Circular No. 06/2003/TT-BXD dated April 14, 2003 of the Ministry of Construction guiding the estimation and management of expenditures on construction of works with capital of international donors

CIRCULAR

GUIDING THE ESTIMATION AND MANAGEMENT OF EXPENDITURES ON CONSTRUCTION OF WORKS WITH CAPITAL OF INTERNATIONAL DONORS

Pursuant to the Regulation on Management of Investment and Construction, promulgated together with the Government's Decree No.52/1999/ND-CP of July 8, 1999, Decree No.12/2000/ND-CP of May 5, 2000 and Decree No.07/2003/ND-CP of January 30, 2003 amending and supplementing a number of articles of the Regulation on Management of Investment and Construction, promulgated together with Decree No.52/1999/ND-CP of July 8, 1999 and Decree No.12/2000/ND-CP of May 5, 2000;

Pursuant to the Government's Decree No.17/2001/ND-CP of May 4, 2001 promulgating the Regulation on Management and Use of Official Development Assistance Sources;

Pursuant to the Government's Decree No.15/CP of March 4, 1994 defining the functions, tasks, powers and organizational structure of the Ministry of Construction;

In order to uniformly manage the expenditures on construction of works with international donors' capital, the Ministry of Construction hereby guides the principles for estimation and management of expenditures on construction of works as follows:

I. GENERAL PROVISIONS

1. This Circular guides the uniform estimation and management of expenditures on construction of works under construction investment projects with the use of international donors' capital, which are implemented through international bidding in Vietnam.

2. International donors' capital mentioned in this Circular means the capital belonging to the Government's foreign loans and international aids for development investment (including official development assistance (ODA) capital), which shall be uniformly managed according to the State Budget Law.

3. Where the guidances in this Circular are different from the provisions of international treaties, agreements and/or documents which the Government or the State of Vietnam has signed with international donors, the provisions of such international treaties, agreements and/or documents already signed with international donors shall be complied with.

4. The estimation of expenditures on construction of works with the use of international donors' capital, which are subject to international bidding in Vietnam, must comply with the guidances in this Circular in order to manage expenditures on construction of works according to laws.

II. ESTIMATION OF EXPENDITURES ON CONSTRUCTION OF WORKS

1. Total investment amount

The total amount of investment in projects using international donors' capital shall be formed from the source of international donors' capital and the source of domestically mobilized reciprocal capital. The total investment amount shall be calculated and determined in the stage of making the feasibility study reports and inscribed in the project investment decisions.

The use of international donors' capital and domestically mobilized reciprocal capital for work volumes, construction items or bidding packages shall be calculated and specified for each project. The contents, order of approval or adjustment (if any) of the total investment amount of the projects shall comply with the current regulations.

2. The total cost estimates of works

All works built with the use of international donors' capital must be subject to the elaboration of total cost estimates of the works and managed according to the provisions of this Circular.

The total cost-estimate of a work is the total expenditure needed for the construction of the work and shall be calculated in the stage of technical design. The total cost estimate of work covers the expenses for construction and installation, for equipment, expenses for consultancy, expenses for ground clearance, resettlement and rehabilitation, other expenses, taxes and reserve expenditures.

All expenditure items in the total cost estimate of work shall be determined according to the following principles and methods:

2.1. Expenses for construction and installation:

The construction and installation expense in the total cost estimate means the expense for the performance of the entire construction and installation volume of the work. The construction and installation volume of a work shall cover:

- The construction and installation volumes of items, bidding packages performed by mode of international bidding;

- The construction and installation volumes of items, bidding packages performed by mode of selection of domestic constructors;

- Other construction and installation volumes.

2.1.1. For construction and installation volumes performed by mode of international bidding, the construction and installation expenditures shall be determined on the basis of construction and installation volume under the technical designs (or equivalent designs of the donors' countries) and the unit prices of construction and installation under international bidding. The elaboration of international bidding construction and installation unit prices is guided in Section 3 below in cases where the volume cannot be determined specifically by design or jobs with small, separate volumes, the expenditure packages shall be made in lump sum in cost estimates, total cost estimates.

