Should VEC take responsibility for Posco derogation?

Should VEC take responsibility for Posco derogation?

It’s illegal when main contractors sell all of the package to subcontractors without permission of the investor. In this case, who will take the responsibility?

09:09, 29/11/2018

Dividing the package for retail

Inspectors of the Ministry of Transport reported that Posco Engineering & Construction Co., Ltd (Korea), the main contractor of the Package A5 of the Da Nang-Quang Ngai Expressway didn’t execute the work but sold the whole package to other agencies.

The 139km highway in the central region crossing through Quang Ngai and Quang Nam provinces and Da Nang City was built in four years with a total investment of VNĐ34.5 trillion (US$1.5 billion), sourced from official development aid from the Japan International Co-operation Agency (JICA) and the World Bank (WB).

The state-run Viet Nam Expressway Corporation (VEC) is the investor of the project, an important part of the north-south expressway. It is intended to alleviate traffic on the National Road No 1 and boost economic competitiveness for the central region.

Posco is the contractor of the Package A5 including the road from Km 124+700 to Km 139+204 (Son Tinh, Tu Nghia and Nghia Hanh districts, Quang Ngai Province). The Package is worth VNĐ 1.4 trillion. Posco was committed to seriously follow the contract and guaranteed the quality of the construction.

A 65km Tam Ky-Quang Ngai section was opened to traffic in August last year. The entire road was put into operation on September 2, but after one month, several potholes appeared.

The Ministry of Transport  inspected the project and discovered that Posco divided the package into small parts and sold to other agencies such as Thien An - Vinaconex joint venture, Incico JSC, Cienco8, Cienco1 and other subcontractors.

The inspectors concluded that Posco didn’t perform the contract signed with the investor, but hired subcontractors to operate all sections of Package A5 without the permission of the investor.

Some subcontractors didn’t have capacity and had to stop the work. During the inspection, Posco didn’t report the works of the subcontractors and the contracts signed between them.

 

Does the investor know about the derogation?

Posco has to take the responsibility of the progress and quality of the Package A5, according to lawyer Pham Cao Cuong from Vinam Law Company. 

“Posco violated the law when it hired subcontractors without permission of the investor. Posco is responsible for the quality of the project as well as the subcontractors it hired, according to Article 9, Circular 09/2016/TT-BXD guidance on construction contracts.”

Selecting subcontractors needs the permission of the investor. Contracts signed with subcontractors have to be comprehensive and synchronized with the contract that the contractor signed with the investor.

VEC takes the right and responsibility to select and assess the capacity and profession of the subcontractors. 

In his opinion, Cuong said VEC should know Posco’s derogation because VEC sent the construction supervisors to the project. That’s the reason why VEC should also take the responsibility in this case.

Responsibilities for the bad quality of construction should be given to the investor, project management board, project supervising consultants, main contractor and subcontractors (if any). The detailed rate of responsibility will be identified following the particular derogation of each side.

Inspectors of the Ministry of Construction will examine the project. It’s recommended that the contractor has a duty to repair or pay the fee for the warranty of the project.

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