CIRCULAR

GUIDING THE FORMULATION AND MANAGEMENT OF WORK CONSTRUCTION INVESTMENT EXPENDITURES

Pursuant to the Government’s Decree No. 36/ 2003/ND-CP of April 4, 2003, defining the functions, tasks, powers and organizational structure of the Construction Ministry;

Pursuant to the Government’s Decree No. 99/ 2007/ND-CP of June 13, 2007, on management of work construction investment expenditures;

The Construction Ministry concretely guides the formulation and management of work construction investment expenditures as follows:

I. GENERAL PROVISIONS ON FORMULATION AND MANAGEMENT OF WORK CONSTRUCTION INVESTMENT EXPENDITURES

1. Work construction investment expenditures means all necessary expenses for constructing new works or repairing, renovating or expanding construction works.

Work construction investment expenditures arc manifested through the criteria of total investment capital at the stage of formulation of a work construction investment project, work construction cost estimate at the stage of execution of a work construction investment project, and value of investment capital payment and settlement upon the completion of construction and commissioning of the work.

2. Work construction investment expenditures are formulated for each specific work as appropriate to the current stage of work construction investment, engineering steps and the State’s regulations.

3. The formulation and management of work construction investment expenditures must ensure investment objectives and efficiency as well as feasibility of work construction investment projects and be based on correct, adequate and reasonable calculations suitable to the actual conditions and objective requirements of the market mechanism.

4. Work construction investors shall bear overall responsibility for management of work construction investment expenditures from the stage of project preparation to the completion and commissioning of works.

5. This Circular provides for the formulation and management of work construction investment expenditures applicable to projects funded with state capital, including state budget capital, official development assistance (ODA), state development investment credit capital, the State-guaranteed credit capital and other investment capital of the Slate. For projects funded with capital of other sources, investors shall decide on the application of the provisions of this Circular.

For ODA projects, if a treaty signed by a competent agency or organization of the Socialist Republic of Vietnam contains provisions on management of work construction investment expenditures different from those of this Circular, the provisions of that treaty prevail.

II. TOTAL INVESTMENT CAPITAL AMOUNTS OF PROJECTS AND WORK CONSTRUCTION COST ESTIMATES

1. Total investment capital amounts of investment projects on construction of works

1.1. Contents of total investment capital amounts of investment projects on construction of works

Total investment capital amount of a work construction investment project (below referred to as total investment capital amount) means all estimated work construction investment expenses stated in the investment decision and serving as a basis for the investor to plan and manage capital in the course of making work construction investment.

Total investment capital amount shall be calculated and determined at the stage of formulation of a work construction investment project according to the project’s contents and basic design. For a project for which only the econo-technical report is required, the total investment capital amount shall be determined according to the construction drawing design.

Total investment capital amount comprises: construction expenses, equipment expenses: ground clearance compensation and resettlement expenses; project management expenses; construction investment consultancy expenses; other expenses and contingency expenses.

1.1.1. Construction expenses include: expenses for building of works and work items; expenses for destruction and dismantlement of old architectural objects; expenses for construction ground leveling and fill-up; expenses for building of makeshift and auxiliary structures in service of construction, and makeshift houses in construction sites for accommodation and construction management.

1.1.2. Equipment expenses include: expenses for procurement of technological equipment (including non-standard equipment which need to be produced or processed), expenses for training and technology transfer; expenses for equipment installation, testing and adjustment; expenses for transportation and insurance of equipment: taxes and related charges.

1.1.3. Expenses for ground clearance compensation and resettlement include: expenses for compensation for houses, architectural objects and crops on land...; expenses for resettlement related to compensation for ground clearance for projects; expenses for organization of ground clearance compensation; land use expenses during the time of construction, and expenses for investment in technical infrastructure.

1.1.4. Project management expenses are those for performance of project management tasks from the stage of project preparation and execution to the completion, takeover test, handover and commissioning of works, including;

- Expenses for elaboration of investment reports, formulation of in vestment projects or econo-technical reports;

- Expenses for performing ground clearance compensation and settlement work under the responsibility of investors;

- Expenses for organization of architectural design contests:

- Expenses for appraisal of investment projects, econo-technical reports and total investment capital amounts; expenses for verification of technical designs, construction drawing designs and work construction cost estimates;

- Expenses for selection of contractors in construction activities;

- Expenses for management of quality, quantity, progress and work construction costs;

- Expenses for assurance of safety and environmental sanitation of works;

- Expenses for formulation of construction norms and unit prices of works;

- Expenses for inspection of material quality and expertise of work quality at the request of investors;

- Expenses for inspection and certification of quality standard conformity of works;

- Expenses for contract performance test, payment and settlement; work construction investment capital payment and settlement;

- Expenses for takeover test and handover of works;

- Expenses for construction commencement and inauguration ceremonies, and publicity work;

- Expenses for performance of other management activities.

When investors lack grounds for determining project management expenses (they are unable to determine total investment capital amounts of projects t but need to make project preparations, they shall make and submit estimates of expenses for this activity to investment deciders for approval, serving as a basis for working out capital plans and organizing the performance of this activity. These expenses will be included in project management expenditures in total investment capital amounts.

1.1.5. Construction investment consultancy expenses include:

- Expenses for construction survey;

- Expenses for elaboration of investment reports (if any), formulation of projects or elaboration of econo-technical reports;

- Expenses for architectural design contests;

- Expenses for verification of technical designs, construction design drawings and work construction cost estimates;

- Expenses for compilation of dossiers of request, dossiers of invitation to prequalification, dossiers of invitation to bids, and expenses for analysis and assessment of dossiers of proposal, dossiers of prequalification participation and bidding dossiers for selecting consultancy contractors, construction contractors, material and equipment provision contractors and construction general contractors;

- Expenses for supervision of construction survey, construction, equipment installment;

- Expenses for elaboration of environmental impact assessment reports;

- Expenses for formulation of work construction norms and unit prices;

- Expenses for management of construction investment costs: total investment capital amounts, construction cost estimates and norms, work construction unit prices, contracts...

- Expenses for project management consultancy;

- Expenses for quality inspection of materials and quality expertise of works at the request of investors;

- Expenses for inspection and certification of quality standard conformity of works;

- Expenses for conversion of work construction investment capital for projects with an execution duration of more than 3 years;

- Expenses for performing other consultancy activities.

1.1.6. Other expenses are necessary expenses not included in above construction expenses, equipment expenses, ground clearance compensation and resettlement expenses, project management expenses and construction investment consultancy expenses, including:

- Expenses for verification of total investment capital amounts;

- Expenses for sweeping of bombs, mines and explosive materials;

- Expenses for work insurance;

- Expenses for transportation of construction equipment and workers to construction sites;

- Expenses for international quality registry and observation of deformation of works;

- Expenses for assurance of traffic safety in the course of work construction;

- Expenses for audit, verification and approval of investment capital settlement;

- Fees and charges as prescribed;

- Expenses for scientific and technological research related to projects; initial working capital amounts for investment projects on construction of works for business purposes, loan interests during the time of construction; expenses for load and non-load trial operation under the technological process before the handover, less the value of recovered products;

- Other expenses.

Some other project expenses, which are not subject to any regulations or cannot be promptly calculated may be estimated for inclusion in total investment capital amounts.

1.1.7. Contingency expenses include those for work volumes which, upon the project formulation, are unforeseeable and those for inflation during the time of project execution.

For projects with an execution duration of up to 2 years, contingency expenses are equal to 10% of the total of construction expenses, ground clearance compensation and resettlement expenses, project management expenses, construction investment consultancy expenses and other expenses.

