Circular No. 06/2016/TT-BXD dated March 10, 2016 of the Ministry of Construction guiding the determination and management of construction investment costs

CIRCULAR

Guiding the determination and management of
construction investment costs[1]

Pursuant to June 18, 2014 Law No. 50/2014/QH13 on Construction;

Pursuant to the Government’s Decree No. 62/2013/ND-CP of June 25, 2013, defining the functions, tasks, powers and organizational structure of the Ministry of Construction;

Pursuant to the Government’s Decree No. 32/2015/ND-CP of March 25, 2015, on management of construction investment costs;

At the proposal of the Director of the Institute of Construction Economics and the Director of the Department of Construction Economics;

The Minister of Construction promulgates the Circular guiding the determination and management of construction investment costs.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular details the items of, and methods of determining and managing, construction investment costs, including preliminary total construction investment amounts, total construction investment amounts, construction cost estimates, cost estimates of construction bidding packages, construction norms, construction prices, construction price indexes, and machine shift and construction equipment prices.

Article 2. Subjects of application

1. This Circular applies to agencies, organizations and individuals involved in the determination and management of construction investment costs of construction investment projects using state budget funds or non-budget state funds as prescribed in Clause 1, Article 2 of the Government’s Decree No. 32/2015/ND-CP of March 25, 2015, on management of construction investment costs (below referred to as Decree No. 32/2015/ND-CP) and construction investment projects in the form of public-private partnership (PPP).

2. This Circular may be applied to construction investment projects using other funding sources.

Chapter II

TOTAL CONSTRUCTION INVESTMENT AMOUNTS

Article 3. Cost items constituting the total construction investment amount

1. Cost items constituting the total construction investment amount must comply with Clause 4, Article 4 of Decree No. 32/2015/ND-CP, of which project management costs, construction investment consultancy costs and other costs are prescribed as follows:

a/ Project management costs mentioned in Clause 2, Article 23 of Decree No. 32/2015/ND-CP are those necessary for performing project management jobs from project preparation, project implementation and construction completion to project commissioning, specifically:

- Preparation of construction investment prefeasibility study report (if any), investment policy proposal report (if any), construction investment feasibility study report, or construction investment economic-technical report;

- Identification of construction survey tasks, construction survey, and construction survey supervision;

- Contest for selection or selection of architectural design or selection of architectural design plan for works;

- Payment of compensations, provision of support and resettlement within the responsibility of the project owner;

- Appraisal of construction investment feasibility study report or construction investment economic-technical report;

- Formulation, appraisal, verification and approval of technical design, construction drawing design or construction cost estimate;

- Selection of construction contractor;

- Management of construction quality, volume, progress, costs and contracts;

- Operation and management of communication system for works;

- Assurance of occupational safety and environmental sanitation for works;

- Elaboration or adjustment of construction norms for works;

- Determination of construction prices and construction price indexes for works;

- Quality inspection of completed construction works by state management agencies upon acceptance test;

- Quality inspection of construction materials, components and products and equipment installed in works;

- Quality testing of works parts, works items or whole works, and specialized construction experiments as required;

- Control of construction investment costs;

- Conversion of construction investment funds for the works after they are completed, tested upon acceptance, handed over and commissioned;

- Acceptance test, settlement and finalization of contracts; settlement and finalization of construction investment funds;

- Supervision and evaluation of construction investment projects;

- Acceptance test and handover of works;

- Construction commencement, inauguration (if any), public information and advertising;

- Determination, update and appraisal of cost estimates of construction bidding packages;

- Performance of management jobs (if any) by competent state agencies;

- Performance of other management jobs.

b/ Construction investment consultancy costs mentioned in Clause 2, Article 25 of Decree No. 32/2015/ND-CP are those necessary for performing construction investment consultancy jobs from project preparation, project implementation and construction completion to project commissioning, specifically:

- Identification of construction survey tasks, construction survey, and construction survey supervision;

- Preparation of construction investment prefeasibility study report (if any), investment policy proposal report (if any), construction investment feasibility study report, or construction investment economic-technical report;

- Verification of the project’s basic design and technological design;

- Contest for selection or selection of architectural design for construction works;

- Engineering;

- Verification of total construction investment amount, engineering and cost estimate;

- Preparation and verification of dossier of invitation for expression of interest, dossier of invitation for prequalification, bidding dossier and dossier of requirements, and evaluation of dossier of interest, dossier of prequalification participation, bid dossier and dossier of proposal for selection of construction contractor;

- Verification of construction contractor selection result;

- Supervision of construction and equipment installation;

- Preparation of environmental impact assessment report;

- Determination and verification of construction norms, construction prices and construction price indexes for works;

- Examination of traffic safety assurance;

