Circular No. 02/2011/TT-BXD dated February 22, 2011 of the Ministry of Construction guiding the determination and publication of construction price index

CIRCULAR

GUIDING THE DETERMINATION AND PUBLICATION OF CONSTRUCTION PRICE INDEX

Pursuant to the Law on Construction No.16/2003/QH11 dated 26/11/2003;

Pursuant to the Law Amending, Supplementing a number of Articles of the Laws relating to basic construction investment No.38/2009/QH12 dated 19/6/2009;

Pursuant to the Decree No.17/2008/ND-CP dated 04/02/2008 of the Government stipulating the functions, tasks, powers and organizational structure of the Ministry of Construction;

Pursuant to the Decree No.112/2009/ND-CP dated 14/12/2009 of the Governmenton management of work construction investment expenditures,

The Ministry of Construction guides the determination and publication of construction price index as follows:

Chapter I

GENERAL PROVISION

Article 1. Scope of governing and subjects of application

This Circular guides the determination and publication of construction price index to:

a) Make and adjust the total investment rate, work construction estimates, bid packages estimates and bidding price, price of construction contract and conversion of work construction investment cost;

b) Develop and publish the construction price index periodically in the areas of provinces, cities under the central government;

c) Manage work construction investment cost.

2. Subjects of application:

a) The organizations and individuals relating to the management of work construction investment cost in the projects using 30% of state funds or more;

b) To encourage organizations and individuals relating to the management of work construction investment cost using less than 30% of state funds and other funding sources applied upon guidance in this Circular.

Article 2. Interpretation of terms

In this Circular, the below terms are construed as follows:

1.Work construction price indexmeans the norm reflecting the volatility degree of the price of work construction by time.

2.Selectedrepresentative worksto determine the construction price indexmean the works which are built newly with use performance in accordance with the classification of works, built following the process of popular construction technology and use of the kinds of common building materials.

3.Types of construction works published price indexmean a collection of construction works that are classified according to current regulations.

4.Original timemeans the time that is selected to be the original for comparison.

5.Comparison timemeans the time that needs to determine the construction price index compared to the original one.

6.The price index of construction partmeans the norm reflecting the volatility degree of part of the construction cost of the work by time.

7.The equipment price indexmeans the norm reflecting the volatility degree of part of work’s equipment cost by time.

8.Price index of part of the other costsmeans the norm reflecting the volatility degree of a number of costs such as project management, consulting and other expenses of the work by time.

9.Price index of work building materialsmeans the norm reflecting the volatility degree of part of the building materials cost in the work construction estimates by time.

10. Price index of work construction workersmeansthe norm reflecting the volatility degree of the manpower costs in the work construction estimates by time.

11.Price index of work constructionmachinesmeans the norm reflecting the volatility degree of part of the cost of machines for work construction in the work construction estimates by time.

12.Price index by type of building materialsmeans the norm reflecting the price volatility degree of each type of building material by time.

13.Price index by type of construction manpowermeans the norm reflecting the price volatility degree of each type of constructionmanpower by time.

14.Price index by group of construction machinesmeans the norm reflecting the volatility degree ofmachines price by time of the types of machines included in the group of machines for construction.

Article 3. Classification of construction price index

1. The construction price index is defined according to works, type of construction work, including:

a) Work construction price index.

b) The price index according to the cost structure includes:

- The price index of construction;

- Price index of the device;

- Price index of the other costs.

c) The price index according to the cost factors includes:

- Price index of work building materials;

- Price index of work construction manpower;

- Price index of work construction machines.

d) The price index by input factors, including:

- Index by type of major building materials;

- Index by type of major construction manpower;

- Index by group of major construction machines.

2. For the specific construction works, the calculation of all or some of the price indexes referred to in clause 1 of this Article depends on purposes, specific requirements in the management of cost and work construction investment period.

Article 4. Principles for determining the construction price index

The determination of the construction price index must meet the following principles:

1. The determination of construction price index must reflect objectively and in accordance with fluctuations of price on the construction market in the localities.

2. Determination and publication of the construction price index must be promptly, in accordance with provisions on management of work construction investment costs.

3. When determining the construction price index by type of work for publication, the list and number of certain representative works for calculations must be selected.