For projects with an execution duration of more than 2 years, contingency expenses shall be determined based on the following two factors:

- Contingency expenses for the factor of arising work volume, which are equal to 5% of the total of construction expenses, ground clearance compensation and resettlement expenses, project management expenses, construction investment consultancy expenses and other expenses.

- Contingency expenses for the factor of inflation shall be calculated on the basis of the execution duration of projects and the construction price index for each type of work in each construction site.

The construction price index used for calculating contingency expenses for the inflation factor is the average of those of the last three or more years, taking into account possible fluctuations of costs and prices in the region and the world. The duration for calculating contingency expenses for the inflation factor is the execution duration of a work construction investment project.

1.2. Method of determining total investment capital amounts

Total investment capital amounts are determined by the methods defined in Clause 1, Article 5 of the Government’s Decree No. 99/2007/ND-CP of June 13, 2007, on management of work construction investment expenditures, and the guidance in Appendix 1 to this Circular.

2. Cost estimates for construction of works

2.1. Contents of cost estimates for construction of works

Cost estimates for construction of works (below referred to as cost estimates of works) shall be determined for every construction work or work item.

The cost estimate of a work covers construction expenses, equipment expenses, project management expenses, construction investment consultancy expenses, other expenses and contingency expenses of the work.

Cost estimates of works shall be formulated under the guidance in Appendix 2 to this Circular.

2.2. Method of formulating cost estimates of works

2.2.1. Construction expenses:

Construction expenses in cost estimates of works shall be projected for works and work items, auxiliary works and make-shift works in service of construction or parts, to-be-performed jobs or tasks of works and work items. Construction expenses shall be determined by estimation. For auxiliary works and make-shift works in service of construction or simple and common works, construction expenses may be estimated on the basis of the construction expense proportion in the ratio of investment capital for work construction or expense norms in percentage (%) (below referred to as percentage norms).

Estimates of expenses for construction of works and work items shall be formulated under the guidance in Appendix 2 to this Circular.

If construction expenses are calculated for each part to-be-performed job or task of a work or work item, the construction expense in the cost estimate of the work or work item is the total of expenses for each part or to-be-performed job or task.

Estimates of construction expenses cover direct expenses, general expenses, pre-determined taxable income, value-added tax and expenses for make-shift houses in construction sites for accommodation and construction management.

2.2.1.1. Direct expenses:

Direct expenses include expenses for materials (including materials provided by investors), expenses for labor, expenses for use of construction machines and other direct charges.

a/ Expenses for materials, labor and construction machines in direct expenses shall be determined by any of the following methods:

- On the basis of volume and consolidated construction unit price.

- On the basis of volume and consolidated construction unit price.

- Combination of the above two methods.

a. 1. Determination of material, labor and construction machines expenses on the basis of volume and consolidated general construction unit prices.

a. 1.1. Determination of volume:

The volume of construction activities is determined based on the technical design drawing or the working drawing design or to-be-performed jobs of a work or work item and sum up from a group of construction and installation activities in order to form a structural unit or part of the work.

a. 1.2. Determination of consolidated construction unit price;

The consolidated construction unit price shall be formulated corresponding to the list and contents of volumes of construction activities specified at Item a. 1.1 above. The consolidated construction unit price-is formulated on the basis of detailed construction unit prices. The consolidated construction unit price may comprise only material expenses, labor expenses and construction machine expenses or include also all other direct expenses, general expenses and pre-determined taxable income. The method of formulating consolidated unit prices comply with the guidance in Appendix 4 to this Circular.

Detailed construction unit prices used for determining consolidated construction unit prices are determined according to Item a.2.2 below.

a.2. Determination of material, labor and construction machine expenses on the basis of volume and detailed construction unit price

a.2.1. Determination of volume:

The volume of construction activities is determined based on the technical design drawing or the working drawing design or to-be-performed jobs of a work or work item according to the list and contents of construction activities in the detailed construction unit price.

a.2.2. Determination of detailed construction unit price:

A detailed construction unit price is formulated under the guidance in Appendix 4 to this Circular and covers material, labor and construction machine expenses determined on the basis of necessary consumption norms and corresponding material, labor and construction machine prices. A detailed construction unit price may cover only material expenses, labor expenses and construction machine expenses or include also all other direct expenses, general expenses and pre-determined taxable income.

- Material prices are prices of materials transported to construction sites, which are determined appropriate to works and their construction locations. Material prices must be reasonable and accordant with market prices in localities where works are constructed; determined on the basis of price quotations of producers, price information of suppliers or prices already applied to other works subject to the same quality standards or prices announced by localities; and be competitive. If materials are not available on the market or are produced by contractors themselves at the request of investors, material prices must be reasonably set on the condition that they satisfy category, quality, quantity and supply schedule requirements, and are competitive.

Upon formulation of work construction unit prices, it is necessary to cheek the compatibility between prices and categories of materials used in construction of works according to their designs.

- Labor prices must be accurately and adequately inclusive of wages and wage-based allowances (including wage supports) on the basis of the minimum wage level announced by a competent state agency in order to ensure that laborers’ wages are based on common market labor prices in each locality for each category of laborers, specific working conditions of works, and investors’ capital source and financial capability to pay wages.

- Construction machine prices (including machine rent rates) shall be calculated under the Construction Ministry’s guidance on the method of determining construction machine and equipment shift prices applicable to construction works or on the basis of construction machine and equipment price tables announced by localities.

b/ Other direct expenses are expenses for necessary jobs in direct service of work construction, the volumes of which cannot be determined at the designing stage, such as movement of the labor force within construction sites and assurance of labor safety, protection of working environment and surrounding environment, water pumping, mud dredging, tests of materials, etc.

Other direct expenses are equal to 1.5% of total material, labor and construction machine expenses. Particularly for construction activities in road tunnels, hydropower tunnels or mining pits, other direct expenses (including also expenses for operation and regular repair of water supply and drainage, ventilation and electricity supply systems for in-tunnel construction) are equal to 6.5% of total material, labor and construction machine expenses.

If other direct expenses calculated in the prescribed percentage arc unreasonable, that percentage shall be considered and adjusted to suit practical conditions.

2.2.1.2. General expenses:

General expenses include enterprise management expenses, expenses for production management in construction sites, expenses for workers, expenses for construction in construction sites and some other expenses. General expenses shall be calculated in a percentage (%) of direct expenses or labor expenses in cost estimates as prescribed for each type of work.

Each work item of a work of a given type shall be considered an independent work entitled to the set percentage of general expenses applicable to such type of work.

2.2.1.3. Pre-determined taxable income:

Pre-determined taxable income shall be calculated in a percentage (%) of direct expenses and general expenses prescribed for each type of work.

Norms of general expenses and pre-determined taxable income count with the guidance in Table 2.4, Appendix 2 of this Circular.

2.2.1.4. Value-added tax:

Value-added tax on construction activities complies with current regulations.

2.2.1.5. Expenses for make-shift houses in construction sites for accommodation and construction management:

Expenses for building make-shift houses in construction sites for accommodation and construction management are equal to 2% of the total of direct expenses, general expenses and pre-determined taxable income for works arranged in lines outside urban centers and residential areas, such as power transmission lines, post and communication lines, roads, canals and ditches, pipelines, other works constructed in lines, or equal to 1% of the total of direct expenses, general expenses and pre-determined taxable income for other works.

For other special cases (for example, big and complicated works, works on islands, etc.), if expenses for make-shift houses in construction sites for accommodation and construction management calculated in the above percentage are unreasonable, investors shall base themselves on practical conditions to make appropriate estimates of these expenses and bear responsibility for their decisions.