- Application of information system for works;

- Control of construction investment costs of works;

- Consultancy on management of construction investment costs, including primary total construction investment amount (if any), total construction investment amount, construction cost estimates, prices of construction bidding packages, prices of construction contracts, construction norms and prices, settlement and finalization of construction contracts and construction investment funds, and other jobs;

- Project management consultancy (in case of hiring consultants);

- Specialized construction experiments;

- Quality inspection of construction materials, components and products and equipment installed in works (if any) as required by the project owner;

- Quality testing of works parts, works items or whole works;

- Supervision and evaluation of construction investment projects (in case of hiring consultants);

- Consultancy on environmental observation and supervision;

- Conversion of construction investment funds for the works after they are completed, tested upon acceptance, handed over and commissioned;

- Performance of other consultancy jobs.

c/ Other costs of performance of the following:

- Cost of sweeping and disposal of bombs and explosives;

- Cost of insurance for works during construction;

- Cost of international quality registration for and monitoring of work deformities;

- Cost of audit, verification and approval of finalized investment funds;

- Cost of competent state management agencies’ inspection of acceptance test during construction and upon completion of work items or works;

- Cost of research into sciences and technologies related to projects; initial working capital for construction investment projects for commercial purposes, and loan interests during construction; trial operation of works under no-load and full-load conditions according to the technological process before they are handed over (except the value of recovered products);

- Payment of royalty, charges and fees as prescribed;

- Costs of general items, including the cost items specified at Point a, Clause 5, Article 7 of this Circular;

- Costs of performance of other tasks.

2. In case the identification of the primary total construction investment amount is required, the cost items constituting such amount must comply with Clause 2, Article 4 of Decree No. 32/2015/ND-CP.

3. For projects which only require construction investment economic-technical reports, the cost items constituting the total construction investment amount must comply with Clause 3, Article 4 of Decree No. 32/2015/ND-CP.

4. For projects using official development assistance (ODA), in addition to the cost items constituting the total investment amount mentioned above, other necessary cost items shall be added to suit the specific characteristics of ODA-funded construction investment projects in accordance with relevant current laws, ensuring that such cost items are correctly and fully calculated as suitable to specific conditions and market prices in the localities where the works are constructed.

Article 4. Methods of determining total construction investment amount

1. The total construction investment amount shall be determined by one of the methods specified in Clause 2, Article 5 of Decree No. 32/2015/ND-CP, as follows:

a/ Based on the construction volume calculated according to the basic design and other necessary requirements of a project;

b/ Based on the investment ratio for work construction;

c/ Based on data on the costs of completed or under-construction similar works;

b/ Combination of the methods prescribed at Points a, b and c, Clause 1 of this Article.

2. The preliminary total construction investment amount of a project shall be determined under Clause 1, Article 5 of Decree No. 32/2015/ND-CP. If it is impossible to determine the scale and capacity of production or service according to the preliminary design of such project or it is possible to do so but no data on construction investment ratio have been announced, the preliminary total construction investment amount shall be determined based on the data on costs of completed or under-construction projects of similar type, grade, scale and capacity of production or service, with necessary adjustments and additions.

3. Several cost items constituting project management expenses, construction investment consultancy expenses and other costs of a project for which no regulations on their calculation are available or which cannot be calculated immediately shall be added and estimated for inclusion in the total construction investment amount.

4. The methods of determining the total construction investment amount and preliminary total construction investment amount are provided in Appendix No. 1 to this Circular.

Article 5. Appraisal, verification and approval of total construction investment amount

1. The contents and competence for appraisal and approval of the total construction investment amounts must comply with Article 6 of Decree No. 32/2015/ND-CP.

2. The form of reports on the result of appraisal and verification of the total construction investment amount is provided in Appendix No. 8 to this Circular.

Article 6. Adjustment of total construction investment amount

1. The approved total construction investment amount may be adjusted in the cases specified in Clause 1, Article 7 of Decree No. 32/2015/ND-CP.

2. The project owner shall determine the additional provisional amount for offsetting inflation as prescribed in Clause 4, Article 7 of Decree No. 32/2015/ND-CP when the average of consecutive construction price indexes announced by a competent state agency during the period from the time of project implementation to the time of adjustment is higher than the construction price index used in the approved total construction investment amount.

3. For works not yet included in the lists of construction price indexes announced by provincial-level Construction Departments and works constructed in lines running through different provinces and centrally run cities as prescribed in Clause 4, Article 22 of Decree No. 32/2015/ND-CP, the average construction price index mentioned in Clause 2 of this Article shall be determined based on the construction price indexes applied during the period from the time of project implementation to the time of adjustment according to the method specified in Article 22 of this Circular.