4. Construction price index calculated averagely in the period selected, excluding some costs on compensation, assistance and resettlement, interest during the construction and initial working capital for manufacture, business. Unit of construction price index is percentage (%).

5. Cost structure used to calculate the construction price index must consist with the cost structure in accordance with provisions on the management of work construction investment cost. These cost structures must be synthesized from the statistics data and used in the fixed period of maximum to 5 years.

Article 5. Management of determination and publication of construction price index

1. Provincial-level Departments of Construction shall organize the data collection, calculation, and periodical publication of construction price index as the basis for the establishment and management of costs of the construction works in their areas.

2. For the works which have not included in the list of construction price index published by the Ministry of Construction or the provinces and cities under central government, the investors determine the price index for the works and decide the application. As for the construction price index used to adjust the construction contract price, it must have the agreement of the local Department of Construction before applying.

3. For construction works upon the line passing through the region to be of many provinces and cities under central government, investors determine the price index for the works and decide the application after have the agreement of the Ministry of Construction.

Article 6. The funding for organization to implement the determination and publication of the construction price index

1. Funding for data collection, calculation of determination and publication of the construction price index on the region of the provinces and cities under central government shall be balanced and allocated from the annual budget of the locality.

Based on price index number which should be published, the number of published times during the year, the Departments of Construction make cost estimates to report to the Provincial-level People’s Committees for consideration and allocation of funds for implementation.

2. Where investors organize by themselves to determine the construction price index for the application, the cost for implementing this work is included in other expense item in the total investment of the project.

Chapter II

METHOD OF DETERMINATION OF CONSTRUCTION PRICE INDEX

Article 7. Time of calculation

1. Time chosen to calculate the construction price index for publication:

a) The original time identified is the year 2006.

b) The comparison time is the month, quarter and year of publication compared to the original one.

2. If the determination of the construction price index to establish and manage the construction investment cost for the project is implemented, the investor must be based on progress and conditions of implementation of the works for choosing the original time, comparison time.

Article 8. Determination order and publication of the construction price index

The determination and publication of the work construction price index is conducted upon the following orders:

Step 1: making a list of types of works, selection of input cost factors.

Step 2: collection and handling of data and calculated data.

Step 3: determination of the price index of work construction includes: determining the cost structure, calculating the price index according the cost structure, the cost factors, and price indexes for each type of input factor.

Step 4: publication of construction price index.

Article 9. Making list of works, selection of input cost factors

1. The choice of the number and list of the works according to type of work for publication is based on the management requirements, regulations on project management, management of work construction investment cost, regulations on classification and work level.

2. When determining the construction cost index for the type of work, it must choose, make a list of works representing such type of works.

The number of works representing the type of work is determined depending on specific conditions of each locality, but not less than three works.

3. In case a specific work is determined construction price index, the work is the representative work.

4. The representative input cost factors are the costs of materials, manpower, and major construction machines for the work or type of work.

The choice of materials, manpower, and major construction machine to calculate the construction price index is determined according to the principle of cost for such materials, manpower; major machines for construction must obtain a major proportion of the cost of materials, manpower, and machine for construction of the work respectively.

Article 10. Collection and processing of data, calculated data

1. Requirements for data, figures collection to determine the cost structure:

a) Data on the cost of work construction investment such as the total investment, work construction estimate and settlement of invested capital for the completed works (if any) which have been approved, including details of cost items;

b) The regimes, policies and regulations on management of work construction investment costs and use of manpower, materials, machinery and construction equipment and other concerned costs at the time of calculation.

2. The request for information on the market price of the input factors:

a) Prices of building materials are determined on the basis of market provided by the function organizations, the manufacturers’ quotes, and price information of the providers. List of building materials which are included to calculate the price index of construction must be unified in types, specifications and labeling;

b) Price of construction manpower is determined on the basis of guiding criteria for determining the market wage of manpower or publication of the provinces in each period;

c) The price of machine for construction is determined by the method of determining machine price and construction equipment guided by the Ministry of Construction or the price list of machine announced by the provinces in each period. List of machines and construction equipment included in to calculate the price index of construction must be agreed on type, capacity, and origin.