In case of bidding, these expenses must be included in bid package prices and bids, and paid according to prices of signed contracts.

Work construction contractors may use these expenses to build new houses or rent houses in construction sites or rent cars to transport staffs and workers, depending on specific conditions of works.

2.2.2. Equipment expenses

Equipment expenses in cost estimates of works include expenses for procurement of technological equipment (including non-standard technological equipment that need to be manufactured or processed); training and technology transfer expenses; equipment installation, test and adjustment expenses.

Equipment procurement expenses comprise purchase prices (inclusive of designing and manufacture supervision expenses), expenses for transportation of equipment from ports or purchasing places to works, expenses for storage in warehouses or storing yards or keeping of containers in Vietnamese ports (for imported equipment), expenses for equipment preservation or maintenance in warehouses in construction sites, taxes and insurance premiums for equipment of works.

Equipment procurement expenses shall be determined by cither of the following methods:

- For equipment the prices of which can be determined, these expenses may be calculated based on the quantity and category of each type of equipment or the whole technological chain and the price per ton, per unit or per complete equipment chain.

- For equipment the prices of which cannot be determined yet. these expenses may be temporarily calculated according to price quotations of suppliers, manufacturers or market prices of similar equipment at the time of calculation or executed works having similar equipment.

For non-standard technological equipment that need to be manufactured or processed, these expenses shall be determined on the basis of the quantity of equipment to be manufactured or processed and the manufacturing or processing price per ton (or per unit of calculation) suitable to the nature and type of equipment under manufacture or processing contracts already signed or according to product processing prices advised by manufacturers selected by investors or manufacturing or processing prices of similar equipment of constructed works.

Training and technology transfer expenses shall be estimated, depending on specific requirements of each work.

Equipment installation, test and adjustment expenses shall be estimated like construction expenses.

If equipment is selected through bidding, equipment expenses include winning bids and expenses stated in contracts for the aforesaid contents.

Equipment expenses of works shall be formulated under the guidance in Table 2.5 in Appendix 2 to this Circular.

2.2.3. Project management expenses

Project management expenses in cost estimates of works include necessary expenses for investors to organize project management as specified in Item 1.1.4, Part II of this Circular.

Project management expenses may be determined according to the percentage norms announced by the Construction Ministry or estimated.

2.2.4. Construction investment consultancy expenses

Construction investment consultancy expenses in cost estimates of works include expenses specified in Item 1.1.5, Part II of this Circular. For a project involving many works, expenses for elaboration of the investment report, formulation of the project or elaboration of the econo-technical report are not included in work construction investment consultancy expenses in cost estimates of the works.

Construction investment consultancy expenses shall be determined according to the percentage norms announced by the Construction Ministry or estimated.

2.2.5. Other expenses

Other expenses in cost estimates of works include expenses specified in Item 1.1.6, Part II of this Circular and are determined in a percentage norm (%) or estimated. For a project involving many works, expenses for verification of total investment capital amount: expenses for scientific and technological research related to the project; initial working capital, for investment projects on construction of works for business purpose; loan interests for the construction duration; expenses for non-load and load trial operation according to the technological process before handover (exclusive of the value of recovered products) and charges and fees, are not counted as other expenses of cost estimates of works.

For some specialized construction works involving special expenses and ODA-funded works, apart from the expenses specified in Items 2.2.3,2.2.4 and 2.2.5 above, any other related expenses may also be added. Investors shall decide on these expenses and take responsibility for their decisions.

If works of a project require hiring of foreign consultants, consultancy expenses shall be estimated according to current regulations and requirements for use of consultants for works or the value of the signed consultancy contract before being included in cost estimates.

Some other expenses, which are not yet governed by any regulations or cannot be immediately calculated, may be temporarily calculated and included in cost estimates of works for the purpose of projecting operating funds.

2.6. Contingency expenses

Contingency expenses are those projected for arising work volumes and for offsetting inflation during the time of work construction.

For works with a construction duration of up to 2 years, contingency expenses are equal to 10% of the total of construction expenses, equipment expenses, project management expenses, construction investment consultancy expenses and other expenses.

For works with a construction duration of more than 2 years, contingency expenses shall be determined based on the following two factors:

- Contingency expenses for the factor of arising work volume, which are equal to 5% of the total of construction expenses, equipment expenses, project management expenses, construction investment consultancy expenses and other expenses.

- Contingency expenses for the factor of inflation, which shall be calculated on the basis of the construction price index for each type of work in each region and construction duration.

The duration used for calculating contingency expenses for the inflation factor is the duration of construction of works according to approved work construction schedules.

For a project involving many works, investor(s) may determine its total cost estimate to serve the management of project expenditures. The total cost estimate of a project shall be determined by summing up cost estimates of works in the project and some construction investment consultancy expenses and other expenses not yet included in cost estimates of the project’s works.

III. MANAGEMENT OF WORK CONSTRUCTION INVESTMENT EXPENDITURES

1. Management of total investment capital amounts and cost estimates for work construction

1.1. Management of total investment capital amounts

1.1.1. When formulating work construction investment projects or elaborating econo-technical reports for cases in which projects are not required to be formulated, investors shall determine total investment capital amounts in order to compute construction investment efficiency. The competence to evaluate and approve total investment capital amounts is defined in Article 6 of the Government’s Decree No. 99/2007/ND-CP of June 13, 2007, on management of work construction investment expenditures (referred to as Decree No. 99/2007/ND-CP for short). Approved total investment capital amounts are maximum expenditures investors may use to invest in work construction and serve as a basis for investors to work out capital plans and manage capital in the course of work construction investment.

1.1.2. Total investment capital amounts may be adjusted in the cases specified in Clause 1; Article 7 of Decree No. 99/2007/ND-CP.

For projects funded with state budget capital, if adjusted total investment capital amounts are not higher than approved total investment capital amounts, even when expenses in total investment capital amounts are restructured to include also contingency expenses, investors shall themselves adjust these expenses and report on adjustment results to investment deciders. Investors shall take responsibility for their decisions. If to be-adjusted total investment capital amounts are higher than approved total investment capital amounts investors shall report such to investment deciders for the latter’s permission before effecting the adjustment.

For works funded with the State-guaranteed credit capital, state development investment credit capital and investment capital of other sources of the State, investors shall themselves decide on adjustment of total investment capital amounts and take responsibility for their decisions.

Differences between adjusted total investment capital amounts and approved ones must be evaluated according to the provisions of Article 6 of Decree No. 99/2007/ND-CP.

1.1.3. Project management expenses shall be determined by investors for performance of project management jobs. For small and simple projects each capitalized at less than VND 1 billion, if investors do not set up project management units but use their professional units in managing the projects, they shall use the project management funding source to finance project management activities and give overtime pays to part-time project management staff according to current regulations.

For projects applying the mode of engineering, procurement and construction (EPC general contractor), general contractors may enjoy part of project management expenses corresponding to project management jobs they perform. Project management expenses enjoyed by general contractors are agreed upon by the two sides and stated in contracts.

If project management units are capable of performing some construction investment consultancy jobs, they may enjoy expenses for performance of these jobs.

When project management consultants are hired, hiring expenses shall be estimated on the basis of contents and volumes of management jobs to be performed by hired consultants and policies and entitlements under regulations. The hire of foreign consultants must comply with the Government’s regulations.

1.2. Management of cost estimates of works

1.2.1. Before being approved, cost estimates of works must be verified. Cost estimates of works and work items must include all expenses as specified. Investors shall organize the verification of cost estimates of works under Clause 1, Article 10 of Decree No. 99/2007/ND-CP.