2.1.2. For construction and installation volumes performed through selection of domestic contractors, the construction and installation expenses shall be determined according to the approved technical designs and the capital construction unit prices in localities where the works are constructed.

2.1.3. Other construction and installation expenses: Depending on the specific nature of each work, other construction and installation expenses mean the expenses for works in support and service of construction such as makeshifts, camps, field offices, power and water supply, information, temporary passages in service of construction, laboratories, health stations, the expenses for traffic safety assurance, construction site safety, post-construction ground restoration, removal of construction equipment... shall be determined by method of estimation based on the specific requirements of each work.

Other construction and installation expenses constitute an independent item of the construction and installation expenses or shall be distributed into various construction and installation items and bidding packages.

2.2. Equipment expenses:

Equipment expenses (equipment procured from overseas and domestically) shall be determined according to the quantity of each type of equipment and the value for one ton or the corresponding type of equipment. The equipment value covers the purchase price, expenses for transportation, preservation, taxes, charges, insurance and other expenses (if any).

For non-standard equipment domestically manufactured or processed, the equipment expenses shall be determined on the basis of the quantity of the to be-manufactured, a processed equipment and the production and processing cost for one ton or the corresponding equipment and other expenses as mentioned above. The production and processing costs of non-standard equipment shall be determined under the current regulations.

Where the volumes of equipment for the projects have already been tendered, the equipment expenses shall be the prices for signing contracts and other expenses (if any).

2.3. Consultancy expenses:

The consultancy expenses include the expenses for works performed by foreign and domestic consultants.

For works performed by foreign consultants, the consultancy expenses shall be determined on the basis of independent estimates suitable to the requirements of using consultancy for projects, the guidance in using consultancy of international donors and other regulations of Vietnam. Where the works performed by foreign consultants are tendered, the consultancy expenses shall be determined according to the value of signed consultancy contracts.

For works performed by domestic consultants, the consultancy expenses shall be calculated as equal to 1.2 time of the norm for similar construction and investment consultancy work under the current regulations. For consultancy works without any provisions on expense norms, the Construction Ministry's guidance shall be complied with.

2.4. Expenses for ground clearance, resettlement and rehabilitation:

The ground clearance, resettlement and rehabilitation expenses include compensations for land, crops, architectures, expenses for relocation, ground clearance, resettlement support or investment in construction of resettlement areas, support for construction of technical infrastructure (if any) and restoration of original state.

The above expenses shall be determined on the basis of the current regulations of the State, the provisions of concluded international agreements and other regulations as well as guidance of international donors.

2.5. Other expenses

For other expenses related to the use of capital of international donors such as expenses for compilation of project documents; expenses for appraisal, supplementation and finalization of project documents, expenses for project-preparing boards, payment of loan interests during the construction period, expenses for international auditing, enhancement of institutions, raising of community awareness, insurance premiums, bidding participation guarantee and contract performance charge..., if there have been no regulations of the State on spending norms, they shall be determined according to international practice, regulations and guidance of international donors, or determined by method of elaborating estimates to be submitted to competent persons for approval. Other expenses of works shall be determined under the State's current guidance.

2.6. Taxes, charges:

Including assorted taxes and charges payable under the current regulations of the State, the provisions in concluded international agreements and other regulations as well as guidance of international donors (if any).

2.7. Reserve expenses:

Reserve expenses used for arising work volumes, inflation and other unforeseeable cases during the construction period. The reserve expenses represent 10% of the total expenses in the total cost estimate. For projects with inflation reserve expenses being determined with grounds or calculated in detail, the reserve expense for arising work volume shall be equal to 7%.

3. International bidding construction and installation unit prices

The unit prices for volume of construction and installation performed through international bidding (hereinafter referred to as international bidding construction and installation unit prices) shall include constituents of expense, direct expenses, general expenses and profits of contractors.

