Circular 14/2019/TT-BXD determination and management of construction price indexes

CIRCULAR

Guiding the determination and management of construction price indexes^[1]

Pursuant to the Government’s Decree No. 81/2017/ND-CP of July 17, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Construction;

Pursuant to the Government’s Decree No. 68/2019/ND-CP of August 14, 2019, on the management of construction investment costs;

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

The Minister of Construction promulgates the Circular guiding the determination and management of construction price indexes.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation and subjects of application

1. Scope of regulation: This Circular guides the determination and management of construction price indexes serving the determination and adjustment of total investment levels, construction cost estimates, prices of construction bidding packages, and prices of construction contracts, conversion of construction investment funds, and management of construction investment costs.

2. Subjects of application:

a/ Agencies, organizations and individuals involved in the determination and management of construction price indexes of construction investment projects funded with state budget capital or non-budget state capital and construction investment projects in the form of public-private partnership (PPP projects).

b/ Organizations and individuals may apply the provisions of this Circular to determine and manage construction price indexes of projects funded with capital from other sources.

Article 2.Classification of construction price indexes

1. Construction price indexes include:

a/ Work type-based construction price indexes, which are indicators reflecting chronological volatility of  construction prices of works of different types.

b/ Cost structure-based construction price indexes, including price indexes for construction activities which are indicators reflecting chronological volatility of construction costs; price indexes for equipment which are indicators reflecting chronological volatility of  costs of equipment of construction works; and price indexes for other costs which are indicators reflecting chronological volatility of project management expenses, construction investment consultancy expenses and other costs.

c/ Cost element-based construction price indexes, including price indexes for construction materials which are indicators reflecting chronological volatility  of costs of construction materials; labor price indexes which are indicators reflecting chronological volatility of costs of labor; and construction machinery and equipment price indexes which are indicators reflecting chronological  volatility  of costs of construction machinery and equipment.

d/ Construction price indexes based on key construction materials, which are indicators reflecting chronological volatility of prices of key construction materials.

2. For specific construction works, the decision to calculate all or several of the price indexes mentioned in Clause 1 of this Article shall be made based on the purposes and requirements of construction investment cost management work.

Article 3.Principles of determination and management of construction price indexes

1. The determined construction price indexes must objectively and suitably reflect volatility of prices in local construction markets.

2. Construction price indexes shall be determined and publicized timely and in accordance with regulations on management of construction investment costs.

3. When determining construction price indexes for publicization, it is required to select a certain number of specific representative works.

4. Construction price indexes shall be calculated as an average value in a selected period, except costs for compensation, support and resettlement and loan interest incurred during construction, and initial working capital for production and business. The unit of calculation of construction price indexes is percentage (%).

5. The cost structure used for calculation of construction price indexes must conform to the cost structure prescribed in regulations on management of construction investment costs, and shall be aggregated from statistical data and used on a stable basis until the base time is changed.

6. The management and application of construction price indexes must comply with relevant regulations on management of construction investment costs.

7. During the determination of price indexes, specialized construction agencies shall review and assess calculated price indexes against information on price indexes in adjacent regions and localities in order to ensure that price indexes are suitable to fluctuations in regional markets and show no big differences between localities.

Chapter II

DETERMINATION OF CONSTRUCTION PRICE INDEXES

Article 4.Order of determining construction price indexes

1. Determining the time of index calculation, including base time and comparison time;

2. Listing price indexes to be determined, and selecting input elements;

3. Collecting and processing figures and data used for calculation;

4. Determining construction price indexes.

Article 5.Time of determination of construction price indexes

1. Time of determination of construction price indexes to be publicized by provincial-level People’s Committees:

a/ Base time is the year 2020. The Ministry of Construction shall prescribe the base time as soon as it is changed for localities to make appropriate adjustments.

b/ Comparison time is the month, quarter and year when construction price indexes are publicized in comparison with those at the base time.

2. In case of determining construction price indexes for a specific work, the project owner shall, based on the progress and conditions for implementation of work items, select the base time and comparison time as appropriate.

Article 6.Determination of the list of work types, selection of input cost elements

1. The number and list of work types for publicization shall be decided based on management requirements, regulations on project management and work construction investment cost management, and characteristics of work types in localities. Provincial-level People’s Committees shall base themselves on the list of work types provided in Appendix No. 3 to this Circular to select and determine the list of work types for calculation and publicization of construction price indexes to localities.

2. When determining construction price indexes for a construction work type, it is required to select construction works representing that type. The number of representative works for a work type for which construction price indexes are to be determined depends on specific conditions of each locality but must be at least 3. A representative work is a work which, among its type, is commonly built in a locality.