1.2.2. Investors that are incapable of verification may hire capable and experienced organizations or individuals to verify cost estimates of works. Organizations or individuals that verify cost estimates of works shall take responsibility before law and investors for verification results. Expenses for verification of cost estimates of works arc decided by investors.

1.2.3. Investors shall approve and take responsibility before law for the approval of cost estimates of works after they are verified, and use these cost estimates as a basis for determining bid package prices and construction costs or for negotiating contracts with and making payments to contractors in case of contractor appointment.

1.2.4. Cost estimates of works are adjusted in the cases specified in Clause 1, Article 11 of Decree No. 99/2007/ND-CP.

Investors shall organize the verification and approval of adjusted cost estimates.

2. Management of construction norms, work construction prices and construction price indices

2.1. Management of construction norms

2.1.1. Construction norms consist of econo-technical norms and percentage norms defined in Article 12 of Decree No. 99/2007/ND-CP.

2.1.2. The Construction Ministry shall announce investment capital ratios and construction norms, including the norm of work construction cost estimate (construction section, survey section and installation section), the norm of cost estimate for repair in work construction, the norm of materials in construction, the norm of project management expenses, the norm of construction investment consultancy expenses, and other construction norms.

2.1.3. Ministries and provincial-level People’s Committees shall base themselves on the method of formulating norms guided in Appendix 3 to this Circular to organize the formulation and promulgation of norms for their own particular construction activities, which are not yet included in the system of construction norms promulgated by the Construction Ministry.

2.1.4. For construction norms in the promulgated system of construction norms, which, however, are not compatible with construction measures and conditions or technical requirements of works, investors shall adjust or supplement them as appropriate.

2.1.5. For construction norms not yet included in the promulgated system of construction norms specified in Items 2.1.2 and 2.1.3 above, investors shall base themselves on technical requirements, construction conditions and the method of formulating norms specified in Appendix 3 to this Circular to organize the formulation of those norms or apply similar construction norms already used in other works.

In case of use of new construction norms not yet included in the promulgated system of construction norms as a basis for formulating unit prices for payment for bid packages funded with the state budget and applying the mode of contractor appointment, investors shall report such use to investment deciders for consideration and decision. Particularly for construction works under projects in which investment has been decided by the Prime Minister, ministers of line management ministries or presidents of provincial-level People’s Committees shall consider and decide on the use of such construction norms.

2.1.6. Investors shall themselves organize or hire capable and experienced organizations to guide the formulation or adjustment of construction norms according to Items 2.1.4 and 2.1.5 above. Consultancy organizations shall take responsibility for the reasonability and accuracy of norms they formulate.

2.1.7. Investors shall decide on the application of promulgated or adjusted construction norms to the formulation and management of work construction investment expenditures.

2.1.8. Every year, ministries and provincial-level People’s Committees shall send construction norms already promulgated in the year to the Construction Ministry for monitoring and management.

2.2. Management of work construction prices

2.2.1. Investors shall base themselves on the nature and particular conditions of works, the norm system specified in Item 2.1, Part III above and the method of formulating work construction unit prices under the guidance in Appendix 4 to this Circular to formulate and decide on the use of unit prices of works for making cost estimates and managing work construction investment expenditures.

2.2.2. For ODA projects that need to employ foreign laborers and use imported materials and construction equipment and meet other particular requirements, expenses for such laborers, materials and equipment must be additionally included in construction unit prices in accordance with practical conditions and particular characteristics of works.

2.2.3. Work construction investors may hire capable and experienced professional consultancy organizations or individuals to perform all or some of jobs related to the formulation of work construction unit prices. Consultancy organizations or individuals shall take responsibility before law and investors for the reasonability and accuracy of work construction unit prices they formulate.

2.2.4. Provincial-level People’s Committees shall direct provincial-level Construction Services in basing themselves on the guidance of this Circular and practical conditions of their localities to promulgate systems of construction unit prices, construction machine and equipment working shift prices, building material prices, etc.. for reference in the process of determining work construction prices.

2.3. Management of construction price indices

2.3.1. Construction price indices include: price index for a group or a type of construction works; price index according to the expenditure structure; price index according to elements of materials, labor and construction machines. Construction price indices constitute a basis for determining total investment capital amounts of work construction investment projects, work construction cost estimates, bid package prices and payment prices under construction contracts.

2.3.2. The Construction Ministry shall promulgate the method of formulating construction price indices and periodically announce construction price indices for investors’ reference and application. Investors and contractors may also refer to and apply construction price indices announced by capable and experienced consultancy organizations.

2.2.3. Investors shall base themselves on the trend of price increase or decrease and particular characteristics of works to decide on appropriate construction price indices.

IV. ORGANIZATION OF IMPLEMENTATION

1. The transitional management of work construction investment expenditures complies with the provisions of Article 36 of Decree No. 99/2007/ND-CP.

2. The Construction Ministry shall promulgate the system of construction norms. Norms promulgated by ministries; construction unit prices, construction machine and equipment working shift prices and building material prices promulgated by localities before the effective date of Decree No. 99/2007/ND-CP shall be announced for investors’ reference or application as a basis for determining work construction prices and managing work construction investment expenditures.

3. Ministries and provincial-level People’s Committees shall base themselves on the provisions of Decree No. 99/2007/ND-CP on management of work construction investment expenditures, the guidance in this Circular and other relevant legal documents to organize and guide the formulation and management of investment expenditures for construction of works under their management.

Provincial-level People’s Committees shall guide the application of investment capital ratios, construction norms, work construction unit prices and construction price indices of works funded with local budget capital.

4. This Circular takes effect 15 days after its publication in “CONG BAO” and replaces the Construction Ministry’s Circular No. 04/2005/TT-BXD of April 1, 2005. guiding the formulation and management of expenses for construction of works under investment projects, and previous stipulations contrary to this Circular.

Any problems arising in the course of implementation should be reported to the Construction Ministry for sum-up, study and settlement.

APPENDIX 1

METHODS OF DETERMINING TOTAL INVESTMENT CAPITAL AMOUNTS OF WORK CONSTRUCTION INVESTMENT PROJECTS
(Attached to the Construction Ministry’s Circular No. 05/2007/TT-BXD of July 25, 2007)

Total investment capital amounts of work construction investment projects are calculated and determined at the stage of formulation of work construction investment projects or elaboration of econo-technical reports. Total investment capital amounts shall be determined by one of the following methods:

1. Method of determination according to basic designs of projects

The total investment capital amount of a work construction investment project is calculated according to the following formula:

V = GXD + GGPMB + GQLDA + GTV + GK + GDP (1.1)

In which:

+ V: Total investment capital amount of the work construction investment project.

+ GXD: Construction expenses of the project.

+ GTB: Equipment expenses of the project.

+ GGPMB: Ground clearance compensation and resettlement expenses.

+ GQLDA: Project management expenses.

+ GTV: Construction investment consultancy expenses.

+ GK: Other expenses of the project.

+ GDP: Contingency expenses.

1.1. Determination of construction expenditure of projects

The construction expenditure of a project (GXD) is the total of construction expenses of works and work items under the project and calculated according to the following formula:

GXD + GXDCT1 + GXDCT2 + ... + GXDCTn       (1.2)

In which: n is the number of works and work items under the project.

Construction expenses of a work or work item under the project arc calculated as follows:

      (1.3)

In which:

+ m: Number of principal construction jobs/main structural parts of the work or work item under the project.

+ j: Ordinal number of principal construction job/main structural part of the work or work item under the project (j = 1÷ m).

+ QXDj: Volume of principal construction job No. j/main structural part No. j of the work or work item under the project.