4. An increase in the total construction investment amount as a result of additional provisional amount under Clauses 2 and 3 of this Article includes the value increased due to higher construction price indexes for the performed volume by the time of adjustment and the value increased due to the change of construction price indexes (including estimated market fluctuations) for the volume to be performed.

5. The verification, appraisal and approval of the adjusted total construction investment amount must comply with Clauses 1 and 2, Article 7 of Decree No. 32/2015/ND-CP.

Chapter III

CONSTRUCTION COST ESTIMATES

Section 1

COST ESTIMATES OF CONSTRUCTION WORKS

Article 7. Contents of cost estimates of construction works

1. Cost estimates of construction works prescribed in Clause 2, Article 8 of Decree No. 32/2015/ND-CP shall be determined for works, work items, auxiliary works, and makeshift works. Specifically, construction costs include direct costs, overhead costs, presumed taxable income and value-added tax.

- Direct costs include cost of materials (including materials supplied by the project owner), labor cost, and construction machinery and equipment cost;

- Overhead costs include the enterprise’s management cost, construction site administration cost, cost of services for workers, cost of services for construction at the construction site, and some other management costs;

- Presumed taxable income means the construction enterprise’s profit projected in the cost estimate of a construction work;

- Value-added tax must comply with state regulations.

2. Equipment costs of a work or work item include the cost items specified at Point b, Clause 2, Article 8 of Decree No. 32/2015/ND-CP.

3. Project management costs include the cost items specified at Point a, Clause 1, Article 3 of this Circular.

4. Construction investment consultancy costs include the cost items specified at Point b, Clause 1, Article 3 of this Circular. For a project consisting of many works, construction investment consultancy costs constituting the cost estimates of these works exclude the construction investment consultancy costs relating to the whole project.

5. Other costs constituting the cost estimates of a construction work include the cost items specified at Point c, Clause 1, Article 3 of this Circular. Specifically as follows:

a/ Costs of general items include:

- Cost of construction of makeshift houses for accommodation and administration of construction at the construction site;

- Cost of occupational safety and environmental protection for workers at the construction site and in surrounding areas;

- Cost of testing materials of contractors;

- Cost of transportation of workers within the construction site;

- Cost of irregular water pumping and mud dredging;

- Cost of transportation of special-use construction machinery and equipment and workers (skilled workers and workers under long-term labor contracts) to and from the construction site;

- Cost of assurance of traffic safety for construction (if any);

- Cost of restoration of technical infrastructure affected by construction activities (if any);

- Cost of building of houses for machinery, machinery foundations, electricity and compressed air supply system, and water supply and drainage system at the construction site; installation and dismantlement of machinery (such as cement concrete mixing station, asphalt concrete mixing station, tracked cranes, tower cranes, and other similar construction machinery and equipment);

b/ Loan interest during construction is not included in the cost estimates of a construction work. For a construction investment project consisting of many works, other costs constituting the cost estimates of these works exclude the cost of sweeping and disposal of bombs or explosives; cost of audit, verification and approval of finalized investment funds; cost of research into sciences and technologies relating to the project; initial working capital for construction investment projects for commercial purposes; cost of trial operation of works under no-load and full-load conditions according to technological process before the works are handed over (excluding the value of recovered products); charges, fees and other costs already calculated for the project.

6. Provisional amounts include a provisional amount for additional volumes and a provisional amount for offsetting inflation during the construction period.

Article 8. Methods of determining cost estimates of construction works

1. Determination of construction costs

Construction costs may be determined by each cost item or aggregate cost items by either of the methods specified at Points a and b below:

a/ Based on volume and construction price of a work

- Costs of materials, labor and construction machinery and equipment constituting the direct costs shall be determined based on the volume and construction price of a work. The volume of construction activities shall be determined according to the technical design drawing or construction drawing design, technical instructions and job requirements of the work or work item, and construction prices of the work as prescribed in Articles 18 and 19 of this Circular. To make them consistent with the cost estimates of a bidding package, the construction prices used for estimation may be adequate construction prices;

- Overhead costs shall be calculated in percentage (%) of direct costs or labor costs in the construction cost estimates applicable to each type of work as guided in Tables 3.7 and 3.8 in Appendix No. 3 to this Circular. For ODA-funded works subject to international bidding, overhead costs shall be determined in percentage (%) prescribed in this Circular and added with necessary costs as required by bidding packages subject to international bidding, ensuring that such costs are correctly and fully calculated;

- Presumed taxable income shall be calculated in percentage (%) of direct costs and overhead costs as guided in Table 3.9 in Appendix No. 3 to this Circular;

- Value-added tax must comply with state regulations.

b/ Based on wastages of materials, labor and construction machinery and equipment and their prices.

