In an EPC contract the contractor takes design, procurement and construction as one package and so bears most schedule risk by default; but ‘turnkey’ does not mean the contractor bears every delay. This article separates three cause groups — contractor-caused, owner-caused, and concurrent — and the different legal consequences of each under Vietnamese law.
Allocating liability: the critical path and the event record
Allocation starts from the EPC contract and Construction Law 50/2014/QH13 (as amended by Law 62/2020/QH14): the contractor bears delays within its scope and risks — labour shortages, weak subcontractors, late procurement. The owner bears delays from late site handover, design/scope changes, slow approvals or late payment that stalls the works; these events generate an extension of time (EOT) for the contractor. In FIDIC practice in Vietnam, what decides the issue is not the parties’ narratives but the updated critical-path programme and a real-time event log — the side that kept no records usually loses the allocation argument.
Concurrent delay and liquidated damages
Where the parties’ delays overlap (concurrent delay), the common EPC approach gives the contractor an EOT matching the owner-caused portion but no prolongation costs for the overlapping period, unless the contract says otherwise. Liquidated damages run only on the net contractor-responsible days after deducting the EOT. Legally, if the contract is commercial in nature, a breach penalty is capped at 8% of the breached obligation’s value under Article 301 of Commercial Law 36/2005/QH11; parties usually structure the LDs as pre-agreed compensation under Civil Code 91/2015/QH13 and state expressly whether they replace actual damages, to avoid stacking disputes.
Frequently asked questions
In an EPC contract dispute, who is liable for delays in progress?
By cause: the EPC contractor answers for delays inside its turnkey scope (design, procurement, construction, subcontractors); the owner answers for delays from site, scope changes, approvals or payment on the owner’s side. Allocation rests on the contract, the critical-path programme and the event record — not on one side’s assertions.
How is liability allocated between the investor and the EPC contractor?
In three steps: (1) establish the approved baseline programme and critical path; (2) map each delay event onto the critical path to see which events actually moved the completion date; and (3) match each event to the party controlling its cause under the contract’s risk matrix. An event off the critical path, however real, usually changes no completion date and generates neither an EOT nor damages.
How is it handled if the delay is caused by both sides?
Apply the concurrent-delay principle: for the overlapping period caused by both sides, the contractor receives time but normally no prolongation costs, and the owner may not levy delay damages for that same period. Each side’s separate delay outside the overlap is still treated under that side’s responsibility. The precondition is schedule data good enough to separate the two layers of cause.
How is the penalty for EPC delays calculated?
Liquidated damages follow the contract formula: a percentage of the contract price per day/week of delay, multiplied by the contractor-responsible days after deducting any EOT, and stopped by an aggregate cap (usually an agreed percentage of the contract price). If the penalty regime of Commercial Law 36/2005/QH11 applies, the cap is 8% of the breached obligation’s value under Article 301; the contract should therefore state whether the sum is pre-agreed compensation or a breach penalty, to avoid an unintended cap.
In EPC disputes the winner is rarely the side that is ‘more right’ but the side with the better schedule records. FDI owners and contractors alike should run the contract’s delay-event notice regime on time during construction — a timely notice is worth more than months of later expert argument.
This article has been quality-reviewed by the FLAW AI Legal Council