3. In case of determining construction price indexes for a specific work, such work is the representative one.

4. Representative input cost elements are costs of materials of different types, labor and major construction machinery for works or work types. Types of materials, labor and major construction machinery to be used for calculating construction price indexes shall be selected based on the principles that costs for such types of materials, labor and construction machinery must account for a large proportion (more than 80%) of the total costs of materials, labor and construction machinery of the work.

Article 7.Collection and processing of figures and data used for calculation

1. Requirements on collection of figures and data for determination of cost structure:

a/ Figures on work construction investment costs such as approved total investment levels, construction cost estimates and settlement of construction investment funds for completed works (if any), including detailed cost items.

b/ Regimes, policies and regulations on management of work construction investment costs, use of labor, materials, construction machinery and equipment, and other relevant costs at the time of calculation.

2. Requirements on information on market prices of input elements:

a/ Prices of construction materials: Prices of construction materials shall be determined in accordance with the Ministry of Construction’s Circular guiding the determination and management of construction investment costs. The list of materials used to calculate construction prices indexes must be consistent in terms of types, specifications and labels. For construction price indexes determined for a work, prices of construction materials shall be based on the publicized prices of the concerned locality. In case the locality has not yet publicized prices of construction materials, the prices shall be collected from the market but must be suitable to the area where the work is built and categories, specifications and labels of construction materials used for such work and conform to requirements on determination of prices of construction materials specified in the Ministry of Construction’s Circular guiding the determination and management of construction investment costs.

b/ Prices of construction labor shall be determined according to unit prices of construction labor publicized by provincial-level People’s Committees. In case a provincial-level People’s Committee has not yet publicized unit prices of construction labor, the Ministry of Construction-guided methods of determining prices of construction labor shall be applied.

c/ Construction machinery and equipment shift rates shall be determined according to machinery shift rates and costs for hiring construction machinery and equipment publicized by provincial-level People’s Committees. In case a provincial-level People’s Committee has not publicized machinery shift rates and costs for hiring construction machinery and equipment, the Ministry of Construction-guided method of determining prices of construction machine shifts and construction equipment shall be applied. The list of construction machinery and equipment used to calculate construction price indexes must be consistent in terms of category, capacity and origin.

3. Processing of figures for calculation of construction price indexes

a/ For figures and data used to determine cost structure: The processing of collected figures and data includes the review, examination and calibration of figures and data, and cost estimate structure. Figures on cost estimate structure shall be converted based on the structure prescribed at the base time. Figures on total investment levels, work construction cost estimates and settlement of work construction investment funds (if any) shall be converted to the price levels at the base time.

b/ For information on prices of input elements: The collected figures and data on prices of input elements shall be examined, reviewed and calibrated. Specifically, prices of input construction materials shall be examined regarding compatibility in terms of category, specification and label; prices of input construction labor shall be examined regarding  compatibility in terms of type and rank of construction workers performing the jobs; and input construction machinery and construction equipment shift rates shall be examined regarding compatibility in terms of category, capacity and origin.

Article 8.Methods of determining construction price indexes

1. A construction price index shall be calculated by the weighted average method by multiplying the price volatility (construction price index) of the selected representative input element by the corresponding weight. The calculation of construction price indexes must comply with guidance in Appendix No. 1 to this Circular.

2. Based on characteristics of the local construction market, a provincial-level People’s Committee shall decide on the calculation of construction price indexes for the whole province or city or calculate construction price indexes for each area of the province or city and summarize such indexes into common construction price indexes. The division of regions for calculation of construction price indexes shall be decided by provinces and cities based on characteristics of administrative boundaries and local construction markets or regulations on zoning off areas for application of region-based minimum wage levels prescribed by the Government.

3. A regional construction price index shall be calculated by the weighted average method by multiplying the construction price index of each province or centrally run city in the region by the corresponding weight.

4. A national construction price index shall be calculated by the weighted average method by multiplying the construction price index of each region by the corresponding weight.

5. Construction price indexes for a specific work shall be determined based on the cost structure of such work and prices (or price indexes) of input cost elements suitable to work construction conditions and site.

6. The cost structure used to determine price indexes for the adjustment of the price of a construction contract shall be based on the price structure stated in such contract. In case of lacking details to determine cost structure based on the contractual price, cost structure shall be determined based on the approved bidding package or work cost estimate.

Chapter III

MANAGEMENT OF CONSTRUCTION PRICE INDEXES

Article 9.Management of determination of construction price indexes

1. The Ministry of Construction shall determine regional (inter-provincial) and national construction price indexes.

2. Provincial-level People’s Committees shall assign specialized construction agencies to determine the construction price indexes specified in Clause 1, Article 2 of this Circular.

3. The determination of and negotiation on construction price indexes of works that are not included in the list publicized by Ministry of Construction or provincial-level People’s Committees must comply with Clause 4, Article 18 of the Government’s Decree No. 68/2019/ND-CP of August 14, 2019.