- Costs of materials, labor and construction machinery and equipment constituting direct costs shall be determined based on the wastages of materials, labor and construction machinery and equipment and their prices. The total wastages of materials, labor and construction machinery and equipment shall be determined based on the wastages of materials, labor and construction machinery and equipment for each volume of construction activities of a work or work item.

The determination of prices of materials, labor and construction machinery must comply with Article 19 of this Circular.

The wastage prices and costs of materials, labor and construction machinery and equipment shall be determined under the guidance in Tables 3.4 and 3.5 in Appendix No. 3 to this Circular.

- Overhead costs, presumed taxable income and value-added tax must comply with Point a, Clause 1 of this Article.

2. Determination of equipment costs

a/ Equipment costs shall be determined based on the volumes, quantities and kinds of equipment according to technological and construction designs and purchase prices of equipment. Purchase prices of equipment are those notified by the supplier or producer, or comply with market prices at the time of calculation, or are prices of completed or under-construction works with similar equipment (in terms of capacity, technology and origin).

For equipment to be produced or processed, equipment costs shall be determined based on the volumes and quantities of equipment and production or processing unit prices as suitable to the characteristics and types of equipment under the signed production or processing contracts, or based on processing price advices of the producer selected by the project owner or production or processing prices of similar equipment of completed or under-construction works.

b/ Costs of training and technology transfer shall be estimated, depending on specific requirements of a work;

c/   Costs of installation, testing and adjustment of equipment, and other relevant costs shall be estimated like construction costs.

3. Determination of project management costs

Project management costs shall be determined based on percentage (%) norms announced by the Ministry of Construction and already included in the total construction investment amount, or estimated.

4. Determination of construction investment consultancy costs

a/ Consultancy costs constituting cost estimates of a construction work shall be determined based on percentage (%) norms announced by the Ministry of Construction, or estimated. If some construction investment consultancy jobs are performed before the determination of cost estimates of a construction work, consultancy costs shall be determined as equal to the value of the signed consultancy contract in accordance with regulations;

b/ In case of hiring foreign consultants, consultancy costs shall be estimated to meet the requirements of use of consultants and comply with regulations of competent authorities and international practices. Methods of determining costs of hiring of foreign consultants must comply with guidance of the Ministry of Construction.

5. Other costs shall be determined based on percentage (%) norms guided by competent agencies, estimated, or equal to the value of the signed contract in accordance with law.

For specialized construction works involving special cost items and ODA-funded works, other relevant costs, if any, shall be added, ensuring that they are correctly and fully calculated to suit specific conditions of such works and market prices in localities where the works are constructed.

6. Determination of provisional amounts

a/ Provisional amount for additional volumes shall be calculated in percentage (%) of the total costs of construction, equipment, project management, construction investment consultancy and other costs;

b/ Provisional amount for offsetting inflation shall be determined based on the period of construction (calculated in month, quarter and year), capital allocation plan and construction price indexes as suitable to types of construction works, taking into account domestic and international price fluctuations.

7. Methods of determining costs of construction, equipment, project management, construction investment consultancy and other costs and provisional amounts prescribed in Clauses 1 thru 6 of this Article are specified in Appendix No. 2 to this Circular.

Article 9. Appraisal, verification and approval of cost estimates of construction works

1. The contents of and competence for appraisal and approval of cost estimates of construction works must comply with Article 10 of Decree No. 32/2015/ND-CP.

2. The form of reports on results of appraisal and verification of cost estimates of construction works is provided in Appendix No. 8 to this Circular.

Article 10. Adjustment of cost estimates of construction works

1. The approved cost estimates of construction works shall be adjusted in the cases specified in Clauses 1 and 4, and the competence for determination, appraisal and approval of adjusted cost estimates of construction works must comply with Clauses 3 and 5, Article 11 of Decree No. 32/2015/ND-CP.

2. Methods of determining adjusted cost estimates of construction work are guided in Part III of Appendix No. 2 to this Circular.

Section 2

COST ESTIMATES OF CONSTRUCTION BIDDING PACKAGES

Article 11. Cost estimates of construction bidding packages

1. The items of, and methods of determining, cost estimates of a construction bidding package must comply with Article 13 of Decree No. 32/2015/ND-CP.

2. In case the approved cost estimates of a construction work are determined based on detailed construction unit prices of an incomplete work, the cost estimates of a construction bidding package should be determined based on detailed construction unit prices of a complete work corresponding to the volume of to-be-performed construction activities of the bidding package under Point b, Clause 2, Article 13 of Decree No. 32/2015/ND-CP. Detailed construction unit prices of an incomplete work and those of a complete work must comply with Clause 1, Article 18 of this Circular.