+ Zj: Unit price of principal construction job No. j/unit price of main structural part No. j of the work. The unit price may be a complete detailed construction unit price or complete consolidated construction unit price (consisting of direct expenses, general expenses and pre-determined taxable income), or a complete unit price of each structural part of the work. If Zj is an incomplete construction unit price, expenses for construction of the work or work item are summed up according to Table 2.2 in Appendix 2 to this Circular.

+ GQXDK: Construction expenses for other remaining jobs/other remaining structural parts of the work or work item, which are approximated in a percentage (%) of the total construction expenses of principal construction jobs/total construction expenses of main structural parts of the work or work item.

The percentage (%) of construction expenses of other remaining jobs/other remaining structural parts of the work or work item shall be approximated depending on each type of construction work.

+ TGTGT-XD: Value-added tax rate prescribed for construction activities.

1.2. Determination of equipment expenditure of projects

Depending on specific conditions of a project and available information and data, one of the following methods may be used to determine equipment expenses of the project.

a/ If the project has detailed information and data on the technological chain; quantity, type and value of each equipment or value of the whole technological chain and the price per ton, per unit or the price of the whole technological chain for a given work, the equipment expenditure of the project (GTB) is the total of equipment expenses of works under the project.

Equipment expenses of works are determined by the method of estimation guided in Section 2, Appendix 2 to this Circular.

b/ If the project has information on offer prices of complete equipment and technological chain (inclusive of expenses specified in Item 1.1.2, Part II of this Circular) from equipment manufacturers or suppliers, equipment expenditure (GTB) of the project may be quoted prices or offer prices of such complete equipment.

c/ If the project has only general information or data on the capacity and technical specifications of technological chain and equipment, equipment expenditure may be determined according to the equipment expense ratio for a unit of production or service capacity of works, and the formula (1.10) in Part II of this Appendix.

1.3. Determination of ground clearance compensation and resettlement expenditure

Ground clearance compensation and resettlement expenditure (GGPMB) of a project is determined according to the volume of compensation and resettlement work of the project and the State’s current regulations on compensation and resettlement prices in the locality where works are constructed, which are approved or promulgated by competent authorities.

1.4. Determination of project management expenses, construction investment consultancy expenses and other expenses of projects

Project management expenses (GQLDA), construction investment consultancy expenses (GTV) and other expenses (GK) of a project are determined by the method of estimation or calculated according to percentage norms (%) (see Sections 3, 4 and 5, Appendix 2 of this Circular). Otherwise, the total of these expenses (exclusive of loan interests during the time of project execution and initial working capital) may be approximated at 10÷15% of the total of construction expenditure and equipment expenditure of the project.

Initial working capital (VLD) (for production and business projects) and loan interest during the time of project execution (LVay) (for projects using loan capital) may be determined depending on specific conditions, execution progress and capital distribution plan of each project.

1.5. Determination of contingency expenses of projects

For projects with an execution duration of up to 2 years, contingency expenses are equal to 10% of the total of construction expenses, equipment expenses, ground clearance compensation and resettlement expenses, project management expenses, construction investment consultancy expenses and other expenses.

Contingency expenses are calculated according to the following formula:

GDP = (GXD+GTB+GGPMB+GQLDA+GTV+GK) x 10%                (1.4)

For projects with an execution duration of more than 2 years, contingency expenses are determined based on two factors of arising work volume and inflation and according to the following formula:

GDP = GDP1 + GDP2                                 (1,5)

In which:

+ GDP1: Contingency expenses for arising work volume:

GDP1 = (GXD+ GTB+ GGPMB+ GQLDA + GTV+ GK) x 5%             (1.6)

+ GDP2: Contingency expenses for inflation:

GDP2 = (V’ – LVAY) x (IXDbp ±ΔIXD)                                                (1.7)

In which:

- V’: Total investment capital amount exclusive of contingency expenses.

- IXDbp : Average construction price index.

The average construction price index is equal to the work construction price index of the group of works with the highest expense proportion in the total investment capital amount. The work construction price index of this group of works is the average of work construction price indices of 3 or more years preceding the time of calculation.

- ±ΔIXD: Forecast level of price fluctuation against the calculated average construction price index.

For works with one-step designs, total investment capital amounts for their construction are determined by the method of work construction cost estimation under the guidance in Appendix 2 to this Circular and added with other related expenses not yet included in cost estimates.

2. Method of calculation according to areas or use capacity of works and consolidated construction prices and work construction investment capital ratios

In case the total investment capital amount of a project is determined according to areas or use capacity of works, the construction expenditure ratio (SXD)) and equipment expenditure ratio (STB) or consolidated construction prices may be used for calculating the construction investment expenditure for each work under the project, and the total investment capital amount of the project is determined according to formula (1.1) in Part I above.

The determination of the total investment capital amount is carried out as follows:

2.1. Determination of construction expenditure of projects

The construction expenditure of a project (GXD) is the total of construction expenses of works and work items under the project and determined according to formula (1.2). Construction expenses of works and work items (GXDCT) are determined as follows:

GXDCT = SXD x N + GCT-SXD                               (1.9)

In which:

+ SXD: Construction expenditure ratio for a unit of production or service capacity or consolidated construction unit price for an area unit of a work or work item under the project.

+ GCT-SXD: Expenses not yet included in the construction expenditure ratio or consolidated construction unit price for an area unit of a work or work item under the project.

+ N: Area or use capacity of a work or work item under the project.

2.2. Determination of equipment expenditure of projects

The equipment expenditure of a project (GTB) is the total of equipment expenses of works under the project. Equipment expenses of a work (GTBCT) are determined according to the following formula:

GTBCT = STB x N + GCT-STB                                (1.10)

In which:

+ STB: Equipment expenditure ratio per unit of production or service capacity or area unit of a work under the project.

+ CPCT-STB: Expenses not yet included in the equipment expenditure ratio of a work under the project.

2.3. Ground clearance compensation and resettlement expenses, project management expenses, project management expenses, construction investment consultancy expenses, other expenses and contingency expenses are determined under the guidance in Sections 1.3, 1.4 and 1.5, Part I of this Appendix.

3. Method of determination according to figures of constructed works with similar econo-technical specifications

Constructed works with similar econo-technical specifications are those of the same type and grade, and furnished with equipment and technological chains of the same size and capacity (for production works).

Depending on the nature and particular characteristics of constructed works with similar econo-technical specifications and the availability of information and figures of these works, one of the following methods may be used to determine the total investment capital amount of the project.

a/ If information and figures on construction investment expenditures of constructed works or work items with similar econo-technical specifications are sufficient, the total investment capital amount is determined according to the following formula:

                            (1.11)

In which:

+ GCTTTi: Construction investment expenditure for similar constructed work or work item No. i of the project (i = 1÷n).

+ Ht: Coefficient for conversion to the time of project formulation.

+ Hkv: Coefficient for conversion to the location of project construction.

+ GCT-CTTTi: Expenses not yet included or already included in the construction investment expenditure of similar constructed work or work item No. i.

b/ If only construction expenses and equipment expenses of constructed works or work items with similar econo-technical specifications can be determined based on their available construction investment expenditure figures and these expenses can be converted to those at the time of project formulation.

Based on determined construction and equipment expenses of a project, ground clearance compensation and resettlement expenses, project management expenses, construction investment consultancy expenses, other expenses and contingency expenses shall be determined under the guidance in Items 1.3, 1.4 and 1.5, Part I of this Appendix.

4. Combined method of determination of total investment capital amounts

For a work construction investment project involving many works, depending on specific conditions of the project and available data, the above methods may be combined to determine the total investment capital amount of the project.

