PART VII:
Contract
 

Article 30: Conclusion of Contract

(1) Following a decision to award a contract to a successful bidder pursuant to Articles 4 to 12, the parties will enter into a written contract binding on both parties. Prior to signing the contract, the procuring entity or project owner will review whether the successful bidder's qualifications and capacity have not changed since the submission of its bid. Where such qualifications have changed adversely to the extent that they no longer comply with Article 17, the Tender Committee will then decide to award the contract to the next lowest evaluated bidder .

(2) The contract document must be signed by the duly authorized representative of the procuring entity (ministry, equivalent agency or province) and the duly authorized representative of the bidder as follows:

     • In the case of a contract whose value exceeds 10 billion Kip, by the minister or his assignee at the central level.

     • In the case of a contract whose value ranges from 5 to 10 billion Kip, by Vice-Minister or his assignee at the central level; Governor or his assignee at the provincial level.

     • In the case of a contract whose value ranges between 500 million – 5 billion Kip Chief of Cabinet or his assignee at central level; Chief cabinet of provincial cabinet or his assignee.

     • In the case of a contract whose value is less than 500 million Kip, by the procuring entity's Director General or his assignee at central level; Chief of line of provincial department or his assignee.

     • The State Owned Enterprises, Head of enterprise or his assignee.

(3) Where the contract may not be signed by both parties simultaneously:

    • The procuring entity shall send the agreed contract document to the contractor or supplier in two original copies with a letter of acceptance, each copy to be signed by its duly authorized representative together with the date of signature;

     • The letter of acceptance shall indicate the deadline for acceptance which would normally not be more than 30 days from the date of receipt of letter of acceptance by the contractor/supplier;

     • If the contractor or supplier agrees to conclude the contract, they must sign and date the original copies of the contract and the letter of acceptance and return one copy of each to the procuring entity before the expiry of the deadline indicated in the letter of acceptance.

(4) All signed contracts should be registered by the contractor or supplier, in accordance with the Decree No. 52/PM, dated 13 March 1993.
 

Article 31: The Contract Documents

     The contract is a formal document which sets out an agreement between the concerned parties. It must, therefore contain all the terms and conditions of the contract define the rights and obligations of the contracting parties and incorporate any documents necessary for the proper fulfillment of the contract. The contract must be signed and dated and clearly refer to such documents. Where the contracting parties agree to further conditions or where a standard form contract requires further conditions, they shall be referred to as “special” conditions of the contract. Any contract falling within the terms of these rules shall include provisions concerning the following:

(1) The purpose of the contract, which must be clear, precise, lawful and enforceable;

(2) The price, currency, method and term of payment, which should also include provisions relating to the possibility and use of advance payments and the mechanisms relating to retention of monies and performance securities. The price of a contract would normally be based on one of the following:

     • Fixed-price or lump-sum price, which means that the final all-inclusive price is agreed in advance. Payment is made at the end of the contract or at intervals coinciding with the progress in the execution of the works, supply of goods or services.

     • Unit price, which means that the price of particular items (units) of works and goods agreed between the parties based on the estimated quantity of units enumerated in a document known as a “bill of quantities” and that the final price will be the unit price multiplied by the actual quantity of units provided. Payment is made within the agreed time period, usually 45 days following the submission of a payment certificate.

     • Cost-plus-fee, used for services contracts which final price is based on a billing rate per unit of time (hour, day, month) multiplied by the units of time actually spent, together with any reimbursable costs foreseen in the contract. This type of contract may include a “maximum payment” clause with an obligation on the service provider to complete the tasks assigned without exceeding the amount of the agreed maximum payment. Payment of the fee is made at prescribed intervals (for example, weekly or monthly) coinciding with the progress of services following the submission of an invoice detailing the services provided during the relevant period. Payment of the costs will similarly be made upon submission of request for payment which shall include all relevant receipts required by the contract.

     • Provisions relating to the possibility and method of price adjustments must also be included in the contract. These are permitted in the case of works contracts of more than 12 months' duration in relation only to the fluctuating costs of labor or construction materials. Either party may seek a price adjustment and must support the request by documentary evidence of market prices.

Currency of Payment

      The currency of payments to be made based on contracts entered with local individuals or firms will be denominated in Kip, whereas contracts for the procurement of goods or services from overseas or works provided by a foreign individual or firm are governed by Presidential Decree 01/PR of 9 August 2002 on the management of foreign currency and precious metals.

Method of payment

     In the case of contracts for the procurement of goods, works and services where implementation does not exceed 1 (one) year, the price of the contract and currency of payment is fixed and payment is made in the following forms:

     • Contracts for the procurement of goods, including the installation costs, may be paid in a single or several installments which shall be duly stipulated in the contract.

