Selling to the Government in Vietnam

An Expert's View about Government Procurement in Vietnam

Last updated: 4 Mar 2011

The Vietnamese Government is the leading purchaser of goods and services in Vietnam. If provincial and municipal governments and SOE’s are included, the potential for sales to this sector is very large. Bolstering state budgets, Vietnam is the recipient of significant levels of Official Development Assistance (ODA). According to the MPI, multilateral and bilateral donors have pledged approximately $11-12 billion in ODA support to Vietnam for the period 2006-2010. Much of this is in the form of loan aid for infrastructure, which is “untied” according to international donor rules. Infrastructure is the principal development priority, but the government also plans to procure a significant amount of equipment in order to modernize its administrative structure. Key industries include transportation, telecommunications, energy, environmental/water, civil aviation, education and financial services. Vietnam’s record for actually implementing domestic and ODA funded projects has been mixed.

 

Government procurement is regulated by the Law on Tendering and Decree 111/2006/ND-CP dated September 29, 2006, providing guidelines for the implementation of the Law on Tendering and the selection of construction contractors. Government procurement funded by ODA loans and grants is normally governed by regulations on tendering of relevant donors in accordance with loan agreements between the Vietnamese government and donors. Government procurement practices can be characterized as a multi-layered decision-making process, which, despite some recent improvements, often lacks transparency and efficiency. Although the Ministry of Finance allocates funds, various departments within the ministry or agency are involved in determining necessary government expenditures. Procurement can be carried out through sole source (direct procurement), direct competitive quotations, tender (open and limited), and design competition (for architectural and design services). Currently, ministries and agencies have different rules on minimum values for the purchase of material or equipment, which must be subject to competitive bidding. High value or important contracts, such as infrastructure, require bid evaluation and selection and are awarded by the Prime Minister’s office or other competent body, except for World Bank, Asian Development Bank, UNDP, or bilateral official development assistance (ODA) projects. Some solicitations are announced officially in the Vietnamese language newspapers such as Dau Thau, Nhan Dan, Lao Dong and Saigon Giai Phong, and in the English language newspapers Vietnam News and Vietnam Investment Review.

 

The key to winning government contracts includes a high degree of involvement and communication between the foreign supplier, the local distributor or representative, and relevant government entities. Interaction should begin during the project planning stage. In order to secure orders in competitive bidding, it is necessary to establish rapport and credibility, as well as to educate the procuring entity as to how the product or service can support project needs well before the bid is publicly announced. Although the timing for tender opening, bid closing and award notification varies from project to project, preparation of government budgets generally occurs between June and October, with actual purchases often made in December and January. Experienced foreign suppliers caution that even after awards are made, negotiations on price, specifications, payment terms, and collateral may continue for some time. In local government-funded projects, contracts are commonly awarded to those who can offer "appropriate" price, "decent" quality and have “strongest connections” with project developers, and are more frequently awarded as direct contracts rather than open competitive bidding.

 

 

Read the full market research report


Posted: 16 June 2010, last updated 4 March 2011