APPENDIX 2

METHOD OF DETERMINATION OF COST ESTIMATES OF WORKS
(Attached to the Construction Ministry’s Circular No. 05/2007/TT-BXD of July 25, 2007)

Cost estimates of works are determined on the basis of technical designs or construction drawing designs. The cost estimate of a work comprises construction expenses (GXD); equipment expenses (GTB): project management expenses (GQLDA); construction investment consultancy expenses (GTV); other expenses (GK) and contingency expenses (GDP).

Formula for determining the cost estimate of a work:

GXDCT = GXD + GTB + GQLDA + GTV + GK + GDP                        (2.1)

The cost estimate of a work shall be summed up according to Table 2.1 of this Appendix.

1. Construction expenses (GXD)

1.1. Expenses for construction of works, work items, parts, jobs or tasks, including direct expenses, general expenses, pie-determined taxable income, value-added tax and expenses for make-shift houses on construction sites for accommodation and construction management are determined according to Table 2.2 of this Appendix.

1.2. If construction expenses are formulated for parts, jobs or tasks, construction expenses in cost estimates of works or work items are calculated according to the following formula:

                                          (2-2)

In which:

+ gi: after-tax construction expenses of part, job or task No. i of a work or work item (i = 1÷ n).

1.3. For auxiliary works and make-shift works in service of construction or simple and ordinary works, construction expenses may be estimated according to the construction expenditure ratio in the work construction investment capital ratio or to a percentage norm.

2. Equipment expenses (GTB)

Equipment expenses, including expenses for procurement of technological equipment (including also non-standard technological equipment that need to be manufactured or processed); expenses for training and technology transfer; and expenses for equipment installation, test and adjustment, are determined according to the following formula:

GTB = GMS + GDT + GLD                             (2.3.)

In which:

+ GMS: expenses for procurement of technological equipment.

+ GDT: expenses for training and technology transfer.

+ GLD: expenses for equipment installation, test and adjustment.

2.1. Expenses for procurement of technological equipment arc calculated according to the following formula:

                                   (2.4)

In which:

+ Qi: weight (ton) or quantity (unit) of equipment (equipment assembly) No. i (i = 1÷n).

+ Mi: price per ton or per unit of equipment (equipment assembly) No. i (i = 1÷n), which is determined according to the following formula:

M = Gg + Cvc + Clk + Cbp + T                                (2.5)

In which:

- G.: price of equipment at the place of purchase (place of production; manufacture or supply of equipment in Vietnam) or price upon arrival at a Vietnamese port (for imported equipment), which is inclusive of designing and manufacture supervision expenses.

Cvc: freight per ton or per unit of equipment (equipment assembly) from the place of purchase or a Vietnamese port to the work.

Clk: expenses for warehouse, storing yard or container storage per ton or per unit of equipment (equipment assembly) in a Vietnamese port for imported equipment.

Cbp: expenses for preservation and maintenance per ton or per unit of equipment (equipment assembly) at the construction site.

T: tax on and insurance cost for equipment (equipment assembly).

+ TiGTGT-TB: value-added tax rate applicable to equipment (equipment assembly) No. i (i = 1÷n).

For equipment the prices of which have not yet been determined, their prices may be temporarily calculated according to price quotations of suppliers, manufacturers or market prices of similar equipment at the time of calculation or of constructed works furnished with similar equipment.

Expenses for non-standard technological equipment that need to be manufactured or processed are determined according to the principle and method defined in Item 2.2.2, Section II of this Circular and comprise the above expenses.

2.2. Expenses for training and technology transfer are calculated by the method of estimation with particular characteristics of each project taken into account.

2.3. Expenses for equipment installation, test and adjustment arc estimated like construction expenses as guided in Item 2.2.1, Part II of this Circular.

Equipment expenses are summed up according to Table 2.5 of this Appendix.

3. Project management expenses (GQLDA)

Project management expenses arc calculated according 10 the following formula

GQLDA = T x (GXDtt + GTBtt)

In which:

+ T: percentage norm (%) for project management expenses.

+ GXDtt: pre-tax construction expenses

+ GTBtt: pre-tax equipment expenses.

4. Construction investment consultancy expenses (GTV)

Construction investment consultancy expenses are calculated according to the following formula:

                   (2.7)

In which:

+ CI: construction investment consultancy expense No. i calculated in a percentage (i = 1÷n).

+ Dj: construction investment consultancy expense No. j calculated by the method of estimation (j= 1÷m).

+ . value-added tax rate currently applicable to construction investment consultancy expense item No. i, calculated according to a percentage norm.

+ : value-added tax rate currently applicable to construction investment consultancy expense item No. j, calculated by the method of estimation.

5. Other expenses (GK)

Other expenses are calculated according to the following formula:

                              (2.8)

In which:

+ Ci: other expense No. i calculated according to a percentage norm (i = 1÷n).

+ Dj: other expense No. j calculated by the method of estimation (j = 1÷m).

+ TiGTGT-K: value-added tax rate currently applicable to other expense item No. i, calculated according to a percentage norm.

+ TjGTGT-K: value-added tax rate currently applicable to other expense item No. j. calculated by the method of estimation.

6. Contingency expenses (GDP)

For works with an execution duration of up to 2 years, contingency expenses are equal to 10%r of the total of construction expenses, equipment expenses, project management expenses, construction investment consultancy expenses and other expenses and calculated according to the following formula:

GDP = 10% x (GXD + GTB + GQLDA + GTV + GK)   (2.9)

For works with an execution duration of more than 2 years, contingency expenses arc determined based on two factors: contingency expenses for arising work volume and contingency expenses for inflation.

Contingency expenses for a work with an execution duration of more than 2 years are calculated according to the following formula:

GDP= GDP1 + GDP2                   (2.10)

In which:

+ GDP1: contingency expenses for arising work volume, which are calculated according to the following formula:

GDP = 5% x (GXD + GTB + GQLDA + GTV + GK)           (2.11)

+ GDP2: contingency expenses for inflation, which are calculated according to the construction price index of each type of construction work, location and construction duration.

Table 2.2. CONSTRUCTION COST ESTIMATE

In which:

+ If material, labor and construction machine expenses are determined according to volume and consolidated construction unit price:

Qj : volume of job group, structural unit or part No. j of a work (j = 1÷n).

Djvl, Djnc, Djm: material, labor and construction machine expenses in the consolidated construction unit price of job group, structural unit or pan No. j of a work.

+ If material, labor and construction machine expenses are determined on the basis of volume and detailed construction unit price:

- Qj: volume of construction job No. j (j = 1÷n).

- Djvl, Djnc, Djm: material, labor and construction machine expenses in the detailed construction unit price of construction job No. j.

Material expenses (Djvl), labor expenses (Djnc) and construction machine expenses (Djm) in detailed and consolidated unit prices shall be calculated and summed up according to Table 2.3 of this Appendix. Work construction unit prices (including detailed and consolidated unit prices) constitute a content of the DOSSIER of Work cost estimates.

+ Knc, Kmtc: labor and construction machine adjustment coefficients (if any).

+ Percentage norms of general expenses and pre-determined taxable income specified in Table 2.4 of this Appendix.

+ G: pre-tax expenses for construction of work, work item, part, job or task.

+ TGTGT-XD: value-added rate prescribed for construction activities.

- GXD. after-tax expenses for construction of work, work item, part, job or task.

+ GXDNT: expenses for building of make-shift houses on the construction site for accommodation and construction management.

+ GXD: after-tax expenses for work, work item, part, job or task and expenses for building of make-shift houses on the construction site for accommodation and construction management.