The contents and method of determining the constituents of expenses in international bidding construction and installation unit price shall be as follows:

3.1. Direct expenses in the unit price include the expense for materials, labor expense, construction machinery expense.

3.1.1. Materials expense:

The materials expense in the unit price shall be determined on the basis of the consumption of each type of materials and the prices of such corresponding materials.

The consumption of each type of materials shall be based on the current estimated norms. In cases where there have been no regulations or have been regulations on materials consumption level, which, however, is not suitable to the characteristics, aesthetic and technical requirements of the works, it shall be determined on the basis of the specific requirements of the works.

The prices of building materials which are not available on the domestic market and must be imported from regional countries or international donors' countries (if so provided in the international agreement. The domestic construction material prices shall be determined according to the construction materials price notices of the competent authorities in localities where the works are constructed. Types of construction materials which are not mentioned in the price notices shall be determined according to the market prices at the time of forming the unit prices or similar reasonable prices of other completed works. The materials prices do not include value added tax.

3.1.2. Labor expense:

The labor expense in the unit price shall be determined on the basis of labor consumption level and corresponding workday pay.

The labor consumption level means the number of workdays (professional and non-professional), based on the current capital construction estimated norms. For works with such level not yet prescribed or already prescribed but not yet suitable to the characteristics, aesthetic and technical requirements of the works, it shall be determined on the basis of the specific requirements of the works.

The workday pay cover the basic wage, wage allowances, expenses contracted directly to laborers and other particular expenses (if any) shall be determined on the following principle: for works requiring foreign labor, the workday pays shall be determined on the basis of the wage floor of the equivalent labor titles in the region, for works involving domestic labor, the wage shall be determined according to the current regulations.

Where the conditions prescribed in Clause 1 of Article 1 and Article 2 of the Government's Decree No.03/2001/ND-CP of January 11, 2001 amending and supplementing a number of articles of the Government's Decree No.28/CP of March 28, 1997 are met when determining domestic labor's wages, the increase coefficients prescribed in Circular No.04/2003/TT-BLDTBXH of February 17, 2002 of the Ministry of Labor, War Invalids and Social Affairs can be applied.

3.1.3. Expenses for construction machines

The construction machine expense in the unit price shall be determined on the basis of a number of construction machine working shifts and the construction machine working shift price.

The number of construction machine working shifts shall be based on the current estimated norms.

The prices of construction machine working shifts shall be determined according to the current table of estimated prices of machine working shifts and current domestic construction equipment. For special-type construction machines which should be imported in service of the construction of works or not yet included in the current table of estimated prices of machine working shifts and construction equipment, the machine working shift prices shall be formulated by the current method of the State or the application of the shift rent of machine of the same types on the market (if any).

3.2. General expenses:

The general expenses include expenses in service of the contractors' activities in the course of preparing for, implementing and completing the construction of works such as expenses for managerial apparatus, travel means, information and communications, offices and office equipment, expenses in service of operation of the offices and other general expenses. The general expenses shall be determined in percentages of the direct expenses in the construction and installation unit prices according to the current regulations.

3.3. Profits of contractors:

The contractors' profits shall be determined as equal to 6% of the direct expenses and general expenses.

4. International bidding package estimates

4.1. Based on the project bidding plans, the bidding package estimates (consultancy, equipment, construction and installation...) shall be elaborated to determine the bidding packages or serve as basis for evaluation of bid dossiers. Where the bidding package estimates are elaborated when the total cost estimates are not yet approved, the elaboration of total work cost estimates must still comply with the provisions in Section 2 of Part II above.

4.2. Depending on the bidding requirements and scopes, the construction and installation bidding package estimates shall cover only construction and installation expenses or cover both the construction and installation expenses and other expenses distributed to each bidding package. The construction and installation expense (including the reserve expense) of each bidding package shall be determined under the guidance in Clause 2.1, Section 2, Part II above.