3. Costs of general items of a construction bidding package include one, several or all of the costs identified in the approved cost estimates of the construction work as suitable to the scope of jobs and technical requirements and instructions of the bidding package, and shall be determined based on the cost norms announced by competent agencies, or estimated. Total costs of general items of a construction bidding package must not exceed costs of general items in the approved cost estimates of the construction work.

4. Provisional amounts constituting cost estimates of a construction bidding package include:

a/ Provisional amount for additional volumes, calculated in percentage (%) of the total construction costs and costs of general items of the bidding package;

b/ Provisional amount for offsetting inflation, determined based on the period of construction of the bidding package and construction price indexes as suitable to types of construction works, taking into account domestic and international price fluctuations;

c/ Percentage (%) used for determining the provisional amount under Point a or b of this Clause must not exceed percentage of the provisional amount in the approved cost estimates of the construction work.

5. Cost estimates of a construction bidding package shall be determined under the guidance in Section 1, Part II of Appendix No. 2 to this Circular.

Article 12. Cost estimates of bidding packages for procurement of supplies and equipment to be installed in works

1. The items of, and methods of determining, cost estimates of a bidding packages for procurement of supplies and equipment to be installed in works must comply with Article 14 of Decree No. 32/2015/ND-CP.

2. Costs of equipment installation, testing and correction include the cost items like those in cost estimates of a construction bidding package and shall be estimated by the methods of determining construction costs specified in Clause 1, Article 8 of this Circular.

3. Provisional amounts constituting cost estimates of a bidding package for procurement of supplies and equipment to be installed in works include:

a/ Provisional amount for additional volumes, calculated in percentage (%) of the total costs of equipment procurement, training and technology transfer (if any), installation, testing and correction, transportation and insurance; taxes and charges;

b/ Provisional amount for offsetting inflation, determined based on the period of construction of the bidding package and construction price indexes as suitable to types of construction works, taking into account domestic and international price fluctuations;

c/ Percentage (%) used for determining the provisional amount under Point a or b of this Clause must not exceed percentage of the provisional amount corresponding to each item of the approved cost estimates of the construction work.

4. Cost estimates of bidding packages for procurement of supplies and equipment to be installed in works shall be determined under the guidance in Section 2, Part II of Appendix No. 2 to this Circular.

Article 13. Cost estimates of construction investment consultancy bidding packages

1. The items of, and methods of determining, cost estimates of a construction investment consultancy bidding package must comply with Article 15 of Decree No. 32/2015/ND-CP.

2. Expert costs, management costs, other costs, presumed taxable income, taxes and provisional amounts shall be determined under the guidance of the Ministry of Construction.

3. Specialized construction testing costs shall be estimated like construction costs.

4. Provisional amounts constituting cost estimates of a construction investment consultancy bidding package include a provisional amount for additional volumes and a provisional amount for offsetting inflation, calculated based on percentage (%) norms guided by the Ministry of Construction, but must not exceed percentage of the provisional amount corresponding to each item of the approved cost estimates of the construction work.

5. The cost of professional liability insurance for construction investment consultancy for construction design jobs of a construction work of grade II or higher grade shall be included in other costs of a bidding package. For a construction survey bidding package of a construction work of grade II or higher grade, such cost constitutes a separate cost item of the cost estimates of such bidding package.

6. Cost estimates of a construction investment consultancy bidding package shall be determined under the guidance in Section 3, Part II of Appendix No. 2 to this Circular.

Article 14. Cost estimates of mixed bidding packages

1. Cost estimates of an engineering and construction (EC) bidding package include cost estimates of the jobs specified in Articles 13 and 11 of this Circular.

2. Cost estimates of a procurement and construction (PC) bidding package include cost estimates of the jobs specified in Articles 12 and 11 of this Circular.

3. Cost estimates of an engineering-procurement-construction (EPC) bidding package and a project formulation-engineering-procurement-construction (turnkey) bidding package must comply with Clauses 3 and 4, Article 16 of Decree No. 32/2015/ND-CP.

Article 15. Competence for determination, verification, appraisal and approval of cost estimates of construction bidding packages

1. The determination, verification, appraisal and approval of cost estimates of construction bidding packages must comply with Clauses 3 and 4, Article 12 of Decree No. 32/2015/ND-CP.

2. For approved cost estimates of a bidding package for which contractor selection has not yet been organized, the project owner shall update price indexes or prices and other relevant regimes and policies, and approve them in replacement of the bidding package’s approved prices around 28 days before the time of bid opening.

3. In case the cost estimates of a construction bidding package exceed the approved cost estimates of the construction work, the project owner shall report such to the investment decider for consideration and decision.