Article 10.Issuance and publicization of construction price indexes

1. Competence to issue and publicize and frequency of issuance and publicization of construction price indexes:

a/ Regional and national construction price indexes shall be issued by the Ministry of Construction on a quarterly and annual basis according to Table No. 1.1 of Appendix No. 4 to this Circular.

b/ The construction price indexes specified in Clause 1, Article 2 of this Circular shall be publicized by provincial-level People’s Committees on a monthly, quarterly and annual basis according to Tables No. 1.2, 1.3 , 1.4 and 1.5 of Appendix No. 4 to this Circular.

2. Time of issuance and publicization of construction price indexes:

a/ Construction price indexes to be publicized on a monthly basis shall be publicized in the third week of the subsequent month;

b/ Construction price indexes to be publicized on a quarterly basis shall be publicized and publicized in the third week of the first month of the subsequent quarter.

c/ Construction price indexes to be publicized on an annual basis shall be publicized and publicized in the third week of the first month of the subsequent year.

3. Issuance and publicization of construction price indexes:

a/ Construction price indexes issued by the Ministry of Construction shall be publicized on the Ministry’s website within 2 days after the issuance of an issuance decision.

b/ Construction price indexes publicized by provincial-level People’s Committees shall be publicized on local construction management agencies’ websites within 2 days after the issuance of a publicization decision.

Chapter IV

ORGANIZATION OF IMPLEMENTATION

Article 11.Responsibilities of the Ministry of Construction

1. To guide, inspect and urge localities to determine and publicize construction price indexes in accordance with this Circular.

2. To organize training and provide professional guidance on the determination and management of construction price indexes.

3. To store information on construction price indexes of provinces and centrally run cities to serve the market management and control and building of a transparent market.

4. To issue regional (inter-provincial) construction price indexes and national construction price indexes.

Article 12.Responsibilities of provincial-level People’s Committees

1. To direct the implementation of this Circular and allocate funds from the sources of current expenditures of their local budgets for the determination and publicization of construction price indexes in provinces and cities.

2. To assign specialized construction agencies to:

a/ Assume the prime responsibility for, and coordinate with related units in, organizing, based on the guidance of this Circular and fluctuations of local construction prices, the determination of construction price indexes to be publicized by provincial-level People’s Committees. In case of necessity, hire cost management consultancy organizations that fully satisfy the prescribed capacity conditions to determine construction price indexes. Consultancy organizations shall take responsibility before law for the quality of the products they provide.

b/ Regularly monitor information on local construction market prices; update and store information on construction prices in local markets and send it to the Ministry of Construction on a monthly basis.

3. To publicize construction price indexes on a monthly, quarterly and annual basis and concurrently send them to the Ministry of Construction for monitoring and management. The time of publicization of construction price indexes specified in this Circular is from January 2021.  In order to convert values of construction price indexes upon change of the base time, in 2021, specialized construction agencies shall publicize construction price indexes based on work types, cost structure and cost elements compared with the base year being 2020 as prescribed in this Circular and the base year selected and publicized under the Ministry of Construction’s Circular No. 06/2016/TT-BXD of March 10, 2016. The method of converting values of construction price indexes upon change of base time is prescribed in Appendix No. 2 to this Circular.

Article 13.Responsibilities of project owners

To determine construction price indexes under Clause 3, Article 9 of this Circular, ensuring objectivity, accuracy and conformity with management requirements, and take responsibility for application of these indexes. In case of necessity, to hire cost management consultancy organizations that fully satisfy the prescribed capacity conditions to determine construction price indexes. Consultancy organizations shall take responsibility before project owners and law for the accuracy and rationality of the  construction price indexes they determine.

Article 14.Transitional handling

1. The determination and use of construction price indexes in the transitional period must comply with Article 36 of the Government’s Decree No. 68/2019/ND-CP of August 14, 2019, on management of construction investment costs.

2. When cost structure at the time selected as the base time under this Circular has not yet been determined, specialized construction agencies shall continue calculating, determining and publicizing construction price indexes by the methods prescribed in the Ministry of Construction’s Circular No. 06/2016/TT-BXD of March 10, 2016 and submit such indexes to provincial-level People’s Committees for issuance till the end of 2020.

Article 15.Implementation provisions

1. This Circular takes effect on February 15, 2020.

2. The contents relating to construction price indexes prescribed in Articles 20 thru 24 of the Ministry of Construction’s Circular No. 06/2016/TT-BXD of March 10, 2016, guiding the determination and management of construction investment costs, cease to be effective on the effective date of this Circular.-

For the Minister of Construction
Deputy Minister
BUI PHAM KHANH

* The appendices to this Circular are not translated.