Circular No. 14/2017/TT-BXD dated December 28, 2017 of the Ministry of Construction guiding the determination and management of costs of urban public services

THE MINISTRY OF CONSTRUCTION

Circular No. 14/2017/TT-BXD dated December 28, 2017 of the Ministry of Construction guiding the determination and management of costs of urban public services

Pursuant to the Government’s Decree No. 81/2017/ND-CP dated July 17, 2017 defining Functions, Tasks, Powers and Organizational Structure of Ministry of Construction;

Pursuant to the Government’s Decree No. 130/2013/ND-CP dated October 16, 2013 providing for production and provision of public products and services;

Pursuant to the Government’s Decree No. 38/2015/ND-CP dated April 24, 2015 on management of waste and discarded materials;

Pursuant to the Government’s Decree No. 79/2009/ND-CP dated September 28, 2009 on management of urban lighting systems;

Pursuant to the Government’s Decree No. 64/2010/ND-CP dated June 11, 2010 on management of urban green spaces and trees;

At the request of the Director of the Department of Construction Economics, the Director of the Technical Infrastructure Agency, and the Director of Institute of Construction Economics;

Minister of Construction promulgates a Circular to provide guidance on determination and management of costs of urban public services.

Chapter I

GENERAL PROVISIONS

Article 1. Scopeof adjustment

1. This Circular provides guidance on determination and management of costs of urban public services, consisting of:

- Costs of collecting and transporting municipal solid waste;

- Maintaining urban lighting system;

- Maintaining and developing urban green spaces and trees;

2. Other urban public services include: management of parks and zoos, and other urban public services whose costs shall be decided by People s Committees of provinces or central-affiliated cities in conformity with guidance herein and local reality.

Article 2.Subject of application

This Circular applies to organizations and individuals involved in determination and management of costs of urban public services mentioned in Article 1 herein.

Article 3. Principles for determination and management of costs of urban public services

1. Costs of urban public services must be calculated accurately and sufficiently and in conformity with technical procedures for provision of urban public services as well as market prices and ability to balance local budget.

2. Costs of urban public services determined according to guidance herein shall be used as the basis for determining cost estimates, considering and deciding prices of public services by means of bidding or commissioning for provision of urban public services, and also the basis for negotiating contracts/agreements, making payments and finalizing contracts/agreements for provision of these public services.

3. Costs of urban public services must be managed in accordance with regulations on production and provision of urban public products and services.

4. People’s Committees of provinces or central-affiliated cities shall base on regulations of this Circular to instruct determination and management of costs of other urban public services in conformity with specific conditions of each province or city.

Chapter II

DETERMINATION OF COSTS OF URBAN PUBLIC SERVICES

Article 4. Cost estimate of urban public services

The cost estimate of urban public services includes direct costs (material cost, labor cost, and costs of vehicles, machinery and equipment), general administration cost, profit target and VAT (if any). Total estimated cost of urban public services is determined in accordance with guidance in the Appendix 1 enclosed herewith.

Article 5. Determination of identifiable component values of the cost estimate of urban public services

1. Direct costs (CP_TT) include: material cost, labor cost and costs of vehicles, machinery and equipment. Direct costs shall be determined in accordance with guidance in the Appendix 2 enclosed herewith.

2. General administration cost (C) includes expenses in general for managing or executive board of an enterprise, indirect managing costs, costs of worker services (including labor safety cost and costs of working tools and devices), payments of loan interests to banks and other credit institutions, social expenses payable by the employer (including compulsory contributions of social insurance, health insurance, unemployment and union dues), fees and charges, costs of leasing assets and houses/workshops (if any), costs of depreciation and repair of fixed assets in service of the enterprise’s executive or managing board, costs of hiring auditors, and other costs related to general operations of the enterprise providing urban public services.

The general administration cost included in the cost estimate of urban public services shall be expressed as the percentage (%) of the direct labor cost.  People’s Committees of provinces or central-affiliated cities shall consider deciding the general administration cost percentages so as to prepare the cost estimate of urban public services provided that such general administration costs shall not exceed the following values:

Unit:  %

If costs of vehicles, machinery and equipment of an urban public service are greater than 60% of the direct cost, the general administration cost must not exceed 5% of the costs of vehicles, machinery and equipment.

The general administration cost set up by the People’s Committee of a province or central-affiliated city must be conformable with the prescribed cost levels and the reality of providing public services as well as the ability to balance local budget.

3. Profit target (LN) shall be expressed as the percentage which must not exceed 5% of the direct cost and the general administration cost specified in the cost estimate of urban public services.

4. VAT (T) (if any) shall be determined in accordance with regulations of the Ministry of Finance. In case certain urban public services are not subject to VAT payment, VAT shall be aggregated in input costs.

Chapter III

MANAGEMENT OF COSTS OF URBAN PUBLIC SERVICES

Article 5. Management of standard costs of urban public services

1. People’s Committees of provinces or central-affiliated cities shall apply the standard costs of urban public services announced by the Ministry of Construction to determination and management of costs of urban public services.