Chapter IV

CONSTRUCTION NORMS, CONSTRUCTION PRICES AND CONSTRUCTION PRICE INDEXES

Section 1

CONSTRUCTION NORMS

Article 16. System of, and methods of making, construction norms

1. Construction norms include economic-technical norms and cost norms prescribed in Articles 17 and 18 of Decree No. 32/2015/ND-CP.

2. Methods of making norms of construction cost estimates:

a/ Norms of construction cost estimates shall be made in the following order:

- Listing construction activities, jobs or structures of a work, indicating technical and technological requirements, construction conditions, construction methods, and appropriate units of calculation;

- Identifying job items from preparation to completion of construction activities, jobs or structures of a work;

- Calculating and identifying wastages of materials, labor and construction machinery and equipment;

- Making mini-norms based on summarized wastages of materials, labor and construction machinery.

b/ Methods of making norms of construction cost estimates are guided in Appendix No. 5 to this Circular.

3. Cost norms shall be determined under guidance of the Ministry of Construction.

Article 17. Management of construction norms

1. The Ministry of Construction shall announce construction norms under Article 34 of Decree No. 32/2015/ND-CP for related agencies, organizations and individuals to apply or refer to in determining and managing construction investment costs.

2. Ministries managing specialized construction works and provincial-level People’s Committees shall, based on methods of determining norms of construction cost estimates guided in Appendix No. 5 to this Circular, elaborate, and reach agreement with the Ministry of Construction on, norms of construction cost estimates for specialized jobs of their ministries, sectors and localities which are not yet available in the system of norms of construction cost estimates or which are already available in this system but apply new technologies as prescribed in Clause 1 of this Article in order to announce these norms to sectors and localities and send the announced norms to the Ministry of Construction for monitoring and management under Clause 2, Article 19 of Decree No. 32/2015/ND-CP.

3. Project owners shall apply or refer to the announced norms of construction cost estimates with the same technologies and application conditions or apply norms of cost estimates with the same technologies and application conditions in completed or under-construction works as a basis for determining total construction investment amounts and construction cost estimates and managing construction investment costs. For construction jobs which are already available in the system of announced norms of construction cost estimates but fail to meet specific technical requirements, construction conditions or construction methods of works or which are not yet available in this system, project owners shall adjust and add norms of construction cost estimates under Clauses 4 and 5, Article 19 of Decree No. 32/2015/ND-CP as a basis for calculating construction investment costs.

4. Contractors providing design-based construction cost estimation consultancy shall propose norms of construction cost estimates for new construction activities or norms which need to be adjusted or added for estimation and send sufficient dossiers and documents to projects owners.

Section 2

WORK CONSTRUCTION PRICES

Article 18. Items of, and methods of making, work construction prices

1. Work construction prices include detailed construction unit prices of a work and general construction prices prescribed in Clause 1, Article 20 of Decree No. 32/2015/ND-CP.

a/ Detailed construction unit prices of a work shall be calculated for specific construction activities of such work, including detailed construction unit prices of an incomplete work (covering costs of materials, labor and construction machinery and equipment) and detailed construction unit prices of a complete work (covering costs of materials, labor and construction machinery and equipment, overhead costs, and presumed taxable income), as a basis for determining construction cost estimates and cost estimates of construction bidding packages;

b/ General construction prices shall be calculated for groups and types of construction activities, structure units or work items and summarized from detailed construction unit prices of a work as specified at Point a of this Clause, including incomplete general construction prices (covering costs of materials, labor and construction machinery and equipment) and complete general construction prices (covering costs of materials, labor and construction machinery and equipment, overhead costs, and presumed taxable income), as a basis for determining construction cost estimates and total construction investment amounts.

2. Methods of making work construction prices are guided in Appendix No. 4 to this Circular.

Article 19. Management of work construction prices

1. Provincial-level People’s Committees shall assign provincial-level Construction Departments to assume the prime responsibility for, and coordinate with related agencies in, determining and announcing prices of construction materials, unit prices of construction workforce, construction machine shift and equipment unit prices, construction price indexes and work construction unit prices as a basis for managing work construction prices under Clause 2, Article 36 of Decree No. 32/2015/ND-CP.

2. Prices of construction materials shall be announced on a monthly or quarterly basis and updated for all common types of construction materials. The announced prices must correspond to quality standards and origin of construction materials and match market prices at the time of announcement (stating distances of transportation of construction materials). For areas lying between provinces and centrally run cities, the concerned provincial-level Construction Departments should exchange information with one another before announcing prices of construction materials in order to avoid big price differences.

3. Unit prices of construction workforce shall be determined and announced under guidance of the Ministry of Construction. These unit prices must suit skills of workers according to their grades in the system of norms of construction cost estimates; match prices of construction workforce in the labor market of each locality; suit the characteristics of jobs of construction workforce; and must ensure workers’ capacity to pay certain expenses under regulations (social insurance, health insurance and unemployment insurance premiums and other payable amounts).

