[1] (hereinafter collectively referred to as “Decree 37”), the Draft Decree introduces 9 notable new points, as follows:

1. Draft Decree providing detailed regulations on construction contracts supplements several new forms of contract pricing

• Decree 37 classifies construction contracts primarily based on pricing forms, including lump-sum contracts, fixed unit price contracts, adjustable unit price contracts, time-based contracts, cost-plus-fee contracts, hybrid contracts, and other types of contracts.[2]

• Certain modern types of contracts that are well aligned with practical needs are proposed to be added to the Draft Decree, notably Output‑Based Contracts and Percentage‑Based Contracts.

Accordingly, an Output‑Based Contract is a construction contract under which, at the time of contract execution, the parties agree that the contract price shall be determined based on specific requirements regarding the quantity and quality of the output products; the contract payment value shall be based on the results of contract performance as accepted in terms of the quality and quantity of the output products and other relevant factors (if any).[3]

A Percentage‑Based Contract is a construction contract under which, at the time of contract execution, the parties agree that the contract price shall be determined as a percentage of the cost or the value of the work to be performed.[4]

Classification of contracts by contract pricing forms as prescribed in the Draft Decree

2. Introduction of additional mechanisms to ensure flexibility for special and urgent projects

• Under Decree 37, the execution of construction contracts is required to comply with general contractual procedures, with flexibility regarding advance payments and performance security granted only for a limited number of emergency works.

Specifically, Clause 2, Article 17 of Decree 37 provides as follows: “Before the execution of a construction contract, the employer must have an appropriate payment security corresponding to the payment schedule agreed upon in the contract. The employer is strictly prohibited from executing a construction contract without having a capital plan in place to make payments in accordance with the payment terms stipulated in the contract, except for construction works executed under emergency orders.”

• This matter has been significantly revised in the Draft Decree through the introduction of an entirely new and flexible mechanism applicable to construction contracts under special public investment projects and emergency or urgent projects and works. Specifically, investors are granted the authority to independently decide on the execution of construction contracts (including framework and partial contracts) and to manage contract performance to ensure timeliness, while remaining fully responsible for their decisions.

Clause 8, Article 4 of the Draft Decree provides as follows: “For construction contracts under special public investment projects; emergency or urgent projects and works, employers are entitled to independently decide on the execution and management of construction contracts to ensure timeliness and flexibility in accordance with the requirements of the project or work (including the execution of framework contracts and partial contracts), ensure progress and quality, and take responsibility for their decisions.”

3. Introduction of a mechanism for internal adjustment of work volumes within joint venture contractors

• Under the current regulations[5], the allocation of work scope among members of a joint venture contractor must strictly comply with the initial joint venture agreement, and there are no detailed guidelines governing the adjustment of work volumes among joint venture members during the contract performance period.
• The Draft Decree supplements provisions on the adjustment of work volumes among members of a joint venture contractor, under the condition that such adjustment does not result in any change to the contract price, with the decision to be made by the employer. Such decision shall be based on the consensus of the joint venture members, the capacity and experience of each member, and must ensure safety, quality, efficiency, timeline, and progress in the performance of the contract[6].

This mechanism is prescribed to ensure flexibility in the coordination and mutual support among joint venture members throughout the performance period of the construction contract.

4. Addressing legal gaps concerning the recovery of performance security in the current Decree providing detailed regulations on construction contracts

While Decree 37 merely sets out the general principle that a contractor shall not be entitled to the return of the performance security if it refuses to perform the contract after it has taken effect or commits other breaches as stipulated in the contract[7], the Draft Decree introduces a highly significant new sanction. Specifically, a contractor shall not be entitled to the return of the performance security where it causes delay due to its own fault and refuses to extend the validity of the performance security[8].

In certain main contracts between the employer and the contractor, refusal to extend the validity of the performance guarantee in cases where the contractor is behind schedule is expressly defined as a contractual breach, entitling the employer to demand payment under the performance security from the issuing bank.

However, for contracts that do not expressly contain such provisions, this supplemental regulation provides the employer with a stronger legal position in circumstances where the contractor deliberately delays performance while the performance guarantee is approaching expiry and yet fails to take any action to extend the validity of the performance security.