4.3. For construction bidding packages performed through bidding in form of design- equipment and supplies provision - construction contracts (called EPC bidding packages for short), the value of the EPC bidding package in the elaborated total construction cost estimate shall cover a part or whole of the consultancy and designing expense, construction and installation expense, equipment expense, reserve expense and other distributed expenses (if any).

The management of the EPC contract expenditures shall comply with the current regulations of the Ministry of Construction.

III. MANAGEMENT OF WORK CONSTRUCTION EXPENSES

1. Estimate norms and international bidding construction and installation unit price

1.1. When elaborating the international bidding construction and installation unit prices, the current estimate norm system shall apply. For construction and installation works not yet included in the current estimate norm system or for which the application of the current estimate norm system is not suitable and foreign norms and standards should be used or norms suitable to the characteristics of the work construction and installation shall be applied, the Construction Ministry's consent is required.

1.2. The international bidding construction and installation unit prices shall be elaborated together with the total construction estimates by the construction designing consultants. They shall be examined by investors in term of their reasonability and forwarded together with the total cost estimates when submitting to the competent authorities the designs and total cost estimates for approval. The total cost estimate-appraising agencies shall check the compliance of these construction and installation unit prices with the current regulations.

2. Currencies and exchange rates in the total cost estimates, construction estimates

The currencies used for elaboration, appraisal and approval of the total cost estimates shall be the currencies inscribed in the credit agreements with international donors and the Vietnamese currency. The total cost estimate values shall be converted into Vietnam dong (VND) or US dollars (USD) at the exchange rates available at the time of submitting the total cost estimates, estimates for appraisal and approval.

3. Adjustment of total construction cost estimates

3.1. In the course of executing projects, if any works, construction items or bidding packages should be added under the written approvals of the competent persons and the international donors, the investors must adjust and add the total cost estimates, estimates.

3.2. If the post-adjustment/ supplementation value of the total cost estimate exceeds 10% of the approved total cost estimate (including reserve expenses after offsetting, subtracting the values of construction items), the investors must re-approve the total cost estimate according to current regulations.

3.3. The post adjustment/supplementation value of the total cost estimate must not exceed the total investment amount already approved. In cases where it exceeds the approved total investment, it must be submitted to the persons competent to decide on the investment for consideration and decision and the total investment must be adjusted before adjusting and supplementing the total cost estimate.

4. Expenses arising in the course of project execution

4.1. Investors may get the payment for the arising volumes strictly according to the current regulations and take responsibility therefor.

4.2. For the arising volumes with unit prices inscribed in the signed contracts, they shall be determined according to these unit prices. In cases where the arising volumes still lack the unit prices to be inscribed in the contracts signed between the investors and the contractors, the investors shall have to elaborate the unit prices under the guidance in this Circular and submit them to the competent persons for approval. Pending the approval by the competent persons, the investors shall be allowed to pay to the contractors a maximum amount equal to 70% of the cost estimate value according to those temporarily calculated unit prices. The payment for the arising volumes without unit prices shall be made according to the unit prices already approved by the competent persons.

5. Expenses for newly added project items

5.1. For newly added project items, which are, however, still implemented by the contractors that are constructing the projects, the expenses therefor shall be determined according to the similar unit prices of the same type stated in the previously signed contracts. In case of the absence of the similar unit prices of the same type in the contracts signed between investors and contractors, the provisions in Clause 4.2 of Section 4, Part III above shall be complied with.

Expenses for consultancy on investment in the construction of these newly added items shall be determined according to the current regulations.

5.2. For newly added items which are implemented through bidding or designation by other contractors, the construction and installation unit prices for works belonging to these items shall comply with the current regulations.

IV. IMPLEMENTATION ORGANIZATION

1. This Circular uniformly applies nationwide and takes effect 15 days after its publication on the Official Gazette.

2. Construction projects which are funded with other capital sources and opened to international bidding in Vietnam may consult and apply the provisions in this Circular to the elaboration and management of expenditures on the construction of works.

3. If any problems arise in the course of implementation, they should be reported to the Ministry of Construction for study and additional amendment.