Table 2.4

NORMS OF GENERAL EXPENSES AND PRE-DETERMINED TAXABLE INCOME

Unit of calculation: %

Notes:

- Pre-determined taxable income is calculated in a percentage (%) of direct expenses and general expenses in construction cost estimates.

- For construction works in mountainous or border areas or islands, the percentage norm of general expenses may be adjusted with a coefficient of between 1.05 and 1.1 as decided by investors depending on specific conditions of works.

APPENDIX 3

METHOD OF FORMULATING WORK CONSTRUCTION NORMS
(Attached to the Construction Ministry’s Circular No. 05/2007/TT-BXD of July 25, 2007)

I. METHOD OF FORMULATING NEW CONSTRUCTION NORMS OF WORKS

New construction norms of a work are formulated in the following order:

Step 1: Drawing up a list of the work’s new construction jobs or structures which are not on the announced list of construction norms.

The list of new construction jobs or structures must clearly state the unit of volume calculation and requirements of construction techniques, conditions and measures of the work.

Step 2: Identifying composition of construction jobs

The composition of construction jobs must clearly state steps to be performed at each stage under the design of the technological chain for construction from commencement to completion, which are suitable to construction conditions and measures and scope of performance of jobs of the work.

Step 3: Calculating and determining consumption of materials, labor and construction machines

A. METHODS OF CALCULATION :

Consumption norms of new construction jobs are calculated by one of the following three methods:

Method 1: Calculation according to technical parameters in the technological chain.

- Material consumption is determined according to the design and work construction conditions and measures or announced material use norms.

- Labor consumption is determined according to the labor use in the technological chain and suitable to work construction conditions and measures, or calculated according to announced labor norms.

- Construction machine consumption is determined according to technical parameters of each machine in the chain or announced construction machine performance norms, taking into account efficiency brought about by the combined use of construction machines in the chain.

Method 2: Calculation according to statistical and analytical figures.

Material, labor and construction machine consumption norms are analyzed, calculated and determined from the following general and statistical figures:

- From consumed quantities of materials, labor and construction machines for performance of a construction volume in one or more than one cycle of an ongoing work.

- From the consumption of materials, labor use and construction machine performance already calculated for similar works.

- From figures announced according to experience of experts or professional organizations.

Method 3: Calculation according to field surveys

To calculate and determine consumption levels according to design documents, field survey figures of works (construction time, location and volume in one or more than one cycle), taking into account announced use norms of materials, labor and machine performance.

- Material consumption is calculated according to field survey figures and compared with technical design, regulations and standards.

- Labor consumption is calculated according to the number of laborers at each stage of the production chain and total number of laborers in the whole chain, and regulations on labor use.

- Construction machine consumption is calculated according to survey figures on performance of each machine and efficiency brought about by the combined use of construction machines in the same chain, and regulations on technical performance of machines.

B. CONTENTS OF CALCULATION OF CONSUMPTION ELEMENTS

B.1. Calculation of material consumption norms The consumption norm of materials necessary for completion of a construction volume or construction structure unit, including also allowable material wastage in the course of construction, covers:

- Principal (main) materials: sand, stone, cement, brick, roofing tile, iron, steel, etc. in jobs of preparing concrete, laying bricks, framing reinforced concrete or prefabricating structures are high-value materials accounting for large proportions in a volume or structure unit. For these materials, consumption norm levels are prescribed in kind and calculated in common units of measurement.

- Other (auxiliary) materials: soap, lubricants, cleaning cloths, etc., which are of small value and hard to be quantified and account for small proportions in a volume or structure unit. For these materials, consumption norm levels are prescribed in percentages of expenses for main materials.

Material consumption norms are determined on the basis of announced material norms or calculated by one of the aforesaid three methods.

B.1. 1. Calculation of consumption of principal materials

The general formula for determining the material consumption norm (VL) in construction norms is as follows:

VL = (QV x Khh +  x KLC) x  x Ktd                  (3.1)

In which:

+ QV: quantity of materials used for each construction job component in the norm (except for recyclable materials), which is calculated by one of the aforesaid three methods.

The quantities of materials constituting products under designs arc determined according to design standards. For example, quantities of macadam, cement and water consumed to make concrete graded according to mortar grade are calculated according to Vietnam construction standards or standards of construction works.

Quantities of materials used in service of construction under designs of construction solutions are determined according to construction techniques and number of recycling times within announced material norms, or calculated in case these materials are subject to no material norms.

+ : quantity of recycled materials (framework, scaffolding, operating bridge, etc.) used for each construction job component in the norm, which is calculated by one of the aforesaid three methods.

+ : coefficient for conversion of the units of calculation for materials according to calculations, construction reality or experience into those in construction norms.

+ Khh: percentage norm of allowable material wastage in construction:

Khh = 1 + Ht/c                     (3.2)

Ht/c: material wastage in construction according to announced material norms, surveys or practical conditions of similar works or experience of experts or professional organizations, for materials not subject to any norms.

Wastage prescribed for loose materials, semi-finished materials (building mortar, concrete mortar) and structural elements (precast piles and beams).

+ KLC: recycling coefficient of materials that need to be recycled prescribed in material use norms. For non-recyclable materials. KLC is 1. For recyclable materials. KLC is smaller than 1.

The recycling coefficient of a recyclable material is calculated according to the following formula:

                  (3.3)

In which:

- h: wastage compensation rate from the second time on.

- n: number of times of use of recyclable materials (n>1).

+ Ktd: time use coefficient depending on work construction progress, which reflects irregular or maximal utilization of materials to complete a construction job according to set schedule. This coefficient is applicable only to recyclable materials, for example: utilization of scaffolding, forms, props, etc.

When a construction solution is used only once or for many times, this coefficient may be added to suit work construction conditions. This coefficient is calculated according to construction progress or solution or experience of concerned professional organizations.

B.1.2. Calculation of consumption of other materials

Consumption of other (auxiliary) materials is subject to prescribed percentages of the total expenses for main materials quantified in construction norms and determined for different kinds of construction jobs according to experience of consultants or norms of similar works.

B.2. Calculation of labor consumption norm

Labor consumption norm in construction norms is determined based on the announced (working) labor norm, or calculated by one of the aforesaid three methods.

- The unit of calculation of the basic labor norm is working hour.

- The unit of calculation of the labor norm in construction norms is workday. The labor consumption level is determined according to the following general formula:

                                        (3.4)

In which:

+ : basic labor norm, which is the consumption level of labor directly used for construction for a unit of calculation of a specific construction job volume or structure.

+ Kcdd: coefficient for conversion of construction norms.

This coefficient is calculated based on construction norms converted from working norms or on experience of experts.

Depending on job groups and single, or mixed type of machine assembly, the value of this coefficient usually varies between 1.05÷1.3 for different construction jobs, technical requirements and specific construction conditions.

+ KVcd: coefficient for conversion of units of calculation from those in construction reality or experience into estimated norms.

+ 1/8: coefficient for conversion of working hour norm into workday norm.

B.3. Calculation of construction machine consumption norm

The construction machine consumption norm in construction norms is determined based on announced technical performance of construction machines or calculated by one of the aforesaid three methods.

The unit of calculation of the basic norm of construction machine performance is machine hour or machine shift.

B.3.1. Calculation of consumption of principal construction machines

The general formula for determining the consumption norm of a construction machine and equipment shift is as follows:

                                    (3.5)

In which:

+ QCM: norm of construction performance of one machine shift determined by one of the aforesaid methods.

+ Kcdd: coefficient for conversion of construction norms.

This coefficient is calculated based on construction norms converted from working norms or on experience of experts.

Depending on job groups and single or mixed type of machine assembly, the value of this coefficient usually varies between 1.05÷1.3 for different construction jobs, technical requirements and specific construction conditions.

