Circular 09/2019/TT-BXD 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. 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 Construction Economics Department;

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 guides the determination and management of construction investment costs of construction investment projects using state budget funds or non-budget state funds and construction investment projects in the form of public-private partnership (below referred to as PPP projects), including preliminary total construction investment, total construction investment, construction cost estimates, prices of construction bidding packages, construction norms, work construction prices, and investment ratios for and general construction prices of structure components of works.

Article 2. Subjects of application

1. 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, and PPP projects.

2. Agencies, organizations and individuals involved in the determination and management of construction investment costs of construction investment projects, or determination of construction investment costs of projects using other funding sources for use as a basis for fulfillment of financial obligations toward the State.

Chapter II

PRELIMINARY TOTAL CONSTRUCTION INVESTMENT AND TOTAL CONSTRUCTION INVESTMENT

Article 3. Cost items of preliminary total construction investment and total construction investment

1. Cost items of preliminary total construction investment and total construction investment must comply with Clauses 2 and 4, Article 4 of the Government’s Decree No. 68/2019/ND-CP of August 14, 2019, on management of construction investment costs (below referred to as Decree No. 68/2019/ND-CP), of which construction costs, equipment costs, project management expenses, construction investment consultancy expenses, and other costs are specified as follows:

a/ Construction costs and equipment costs include the costs mentioned in Clauses 2 and 3, Article 8 of this Circular.

b/ Project management expenses, including those mentioned in Clause 2, Article 21 of Decree No. 68/2019/ND-CP, are expenses necessary for performing management jobs of a project from the stage of project preparation to construction completion and putting of the project’s works into operation and use, including the following jobs:

- Construction survey supervision;

- Selection of architectural designs or architectural design plans for works;

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

- Appraisal of the construction investment feasibility study report or construction investment techno-economic report;

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

- Selection of construction contractors;

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

- Management of information systems of works; collection and provision of information and data for the management of construction investment costs at the requests of competent state agencies;

- Assurance of occupational safety and environmental sanitation for works;

- Formulation or adjustment of construction norms for works;

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

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

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

- Control of construction investment costs;

- Conversion of construction investment funds for the works after they are completed, tested before acceptance, handed over and put into use;

- Acceptance test, payment and liquidation of contracts; and payment and final settlement of work construction investment funds;

- Organization and performance of supervision and evaluation of work construction investment projects;

- Acceptance test and handover of works;

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

- Determination and update of prices of construction bidding packages;

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

- Performance of other project management jobs.

c/ Construction investment consultancy expenses, including those mentioned in Clause 2, Article 23 of Decree No. 68/2019/ND-CP, are expenses necessary for performing construction investment consultancy jobs at different stages of the construction investment process of a project, from project preparation, project implementation to construction completion and putting of the project’s works into operation and use, including the following jobs:

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

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

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

- Verification of compensation, support and resettlement plans;

- Organization of contests for selection of architectural designs for construction works;

- Engineering;

- Verification of total construction investment, engineering and construction cost estimates;

- Preparation and appraisal of dossiers of invitation for expression of interest, dossiers of invitation for prequalification, bidding dossiers and dossiers of requirements, and evaluation of dossiers of interest, dossiers of prequalification participation, bid dossiers and dossiers of proposal for selection of construction contractors;

- Appraisal of construction contractor selection results;

- Supervision of construction and equipment installation;

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

- Verification of traffic safety conditions;

- Application of the Building Information Modeling (BIM) system (if any);

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

- Specialized construction testing;

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

- Quality testing of work parts, work items or whole works (if any);

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

- Preparation of environmental impact assessment reports in accordance with the law on environmental protection;

- Conversion of construction investment funds for the works after they are completed, tested before acceptance, handed over and put into use;

- Performance of other consultancy jobs.

Particularly, construction survey costs, including direct costs, indirect costs, presumed taxable income, and value-added tax, shall be determined and managed as construction costs in construction cost estimates.

d/ Other expenses, including those necessary for implementing construction investment projects, shall be determined based on cost norms or cost estimates issued by competent state agencies in accordance with relevant regimes and policies for performance of jobs of projects, including:

- Expenses for demining;

- Costs (compulsory) of insurance for works during the construction;

- Costs of international quality inspection registration for and monitoring of work deformities (if any);

- Expenses for the audit, verification and approval of final accounts of investment funds;

- Costs for competent state management agencies to inspect acceptance tests during construction and upon completion of work items or works (in case of hiring experts);

- Costs for scientific and technological research related to the project; initial working capital, for construction investment projects for commercial purposes, and loan interests during construction; costs for load and no-load trial operation of works according to the technological process before they are handed over (after subtracting the value of recovered products);

- Payment of royalty, charges and fees as prescribed;

- Other expenses (if any).