4. Construction machine shift and equipment unit prices shall be determined and announced under guidance of the Ministry of Construction and must match market prices in localities at the time of price announcement.

5. Responsibilities of project owners, construction investment cost management consultancy organizations and construction contractors to manage work construction prices

a/ Project owners shall determine and manage construction prices under Articles 21 and 31 of Decree No. 32/2015/ND-CP;

b/ Construction investment cost management consultancy organizations shall set, verify and manage work construction prices under Clause 2, Article 21, and Article 32, of Decree No. 32/2015/ND-CP;

c/ Construction contractors shall manage work construction prices under Article 33 of Decree No. 32/2015/ND-CP.

Section 3

CONSTRUCTION PRICE INDEXES

Article 20. General provisions on determination of construction price indexes

1. Construction price indexes announced by type of works, cost items (including price indexes for construction, equipment and other components), and cost elements covering price indexes for construction materials, labor and machinery and equipment, shall be determined based on the list and number of representative works for calculation.

2. Construction price indexes shall be averagely calculated in a specified period, excluding expenses for compensation, support and resettlement and loan interest during construction, and initial working capital for production and business (if any). The unit of calculation of construction price indexes is percentage (%).

3. Cost items used for calculation of construction price indexes must conform to the cost items under regulations on management of construction investment costs, and shall be summarized from statistical data and used on a stable basis until a change in the initial time occurs. The items of price indexes for settlement of contracts shall be determined based on the items of cost estimates of a bidding package.

Article 21. Classification of construction price indexes

1. Construction price indexes shall be classified by works and type of works, including:

a/ Price indexes by cost elements, covering:

- Price index of construction materials, which reflects price fluctuations of construction materials;

- Price index of construction workforce, which reflects price fluctuations of construction workforce;

- Price index of construction machinery and equipment, which reflects price fluctuations of construction machinery and equipment.

b/ Price indexes by cost items, covering:

- Price index of construction component, which reflects price fluctuations of construction component;

- Price index of equipment component, which reflects price fluctuations of equipment component;

- Price index of other costs, which reflects price fluctuations of project management costs, construction investment consultancy costs and other costs of a work.

c/ Price index by type of works, which reflects price fluctuations of each type of construction works.

2. Construction price indexes eligible to be announced include the price indexes prescribed at Points a, b and c, Clause 1 of this Article.

3. For specific construction works and bidding packages, the calculation of all or several of the price indexes mentioned in Clause 1 of this Article shall be based on the purposes and requirements of cost management work and items of cost estimates of a bidding package.

Article 22. Methods of determining construction price indexes

1. Construction price indexes to be announced shall be determined in the following order:

a/ Determining the time of index calculation, including initial time and comparison time;

b/ Listing price indexes to be determined, and selecting input factors;

c/ Collecting and processing figures and data used for calculation;

d/ Determining construction price indexes, which covers determination of cost items and calculation of price indexes for each input factor, based on cost elements, cost items and construction price indexes.

2. Construction price indexes for a work shall be determined based on the progress and conditions for performance of different jobs to select the initial time and comparison time as appropriate. Cost items used for determining price indexes to adjust cost estimates are items of cost estimates of a work. Cost items used for determining price indexes to adjust contract prices are cost items of the price of a bidding package.

3. Construction price indexes shall be determined under guidance in Appendix No. 7 to this Circular.

Article 23. Management of construction price indexes

1. Provincial-level People’s Committees shall allocate their annual local budget funds for provincial-level Construction Departments to:

a/ Assume the prime responsibility for, and coordinate with related units in, determining and announcing in time construction price indexes in their localities under Clause 2, Article 36 of Decree No. 32/2015/ND-CP, based on guidance in this Circular and construction price fluctuations in their localities;

b/ Regularly update and store information on prices of construction supplies and materials, workforce, machine shifts and equipment in local construction markets and monthly send such information to the Ministry of Construction;

c/ Announce construction price indexes on a monthly, quarterly and annual basis and send them to the Ministry of Construction for monitoring and management.

2. Project owners shall, based on methods of determining construction price indexes guided in Appendix No. 7 to this Circular, determine construction price indexes under Clause 4, Article 22 of Decree No. 32/2015/ND-CP. If wishing to apply the above construction price indexes to adjust construction contract prices, project owners shall report such application to investment deciders for decision. For projects the investment in which is decided by the Prime Minister, the application of construction price indexes shall be reported to ministers, chairpersons of provincial-level People’s Committees or chairpersons of state groups or corporations for decision.