2. People’s Committees of provinces or central-affiliated cities shall adjust standard costs if there is significant difference between the local conditions and those specified in the system of standard costs announced by the Ministry of Construction; set up standard costs of urban public services of that province or city, which are not available in the system of standard costs announced by the Ministry of Construction, and obtain an approval from the Ministry of Construction before applying such standard costs.

3. People’s Committees of provinces or central-affiliated cities shall submit annual report on adjusted or new standard costs to the Ministry of Construction for management.

Article 6. Management of costs of urban public services

1. People’s Committees of provinces or central-affiliated cities shall instruct specialized authorities to set up unit costs and make cost estimates of urban public services and cost estimates of supervision or management of urban public services, and carry out appraisal and approval for or authorize competent entities to consider approving such unit costs and cost estimates.

2. People’s Committees of provinces or central-affiliated cities shall instruct their affiliated enterprises providing urban public services to restructure and/or downsize their executive boards, and formulate plans for investment in technologies and mechanical equipment with the aims of enhancing productivity and reducing costs.

3. Specialized authorities affiliated to People’s Committees of provinces or central-affiliated cities may hire qualified and experienced consultants to formulate or verify standard costs, unit costs and cost estimates for serving their management of costs of urban public services.

4. The Ministry of Construction shall conduct regular or unscheduled inspection of determination and management of costs of urban public services of local authorities.

Chapter IV

IMPLEMENTION PROVISIONS

Article 7. Transitional provisions

1. If estimates of costs of urban public services have been given approval by competent authorities before the date of entry into force of this Circular but no service contract is entered into, People’s Committees of provinces or central-affiliated cities shall instruct specialized authorities to consider adjusting such cost estimates in accordance with regulations herein.

2. If service contracts/ agreements have been concluded before the date of entry into force of this Circular, payment of costs shall be made under terms and provisions of such signed contracts/ agreements.

Article 8. Effect

1. This Circular takes effect on February 15, 2018 and supersedes the Circular No. 06/2008/TT-BXD dated March 20, 2008 of the Ministry of Construction providing guidance on management of costs of urban public services.

2. Any difficulties arising in the course of implementation of this Circular should be reported to the Ministry of Construction for consideration./.

For the Minister

The Deputy Minister

Phan Thi My Linh

APPENDIX 1

COST ESTIMATE OF URBAN PUBLIC SERVICES
(Attached with the Circular No. 14/2017/TT-BXD dated December 28, 2017 of the Minister of Construction)

Where:

- Q_jrefers to the volume of the urban public service j (j=1÷n).

- D_j^VL, D_j^NC, D_j^Mmean unit price of material; unit labor cost, and unit price of vehicles, machinery and equipment used to provide the urban public service j.

- K_nc; K_mtcmean adjustment coefficients of labor cost and costs of vehicles, machinery and equipment (if any).

- C means the general administration cost which is expressed as the percentage (%) of the direct cost or the costs of vehicles, machinery and equipment.

- LN means the profit target which is expressed as the percentage (%) of the direct cost and general administration cost.

- T means VAT (if any); or input VAT in case urban public services are not subject to VAT payment.

- DT_CPmeans the total estimated cost of urban public services.

APPENDIX 2

DIRECT COST INCLUDED IN THE COST ESTIMATE OF URBAN PUBLIC SERVICES
(Attached with the Circular No. 14/2017/TT-BXD dated December 28, 2017 of the Minister of Construction)

1. The volume of an urban public service provided shall be determined according to the plan or duties assigned by a competent authority.

2. Unit cost of an urban public service includes unit price of material, unit labor cost, and unit price of vehicles, machinery and equipment.

a) Unit price of material refers to the cost of materials used to provide a predetermined volume of urban public service and shall be calculated by adopting the following formula:

- The input rate of certain type of materials used to provide a predetermined volume of urban public service shall be determined according to standard costs announced by Ministry of Construction or People’s Committees of provinces or central-affiliated cities.

- Price of a certain type of material shall be the market price and determined according to the price announced by local authority, the supplier’s quotation or the price of a similar type of material (material price included in the unit price is exclusive of VAT).

b) Unit labor cost means the total cost of direct workers employed to provide a predetermined volume of urban public service and shall be calculated by adopting the following formula:

- The input rate of rank-based working days for a predetermined volume of urban public service shall be determined according to standard costs announced by Ministry of Construction or People’s Committees of provinces or central-affiliated cities.

- Unit price of a rank-based working day of a corresponding direct worker shall be determined in accordance with guidance of a competent authority (The Ministry of Labor, War Invalids and Social Affairs or People’s Committee of province or central-affiliated city).

c) Unit price of vehicles, machinery and equipment refers to the cost of vehicles, machinery and equipment used to provide a predetermined volume of urban public service and shall be calculated by adopting the following formula:

- The input rate of vehicles, machinery and equipment used to provide a predetermined volume of urban public service shall be determined according to standard costs announced by Ministry of Construction or People’s Committees of provinces or central-affiliated cities.

- Price of corresponding vehicles, machinery and equipment shall be determined according to the method for determining price of building machinery and equipment regulated by the Ministry of Construction or the price of vehicles, machinery and equipment announced by local authority. Unit cost of operators or vehicles, machinery and equipment shall be determined according to the method for determining rank-based wages of direct workers./.