To meet the demand of the incoming school curriculum reform focusing on competency-based learning in Vietnam, this paper reports on an innovation project on developing secondary mathematics preservice teachers' (PSTs) mathematical literacy and preparing them to teach mathematics contextually. We developed a curriculum and studied the effectiveness of the implementation to a secondary mathematics PST education program that integrates mathematical literacy (ML) in methods courses. The courses offer PSTs opportunities to experience ML as active learners and prepare them to teach ML. In this paper, we discuss the results on a project-based modeling task. The results showed that the PSTs begin to develop an understanding of ML when they engaged with the phases of the modeling cycle at different levels of sophistication. The PSTs did not take advantage of visual representations to support the analysis of the project-based task and to communicate their work. Discussion about the tension between simplifying models and reflecting the real problem and directions for future study are suggested.