3. Handling of data to calculate construction price index:

a) For data and figures to determine the cost structure:

- The handling of the collected data and figures includes the review, inspection and data, figure correction, and cost estimate structure. Data on the structure of cost estimates need to be converted into estimate structure defined at the original time;

- The data on total investment, estimate of work construction and settlement of invested capital for the completed works (if any) must be converted into terms of cost at the original time.

b) For information on prices of input factors: collected data, figures on prices of input factors need to be tested, reviewed, and corrected specifically:

- Prices of input building materials to be tested the appropriateness of the types, specifications and labeling;

- The price of input manpower to be checked in conformity with the type of workers, workers’ levels of implementing the jobs;

- Prices of input machines and construction equipment to be tested in conformity with type, capacity, and origin.

Article 11. Determination of the construction price index

1. The calculation of the construction price index shall comply with the guidance specified in the Appendix attached to this Circular.

2. For the determination of the construction price index according to type of work for publication, it can calculate the construction price index generally applicable to the area of provinces and cities under central authority or calculate the price index of construction for each area of the area and aggregate to set a general construction price index.

The division by area for calculating the construction price index decided by provinces and cities depends on the characteristics of administrative boundaries and characteristics of the construction market at the locality.

Article 12. Publication of the construction price index

1. The construction price indexes published include:

a) Price index of work construction; price index by the cost structure: published quarterly and yearly;

b) The price indexes according to the cost factors; price index of materials, manpower, and group of machines for major construction: published monthly, quarterly and annually.

2. Time of publication:

a) For the construction price index published monthly: the publication is made ​​in the second week of the next month;

b) For the construction price index published quarterly: the publication is made ​​in the second week of the first month of the next quarter;

c) For the construction price index published yearly: the publication is made in​​ the third week of the first month of next year.

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 13. Responsibilities of the Ministry of Construction

1. To Guide the localities to organize the determination and publication of the construction price index in accordance with provisions in this Circular.

2. To publish the construction price index by quarter and year for the construction industry since 2012 as decided by the Prime Minister.

3. To synthesize and store information on the fluctuation of construction price of the provinces and cities under central government, region.

4. To assist the calculation software, information and data on the cost structure of some representative works for the localities’ reference, application when having specific request.

5. To organize the training, professional guidance on calculation of the construction price index at demand.

6. To consider and have consents to the construction price index of construction works along the routes passing through areas of many provinces and cities under central authority identified by the investors.

7. To inspect and supervise the implementation of the provisions of this Circular

Article 14. Responsibilities of the provincial-level People s Committees

1. To direct the implementation of the provisions of this Circular and arrange regular funding source from the budget for the organization to determine and publish the construction price index.

2. To assign the Construction Departments to implement some following tasks:

a) To preside over and coordinate with the related units based on the guidance of this Circular and the fluctuation of construction price of the locality to identify and promptly publish the construction price indexes for use as a basis in the establishment and management of work construction investment costs. Where necessary, it could sign the contract to lease the qualified and experiencing consulting organizations to perform some part or all of the data collection for determining the construction price index. The consulting organization is responsible before law for the truthfulness and objectivity of the data collected.

b) To publish the price indexes of construction in the area since 10/2011;

c) To organize the regular monitoring of information on construction market prices in the locality; update, store and sent to the Ministry of Construction the information on construction market prices in the locality monthly;

d) To consider and consent to the construction price index applied for adjustment of construction contract price held to determined by investors;

e) To report periodically the publication of the construction price index to the Provincial-level People’s Committee and the Construction Ministry for monitoring and inspection.

Article 15. Responsibilities of investors

1. To organize the determination of construction price index prescribed in clause 2, clause 3 Article 5 of this Circular to ensure the objectivity, accuracy, conformity with requirements of management and self-responsible for the application. If insufficient conditions for self-determination of the construction price indexes, may sign the contract to lease the qualified and experiencing consulting organizations to perform. The consulting organization determining construction price index shall be responsible before the investors and the law in ensuring the accuracy and reasonableness of the price indexes of construction determined by their own.

2. To get the consent as prescribed in clause 2, clause 3 of Article 5 of this Circular before applying.

Article 16. Transitional settlement

The Ministry of Construction continues to publicize construction price index for a number of provinces, cities directly under the central government toward 9/2011.

Article 17. Effect

1. This Circular takes effect on April 15, 2011.

2. During the course of implementation, if any problems arise, the organizations, individuals send opinion to the Ministry of Construction for consideration, settlement./.