     • Contracts for the procurement of works may be paid in any of the following forms:

• In a lump sum in the case of small works;

• According to certified measured quantities for which unit prices and volume of works are stipulated in the contract; and

• By certified invoices for works that cannot be measured exactly initially such as maintenance, excavation, underground survey, sanitation of canals or stream alignments.

     • Contracts for the procurement of services or experts may be paid in a lump-sum by task or time based inputs, in which case the tasks must be determined as precisely as possible.

Terms of payment

     All payments under contracts are carried out under the following procedures. The tender documents shall clearly specify how the advance payment shall be paid made and recovered from the bidder.

     • Payments for goods procured from local individuals or firms are paid in Kip after due receipt and storage of goods by the procuring entity as evidenced by complete delivery documents.

     • Payments for imported goods requiring overseas transfers are made through the banking system on the basis of internationally recognized letters of credit or other commercially acceptable methods.

     • When advance payments are made partially after a contract signing for works and goods. Such payment will not exceed 15% of the contract value against an irrevocable bank guarantee to be provided by the contractor or supplier for equal value.

     • Advance payment may be paid for no more than 20% of the contract value if the required machinery, equipment and labor to complete the works have been mobilized by the contractor and verified by the procuring entity or its representative. Thereafter, payments are made according to work progress.

    • Payments based on work progress are made when supported by a certified report by the procuring entity in coordination with the works supervising engineer of actual work volume performed.

    • Payment of consultant or expert fees will be specified in each contract and may be based on time based inputs, completion of well defined tasks or in lump sum payments.

(3) Period of performance, place of performance, time and place of delivery. Construction conditions of contracts shall include the following:

     • The time limit for the contract or for the submission of a detailed schedule or program setting out the specific manner in which the contractor proposes to perform the contract and proposed operation.

     • The starting and completion dates, particularly where complex projects are broken down into several stages or periods.

(4) The scope, quantity and quality of the contractual obligations. These consist of:

     • The identification of key elements of the contract, such as the parties, the nature and quantity of works, goods or services concerned, the specifications used and all other elements necessary to complete the contract.

     • Technical specifications must be based on performance requirements. During the bidding procedure, any reference to brand names, catalogue numbers or any other method of specification which results in identification of a supplier is prohibited unless the goods may not be described without recourse to such a specification. If such a specification is used, the reference should be followed by the words “or equivalent” to allow for offers of alternative goods with equivalent security and reliability.

     • Standards of the goods, equipment or materials. These must be defined both in the bidding and contract stages by reference to international standards. Where such international standards do not exist, national standards shall be used. In all cases, the procuring entity or project owner should accept any standards which ensure equivalent or superior quality to the standards mentioned.

     • The responsibilities of the concerned parties.

     • Provisions relating to a guarantee of the quality of workmanship and materials for a stipulated period beyond the completion of the contract and a requirement for the contractor or supplier to make good any defect during the warranty period at his own expense.

     • Provisions relating to the costs of insurance and transportation.

    • Provisions relating to the compensation for the procuring entity or project owner in the event of delays in the completion of works or delivery of goods resulting in extra cost, loss of revenues or deprivation of other benefits to the procuring entity.

     • Lawful requirements relating to the use of local labor and materials.

     • Provisions relating to performance securities to ensure the completion of works or delivery of goods, installation and quality of goods and to protect the procuring entity or project owner against the failure of the contractor or supplier to perform his contractual obligations. These may be in the form of cash deposits for the period of validity of the contract or performance bonds or bank guarantees. Such securities should not be less than 10% of the contract value.

(5) The conditions for any variation of the contract and early termination may include:

     • Details of circumstances under which adjustments may be made to the terms and conditions of the contract, notably the contract price and the mechanism through which adjustments can be made. 

     • A force majeure clause which provides that the failure on the part of the parties to fulfill their contractual obligations will not be considered to be a breach of contract if such failure is due to an unforeseen event. Such a clause should set out the consequences of such an event.

(6) The mechanisms for dispute resolution to regulate events following a breach of contract. This will include:

     • The language of interpretation of the contract. Where more than one language is used, reference must be made to the language version which takes precedence.

     • The governing law and forum of dispute resolution. The governing law shall be the laws of Lao PDR and the forum may be in accordance with Economic Arbitration Decree No. 106/PM dated 15 July 1994 or any other mediation or arbitration selected and agreed by the parties.

     •  A clause requiring the parties to attempt to reach an amicable settlement before turning to the courts or other tribunals.