2. For projects which only require construction investment techno-economic reports, cost items of total construction investment must comply with Clause 3, Article 4 of Decree No. 68/2019/ND-CP.

3. For projects using official development assistance (ODA) and PPP projects, in addition to the cost items of preliminary total construction investment and total construction investment mentioned above, other necessary cost items shall be added to suit the specific characteristics of such projects in accordance with relevant current laws.

Article 4. Methods of determining preliminary total construction investment

1. The preliminary total construction investment of a project shall be determined under Clause 1, Article 5 of Decree No. 68/2019/ND-CP. If it is impossible to determine the size or service capacity according to the preliminary design plan of such project or it is possible to do so but no datum on construction investment ratio has been announced, the preliminary total construction investment shall be determined based on the data on costs of completed or ongoing construction projects of similar type, grade, size or service capacity, with adjustment and addition of other necessary costs, and conversion of costs as suitable to the levels applied at the time of determining the preliminary total investment, places of construction and characteristics of such project.

2. For a project implemented under a turnkey contract, construction costs and equipment costs in the preliminary total construction investment shall be calculated mainly by determining the construction volume based on the preliminary design in combination with the use of the investment ratio or data on costs of similar works, ensuring that such costs are correctly and fully calculated to determine the cost estimate for the turnkey bidding package.

3. The appraisal and approval of the preliminary total construction investment must comply with:

a/ The law on public investment and law on investment, for projects using state budget funds or non-budget state funds.

b/ The law on PPP, for PPP projects.

4. Grounds for determination of cost estimates for turnkey bidding packages must comply with Clause 2, Article 11 of this Circular. Investment deciders shall appraise and approve cost estimates for turnkey bidding packages.

5. Methods of determining the preliminary total construction investment are provided in Section 1, Appendix No. 1 to this Circular.

Article 5. Methods of determining total construction investment

1. The total construction investment shall be made on the basis of the contents of a construction investment feasibility study report, including base design, explanation of base design, applicable technical regulations and standards, technological and technical solutions and equipment; solutions on architecture and main structure of works; solutions on construction and major materials, construction conditions; project implementation plan, and other necessary requirements in accordance with the contents of the construction investment feasibility study report.

2. The total construction investment of a project shall be determined according to one of the methods specified in Clause 2, Article 5 of Decree No. 68/2019/ND-CP, specifically as follows:

a/ Based on the construction volume calculated according to the base design, project implementation plan, construction methods, practical conditions of the project, other necessary requirements of the project, construction norms and unit prices, and relevant regimes and policies;

b/ Based on data on costs of similar works;

c/ Based on work construction investment ratio;

d/ Combination of the methods mentioned at Points a, b and c of this Clause.

3. The methods mentioned at Points b and c, Clause 2 of this Clause shall be applied only to ordinary construction works.

4. Several cost items constituting construction costs, equipment costs, project management expenses, construction investment consultancy expenses and other costs of a project for which no regulations are issued or no grounds are available for their calculation at the time of making the total construction investment shall be added and estimated for inclusion in the total construction investment.

5. For projects implemented under engineering, procurement and construction (EPC) contracts, engineering and construction (EC) contracts, or engineering and procurement (EP) contracts, construction costs and equipment costs in the total construction investment shall be determined mainly according to the method mentioned at Point a, Clause 2 of this Article in combination with other methods.

6. Methods of determining the total construction investment are provided in Section 2, Appendix No. 1 to this Circular.

Article 6. Contents of, and competence for, appraisal and approval of total construction investment

1. The contents of appraisal of total construction investment must comply with Clause 1, Article 6 of Decree No. 68/2019/ND-CP.

2. The competence for appraisal of total construction investment must comply with Clauses 3 and 4, Article 6 of Decree No. 68/2019/ND-CP. For projects using non-budget state funds which only require construction investment techno-economic reports, the competence for appraisal of their total construction investment must comply with Clause 5, Article 1 of the Government’s Decree No. 42/2017/ND-CP of April 5, 2017, amending and supplementing a number of articles of the Government’s Decree No. 59/2015/ND-CP of June 18, 2015, on management of construction investment projects.