Article 24. Announcement of construction price indexes

1. Construction price indexes eligible to be announced include:

a/ National construction price indexes announced by the Ministry of Construction on a quarterly and annual basis;

b/ Construction price indexes prescribed in Clause 1, Article 21 of this Circular which are announced by provincial-level Construction Departments on a monthly, quarterly or annual basis according to forms No. 7.1, 7.2. 7.3 and 7.4, Part II of Appendix No. 7 to this Circular.

2. Time of announcement

a/ Construction price indexes of a month shall be announced in the second week of the subsequent month;

b/ Construction price indexes of a quarter shall be announced in the second week of the first month of the subsequent quarter;

c/ Construction price indexes of a year shall be announced together with price indexes of the last quarter of the year.

Chapter V

CONSTRUCTION MACHINE SHIFT AND
EQUIPMENT PRICES

Article 25. General provisions on determination of construction machine shift and equipment prices

1. Construction machine shift and equipment price means an average cost determined for a work shift as prescribed for construction machinery and equipment.

2. Construction machine shift and equipment prices shall be determined based on requirements on use management of construction machinery and equipment, wastage norms for calculation of these prices, and local market prices.

3. The construction machine shift and equipment price of a work shall be determined as suitable to construction design, construction method, type of construction machinery used or expected to be used for construction, construction progress, and market prices in the locality where such work is constructed.

Article 26. Cost items constituting construction machine shift and equipment prices

1. Construction machine shift and equipment prices include all or several of the cost items, such as depreciation cost, repair cost, fuel and energy cost, cost of operators, and other costs of machinery and equipment.

2. Construction machine shift and equipment prices exclude the cost of building houses for machinery, machinery foundations, electricity and compressed air supply system, water supply and drainage systems at the construction site, and installation and dismantlement of machinery (such as cement concrete mixing station, asphalt concrete mixing station, tracked cranes, tower cranes and other similar construction machinery and equipment).

Article 27. Methods of determining construction machine shift and equipment prices

1. Construction machine shift and equipment prices shall be determined as suitable to machinery of the same technology, origin and major technical norms, and in the following order:

a/ Listing construction machinery and equipment;

b/ Determining wastage norms for calculating construction machine shift and equipment prices;

c/ Calculating construction machine shift and equipment prices.

2. Methods of determining construction machine shift and equipment prices are guided in Appendix No. 6 to this Circular.

Article 28. Management of construction machine shift and equipment prices

1. Provincial-level People’s Committees shall assign provincial-level Construction Departments to, based on methods of determining construction machine shift and equipment prices guided in Appendix No. 6 to this Circular, determine and announce construction machine shift and equipment prices in their localities under Clause 2, Article 36 of Decree No. 32/2015/ND-CP for reference or application when determining construction prices, and send them to the Ministry of Construction for monitoring and management.

2. Project owners shall apply or refer to the announced construction machine shift and equipment prices as a basis for determining work construction prices. If construction machinery and equipment are not available in the list of announced prices or are available but do not satisfy use requirements and construction conditions of works, project owners shall set construction machine shift and equipment prices of such work under guidance in Appendix No. 6 to this Circular.

3. Contractors providing design-based construction cost estimation consultancy shall propose construction machine shift and equipment prices not yet announced under Clause 1 of this Article or already announced but failing to meet use requirements and construction conditions of works in order to make cost estimates and send sufficient dossiers and documents to project owners.

Chapter VI

ORGANIZATION OF IMPLEMENTATION

Article 29. Responsibilities of state management of construction investment costs

The responsibility of the Ministry of Construction, the Ministry of Finance, other ministries and provincial-level People’s Committees to perform the state management of construction investment costs must comply with Articles 34, 35 and 36 of Decree No. 32/2015/ND-CP.

Article 30. Transitional handling

a/ The determination and management of construction investment costs in the transitional period must comply with Clauses 1 and 2, Article 37 of Decree No. 32/2015/ND-CP;

b/ For projects approved before the effective date of this Circular but not yet implemented, their adjustment must comply with Decree No. 32/2015/ND-CP and this Circular.

Article 31. Effect

1. This Circular takes effect on May 1, 2016, and replaces the Ministry of Construction’s Circular No. 04/2010/TT-BXD of May 26, 2010, guiding the formulation and management of construction investment costs, Circular No. 06/2010/TT-BXD of May 26, 2010, guiding methods of determining construction machine shift and equipment prices, and Circular No. 02/2011/TT-BXD of February 22, 2011, guiding the determination and announcement of construction price indexes.

2. Any problems arising in the course of implementation of this Circular should be reported to the Ministry of Construction for study and settlement.-

For the Minister of Construction
Deputy Minister
BUI PHAM KHANH

* All appendices to this Circular are not translated.