Circular 18/2019/TT-BXD guiding conversion of construction investment funds

CIRCULAR

Guiding the conversion of construction investment funds^[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 management of construction investment costs;

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

The Minister of Construction promulgates the Circular guiding the conversion of construction investment funds.

Article 1.Scope of regulation

This Circular guides the content and method of conversion of construction investment funds for construction investment projects funded with state budget capital or non-budget state capital to determine the value of newly increased assets formed through investment under Clause 1, Article 32 of the Government’s Decree No. 68/2019/ ND-CP of August 14, 2019, on management of construction investment expenses. Particularly, investment projects in the form of public-private partnership (PPP) must comply with the law on PPP investment.

Article 2.Subjects of application

1. Agencies, organizations and individuals involved in the conversion of construction investment funds of projects funded with state budget capital or non-budget state capital.

2. Agencies, organizations and individuals involved in the conversion of construction investment funds for projects funded with capital from other sources are encouraged to apply this Circular.

Article 3.Principles of conversion of construction investment funds

1. Conversion of construction investment funds means conversion of settled investment cost items to the price levels at the time works are handed over and put into commission.

2. Project owners shall, based on the guidance in the Circular, convert construction investment funds for projects and works of which the construction lasts for more than 2 years (counting from the date of commencement of construction to the date of acceptance testing).

3. The conversion of construction investment funds must reflect all investment costs of construction investment projects by the time of conversion. If the value of an investment item, after being converted, is smaller than the value used for settlement, the value already used for settlement of investment funds shall be used as the conversion value. For construction investment projects which incur interest costs in the investment process, such costs shall be kept unchanged in the conversion value of the works.

4. A report on conversion of construction investment funds of a construction work shall be made and submitted together with a settlement dossier to the work’s investment decider for approval within 9 months after the minutes of acceptance testing of the work is signed and the work is put into commission.

5. Project owners may hire cost management consultancy organizations that fully satisfy the capacity conditions prescribed in the Government’s decree on management of construction investment projects to conduct the conversion of construction investment funds. The selection of consultancy organizations must comply with law.

Article 4.Content of conversion of construction investment funds

1. Conversion of construction investment funds means conversion of investment cost items, including compensation, support and resettlement costs (if any); construction costs; equipment costs; project management costs; construction investment consultancy costs; and other costs.

2. Compensation, support and resettlement costs incurred each year shall be converted due to the volatility of factors in compensation cost, construction cost, cash flow-based costs and other relevant factors to the price level at the time works are handed over and put into commission.

3. Construction costs to be converted are the total of construction costs of a work (work item) which incurred each year and shall be converted due to the volatility of factors in construction costs (including material cost, labor cost, construction machinery cost and other remaining cost items included in construction costs such as indirect costs and presumed taxable income) under the Ministry of Construction’s guidance on determination and management of construction investment costs at the time works are handed over and put into commission.

4. Equipment costs to be converted are the total of costs of procurement of construction equipment and technological equipment; costs of management of procurement of construction equipment by contractors; costs of purchase of copyrighted software used for construction equipment and technological equipment of projects; costs of training and technology transfer; costs of the processing and manufacture of non-standard equipment (if any); installation, testing and calibration costs; costs of trial operation of equipment according to technical requirements; transportation and insurance costs; and relevant taxes, charges and other costs which incurred each year and shall be converted due to the volatility of cash flows (local currency and foreign currencies) and other relevant factors to the price level at the time works are handed over and put into commission.

5. Project management costs to be converted are the value of project management costs which incurred each year and shall be converted due to the volatility of factors in construction costs and other relevant factors to the price level at the time works are handed over and put into commission.

6. Construction investment consultancy costs to be converted are the total of construction investment consultancy costs which incurred each year and shall be converted due to the volatility of factors in construction costs and cash flow-based costs and other relevant factors to the price level at the time works are handed over and put into commission.

7. Other costs to be converted are the total of other costs incurred each year and converted due to the volatility of factors in construction costs, cash flow-based costs and other relevant factors to the price level at the time works are handed over and put into commission.

Article 5.Methods of conversion of construction investment funds

1. Construction investment funds shall be converted according to the following methods:

a/ Using conversion factors.

b/ Using construction price indices.

c/ Making cost estimates based on the completed volume and construction prices of works at the time works are handed over and put into commission.

d/ Combining the methods prescribed at Points a, b and c of this Clause.

2. Projects owners shall base on project implementation and contractual price forms of construction bidding packages to select one of the methods prescribed at Points a, b, c and d, Clause 1 of this Article to convert investment funds in an appropriate manner. Specific contents of methods of converting construction investment funds are provided in Appendix 1 to this Circular.

3. The forms of report on the result of conversion of construction investment funds and table of conversion of construction investment funds are provided in Appendix 2 and Appendix 3 to this Circular, respectively.

Article 6.Transitional handling

To comply with Article 36 of the Government’s Decree No. 68/2019/ND-CP of August 14, 2019, on management of construction investment costs.

Article 7.Effect

This Circular takes effect on February 15, 2020.-

For the Minister of Construction
Deputy Minister
BUI PHAM KHANH

* The appendices to this Circular are not translated.