+ : coefficient for conversion of units of calculation from those in construction reality or experience into estimated norms.

+ Kcs: performance utilization coefficient, which reflects the utilization of performance of a machine assembly in a combined chain. This coefficient is calculated according to the performance of construction machines in each working step and appropriately adjusted when machines of the poorest performance are used in the chain.

B.3.2. Calculation of consumption of other construction machines and equipment

Consumption of auxiliary construction machines and equipment is subject to norms in percentages of the total expenses for main machines quantified in construction norms and determined for different kinds of construction jobs according to experience of consultants or norms of similar works.

Step 4: Formulation of norm items on the basis of summing up material, labor and construction machine consumptions

To gather norm items on the basis of summing up material, labor and construction consumption breakdowns.

A norm item consists of two parts:

Composition of jobs, which clearly and fully specifies working steps in the order from the initial preparation for to the completion of a construction job or structure, including also specific construction conditions and solutions.

- Table of norms of consumption breakdowns, which clearly states names and describes categories and specifications of principal materials used in a construction job or structure, and other auxiliary materials: kinds of workers: average grade of construction workers; names, types and capacity of principal machines and equipment and some other machines and equipment in the construction technological chain for accomplishment or completion of a construction job or structure.

In the table of norms, the consumption of principal materials is calculated in kind while that of auxiliary materials is calculated in percentages of expenses for principal materials. Labor consumption is calculated in workdays regardless of grades of workers but according to the average grade of construction w orkcrs. The consumption of principal machines and equipment is calculated in number of machine shifts while that of other (auxiliary) machines is calculated in percentages of expenses for principal machines and equipment.

Construction norm items shall be gathered by group or kind of construction jobs or structures and uniformly encoded.

II. ADJUSTMENT OF MATERIAL, LABOR AND CONSTRUCTION MACHINE CONSUMPTION ELEMENTS UPON APPLICATION OF ANNOUNCED CONSTRUCTION NORMS

Upon application of announced construction norms to a work, if some elements remain inappropriate to the provisions of these norms due to construction conditions and solutions and technical requirements of the work, relevant material, labor and construction machine elements should be adjusted to suit the work.

II.1. Grounds for adjustment

- Construction conditions and solutions of works.

- Technical and construction schedule requirements of works.

II.2. Methods of adjustment

11.2.1. Adjustment of material consumption

- For consumption of materials constituting products under designs, designing regulations and standards of works are bases for calculation and adjustment.

- For materials used in construction solutions, elements in announced norms shall be adjusted according to consumption calculations based on designs of construction solutions or experience of experts and professional organizations.

II.2.2. Adjustment of labor consumption

Increase or decrease in the labor element in announced norms and consumption calculations under conditions of construction organization or according to experience of experts and professional organizations.

II.2.3. Adjustment of construction machine consumption

- In case of change due to construction conditions (complex or simple terrains, quick or slow progress of works), calculations for increase or decrease of the norm value shall be made under construction-organizing conditions or according to experience of experts and professional organizations.

- In case of change due to increase or decrease of construction machine capacity, adjustment shall be made on the principle that an increase in capacity leads to a decrease in value and vice versa.

APPENDIX 4

METHOD OF FORMULATION OF WORK CONSTRUCTION UNIT PRICES
(Attached to the Construction Ministry’s Circular No. 05/20077TT-BXD of July 25, 2007)

Work construction unit prices are econo-technical norms, including all direct expenses for materials, labor and construction machines, for completion of a unit of construction or installation job volume or work structure or part.

Work construction unit prices include detailed construction unit prices (below referred to as detailed unit prices) and consolidated construction unit prices (below referred to as consolidated unit prices) of a work.

1. METHOD OF FORMULATING WORK CONSTRUCTION DETAILED UNIT PRICES

1.1. Bases for formulating work construction detailed unit prices:

Bases for formulating detailed unit prices of a work include:

- List of construction jobs for which detailed unit prices need to be formulated;

- Norms of consumption elements of above jobs;

- At-work prices of materials used for calculation of unit prices, which are exclusive of value-added tax;

- Labor price of the work;

- Construction machine and equipment shift price of the work.

1.2. Formulation of work construction detailed unit prices

1.2.1. Determination of material expenses

Material expenses are determined according to the following formula:

                          (4.1)

In which:

+ Di: material quantity No. i (i = 1÷n) calculated for a unit of construction job volume prescribed in work construction norms.

+ :at-work price of material unit No. i (i=1÷n), which is determined as follows:

- Being compatible with standards, category and quality of materials used for the construction work and based on market prices of materials provided by a capable organization, price quotation of the manufacturer and price information supplied by the supplier or prices already applied to other works with similar standards and quality.

- Being equal to original prices plus freight for transportation to the work site and related expenses, for materials unavailable on the market of the work location.

+ KVL: coefficient for calculation of expenses for other materials compared with total expenditure for principal materials prescribed in work construction norms of construction jobs.

1.2.2. Determination of labor expenses

Labor expenses are determined according to the following formula:

NC = B x gNC x (1+f)                            (4.2.a)

In which:

+ B: labor consumption calculated based on the number of workdays of an average grade worker for a unit of construction job volume prescribed in work construction norms.

+ gNC: average unit wage per direct construction workday corresponding to the grade of workers prescribed in work construction norms.

- f: total of stable wage allowances and supplemental wages, which is included in the unit price by the following formula:

f = f1 + f2 + f3                              (4.2.b)

In which:

- f1: total of stable wage allowances.

- f2: some supplemental wage amounts equal to 12% of the basic wage and some expenses payable directly to laborers and equal to 4% of the basic wage.

- f3: coefficient for adjusting labor expenses to make them suitable to the local labor market and characteristics of the work.

1.2.3. Determination of construction machine expenses

                         (4.3)

In which:

+ Mi. machine shift consumption of principal machine or equipment No. i (i=1÷n) per unit of construction job volume prescribed in work construction norms.

+ : estimated machine shift price of principal machine or equipment No. i (i=1÷n) according to the cable of construction machine and equipment shift prices of the work or machine rent rates.

+ : : coefficient for calculating expenses for other machines (if any) compared with total expenses for principal machines and equipment prescribed in work construction norms of construction jobs.

2. METHOD OF FORMULATING CONSOLIDATED UNIT PRICES FOR WORK CONSTRUCTION

2.1. Bases for formulation of consolidated unit prices for work construction

Bases for formulation of the consolidated unit price of a work:

- List of construction jobs, structural units, sections or functional units of a work:

- Detailed unit prices relevant to the list of construction jobs, structural units, sections or functional units of a work.

2.2. Formulation of consolidated unit prices for work construction

2.2.1. Drawing up a list of construction and installation jobs, structural units for which a consolidated unit price needs to be formulated, some major technical specifications, unit of calculation, and steps of those jobs.

2.2.2. Calculating the construction and installation volume (q) of each kind of construction and installation job constituting the consolidated unit price.

2.2.3. Determining expenses for materials (VL), labor (NC) and construction machines (M) corresponding to the construction and installation volume (q) of each kind of construction and installation job constituting the consolidated unit price according to the following formulas:

VL = q x vI;                       NC = q x nc;               M = q x m                 (4.6)

2.2.4. Figuring out results for each expense breakdown in the consolidated construction unit price according to the following formulas:

                                        (4.7)

In which:

- VLi, NCi, Mi: material, labor and construction machine expenses of construction and installation job No. i (i=1÷n) included in the consolidated unit price.

A consolidated unit price may be formulated into a complete one consisting of direct expenses, general expenses and pre-determined taxable income.