5. Supplementation of methods for proving adequate financial capacity in contract performance for PPP projects

• Under the provisions of Decree 37, performance security for construction contracts is implemented in the form of a cash deposit, bank guarantee, or similar instruments, at a level ranging from 2% to 10% of the construction contract price. In cases where higher risk prevention is required, the value of the performance security may be increased but shall not exceed 30% of the contract price, and such increase must be approved by the authority competent to decide on the investment.[9]
• The Draft Decree continues to maintain the performance security level at 2% to 10% of the construction contract price, while also introducing additional provisions to ensure consistency with the Law on Investment under the Public–Private Partnership model. Specifically, the contracting authority under a PPP contract may demonstrate financial capacity through credit facility agreements, loan agreements with financial institutions, or other measures for securing payment obligations.[10]

6. Further detailing the operation of the Dispute Adjudication Board / Dispute Resolution Board (DAB/DRB)

• The Dispute Adjudication Board / Dispute Resolution Board (DAB/DRB) is provided for under Decree 37; however, the relevant provisions are limited to fundamental principles only, including the number of members of the DAB/DRB, requirements applicable to its members, and costs related to the DAB/DRB.[11]
• The Draft Decree introduces more detailed provisions on the DAB/DRB in order to align more closely with international practices (such as those under FIDIC). The Draft Decree clearly provides that the parties may establish a DAB/DRB immediately after the execution of the contract, on a standing basis throughout the contract performance period, or only after a dispute has arisen. It also emphasizes that members of the DAB/DRB must ensure objectivity, independence, and the absence of any conflict of interest with the parties.

Specifically, Points a and b, Clause 3, Article 17 of the Draft Decree provide as follows:

“3. The application of the international practice–based dispute resolution model (hereinafter referred to as the Dispute Settlement Board model) as prescribed in Point b, Clause 5, Article 86 of the Construction Law shall be governed as follows:

1. a) The parties shall specifically agree in the contract on the timing for establishing the Dispute Settlement Board (which may be established immediately after the execution of the contract, operate on a standing basis during the contract performance period, or be established after the occurrence of a dispute); the number, criteria, qualifications, and experience of the members of the Dispute Settlement Board in accordance with the requirements of the contract and the nature and scope of the works under the construction contract; the binding nature of dispute adjudication decisions or recommendations; the procedures for selecting members of the Dispute Settlement Board; and the procedures and subsequent steps to be taken where a party disagrees with a decision or recommendation on dispute adjudication;
2. b) Members of the Dispute Settlement Board selected must ensure objectivity, independence, and the absence of any conflict of interest with the parties.”

Comparison of Regulations on the Dispute Settlement Board under Decree No. 37 and the Draft Decree

7. Tightening regulations on the use of subcontractors in construction contracts under public investment projects and PPP projects

• Under Decree 37, only a general principle is prescribed whereby the main contractor or general contractor is prohibited from subcontracting the “entire scope of works” under the contract to subcontractors.[12]

• The Draft Decree introduces more stringent regulations applicable to public investment projects and PPP projects. Specifically, in addition to the prohibition on subcontracting the entire scope of works, the main contractor is not permitted to subcontract the principal works of the contract that were not identified in the bidding dossier or proposal dossier. Furthermore, the appointment of subcontractors by the employer is subject to stricter constraints, including the requirement that such appointment must not result in any change to the contract price agreed with the main contractor and must ensure efficiency and avoidance of waste.[13]

8. Adjustment of time limits for the submission of claims and responses to claims

• Pursuant to Clauses 3 and 4, Article 44 of Decree 37, the time limit for the parties to issue a notice of claim is within fifty‑six (56) days from the date on which an issue arises as a result of one party’s performance of the contract being inconsistent with the agreed contractual terms. The party receiving the claim is entitled to a period of up to twenty‑eight (28) days to provide grounds and supporting evidence in response to such claim and to determine whether the claim is acceptable.
• Corresponding provisions are also set out in Clause 4, Article 21 of the Draft Decree; however, the limitation on the time period for the claiming party to issue a notice of claim to the other party has been abolished. In addition, for public investment projects and PPP projects, the time limit for the party receiving the claim to respond (either accepting or rejecting the claim, with reasons to be clearly stated in the event of rejection) is prescribed as seven (07) days from the date of receipt of the claim. Specifically, Clause 4, Article 21 of the Draft Decree provides as follows:

Article 21. Claims During the Performance of Construction Contracts

…
4. In addition to the provisions of Clauses 1, 2, and 3 of this Article, with respect to construction contracts under public investment projects and PPP projects, within seven (07) days from the date of receipt of a claim, the party receiving the claim shall respond in writing to the claiming party, clearly stating whether it accepts or rejects the claim; in the event of rejection, the reasons for such rejection must be clearly specified.

Comparison of claim handling time limits under Decree No. 37 and the Draft Decree (applicable to public investment projects and PPP projects)

9. Expansion and flexibilization of the data sources used as the basis for price adjustment

Pursuant to Point a, Clause 3, Article 38 of Decree No. 37,  it is stipulated that: “Methods for adjusting construction contract prices include the direct offset method and the adjustment by price adjustment formula as prescribed at Point b of this Clause. The application of a price adjustment method must be appropriate to the nature of the works, the type of contract price, and the payment currency, and must be agreed upon by the parties in the contract. The price index used for adjusting construction contract prices by the adjustment formula prescribed at Point b, Clause 3 of this Article shall be the construction price index.”

=> Accordingly, under the current regulations, the price index used for adjusting construction contract prices by an adjustment formula is strictly limited to the “construction price index.”

• Under the Draft Decree, this matter is regulated more flexibly by allowing the employer to refer to price sources and price indices issued by the Ministry of Finance or other competent authorities or organizations in cases where the price data or construction price indices published by the Ministry of Construction or provincial‑level People’s Committees are unavailable or inappropriate. In particular, with respect to contract cost items originating from foreign sources, the parties may use price data and price indices issued or published by the competent authorities or organizations at the place where such costs arise.

• Specifically, Points e and g, Clause 2, Article 24 of the Draft Decree provide as follows:

“Article 24. Adjustment of Unit Prices and Construction Contract Prices
e) The use of adjustment formulas, database sources, price information, and input price indices for adjusting unit prices and contract prices must be appropriate to the content and nature of the contract works and must be agreed upon by the parties in the contract.
g) The employer shall consider and decide on the use of database sources, price information, and construction price indices published by the Ministry of Construction or provincial‑level People’s Committees, where appropriate, for adjusting unit prices and contract prices. In cases where the database sources, price information, and construction price indices published by the Ministry of Construction or provincial‑level People’s Committees are inappropriate or unavailable, the employer shall organize the determination of prices and construction price indices in accordance with the laws on construction investment cost management, or may refer to price sources and price indices issued or published by the Ministry of Finance or other competent authorities or organizations.

• For contract cost items originating from foreign sources, database sources, price information, and price indices issued or published by the competent authorities or organizations at the place where such costs arise may be used.”

Managed by

Tran Pham Hoang Tung I Partner Phone: (84) 901 334 192 Email: tung.tran@cnccounsel.com

Nguyen Thi Nhu Ngoc I Senior Associate Phone: (84) 986 435 462 Email: ngoc.nguyen@cnccounsel.com

Contact Us

For further information, please contact:

CNC Vietnam Law Firm

Address: The Rise Building, 2A1 Nguyen Thi Minh Khai, Sai Gon Ward, Ho Chi Minh City, Vietnam

Phone: (84) 28-6276 9900 

Hotline: (84) 916-545-618 

Email: contact@cnccounsel.com 

Website: cnccounsel

We would be delighted to welcome you at CNC’s office, where you’ll have the opportunity to consult with the lawyer best suited to your circumstances. Of course, if you are unable to meet in person, simply email us via contact@cnccounsel.com or call us via (+84-28) 6276 9900.

It would be a pleasure for CNC’s lawyers to help you build a solid legal foundation, thus ensuring the success and sustainable development of your project!

Disclaimers:

This article has been prepared and published for the purpose of introducing or informing our Clients and potential clients on information pertaining to legal issues, opinions and/or developments in Vietnam. Information presented in this article does not constitute legal advice of any form and may be adjusted without advance notice.

——————————————-

[1] Decree No. 50/2021/ND-CP dated 01 April 2021 and Decree No. 35/2023/ND-CP dated 20 June 2023;

[2] Clause 2, Article 3 of Decree 37;

[3] Point e, Clause 2, Article 6 of the Draft Decree;

[4] Point g, Clause 2, Article 6 of the Draft Decree;

[5] Clause 1 Article 4 of Decree No. 37/2015;

[6] Clause 5 Article 23 of the Draft Decree;

[7] Clause 5, Article 16 of Decree No. 37/2015;

[8] Point g, Clause 2, Article 13 of the Draft Decree;

[9] Clauses 3 and 4, Article 16 of Decree No. 37;

[10] Point d, Clause 2, Article 13 of the Draft Decree;

[11] Clauses 2 and 3, Article 45 of Decree No. 37;

[12] Point đ, Clause 1, Article 47 of Decree No. 37;

[13] Point c, Clause 1 and Point d, Clause 2, Article 19 of the Draft Decree;