3. The competence for approval of total construction investment must comply with Clause 7, Article 6 of Decree No. 68/2019/ND-CP.

4.  The form of a report on the result of appraisal or verification of total construction investment is provided in Appendix No. 10 to this Circular.

Article 7. Adjustment of preliminary total construction investment and total construction investment

1. The adjustment of preliminary total construction investment must comply with the law on public investment, the law on investment and the law on PPP.

2. The adjustment of the approved total construction investment must comply with Article 7 of Decree No. 68/2019/ND-CP.

3. The form of a report on the result of appraisal or verification of the adjusted preliminary total construction investment or adjusted total construction investment is provided in Appendix No. 10 to this Circular.

Chapter III

CONSTRUCTION COST ESTIMATES

Article 8. Contents of construction cost estimates

1. Contents of construction cost estimates must comply with Article 8 of Decree No. 68/2019/ND-CP. Items of construction cost estimates are specified in Clauses 2 thru 7 of this Article.

2. Construction costs, including direct costs, indirect costs, presumed taxable income and value-added tax, are specified as follows:

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

b/ Indirect costs include:

- Overhead costs, including the enterprise’s general management cost, construction site administration cost, and cost of insurance for employees payable by employers.

- Cost of makeshift houses for worker accommodation and construction administration.

- Cost of a number of jobs the volume of which cannot be determined under designs, including cost of occupational safety and environmental protection for workers at the construction site and in surrounding areas; cost of testing of materials of contractors; cost of transportation of workers within the construction site; and cost of irregular water pumping and mud dredging.

- Based on specific conditions of each project, work or construction bidding package, indirect costs may also include other indirect costs, such as cost of transportation of special-use construction machinery and equipment 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 material warehousing (if any); cost of building of houses for machinery, machinery foundations, electricity and compressed air supply system, and water supply 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).

c/ Presumed taxable income means the construction enterprise’s profits projected in the construction cost estimate.

d/ Value-added tax must comply with the State’s regulations.

3. Equipment cost of a work or work item includes the cost items specified at Point b, Clause 2, Article 9 of Decree No. 68/2019/ND-CP.

4. Project management expense includes the cost items specified at Point b, Clause 1, Article 3 of this Circular.

5. Construction investment consultancy expense is specified at Point c, Clause 1, Article 3 of this Circular.

6. Other costs in cost estimates include the cost items specified at Point d, Clause 1, Article 3 of this Circular. For a project consisting of many works, other costs in its cost estimate exclude cost of loan interest during construction; cost of demining; cost of audit, verification and approval of final accounts of investment funds; cost of project-related scientific and technological research; initial working capital, for construction investment projects for commercial purposes; cost of no-load and full-load trial operation of works according to technological process before handover (excluding value of recovered products); charges, fees and other costs already calculated for the project.

7. Contingency amounts include contingency amounts for newly arising job volumes and inflation during the construction period.

Article 9. Methods of construction cost estimation

1. Grounds for construction cost estimation are provided in Clause 1, Article 9 of Decree No. 68/2019/ND-CP.

2. Determination of construction costs

Construction costs may be determined through separate cost items or aggregate cost items by the method specified at Point a or b below:

a/ Determination based on work construction volume and price

- Direct costs, including material cost, labor cost and construction machinery and equipment cost, shall be determined based on volume of construction jobs and construction price of a work.

- Indirect costs shall be determined in percentage (%) or by cost estimation as guided in Section 3.1 of Appendix No. 3 to this Circular.

- Presumed taxable income shall be calculated in percentage (%) of direct costs and indirect costs as guided in Table 3.11 of Appendix No. 3 to this Circular.

- Value-added tax must comply with the State’s regulations.

- The volume of construction jobs shall be measured and calculated according to technical design drawings, blueprints or front-end engineering designs (FEED), technical instructions and job requirements of the work. The method of measurement of construction job volume must comply with the Minister of Construction’s guidance.

- Work construction prices used for construction cost estimation may be detailed or summary ones conformable with construction job volume that is measured and calculated according to technical design drawings, blueprints or FEED, technical instructions and job requirements of the work. Contents and method of determination of work construction prices must comply with Article 18 of this Circular.

b/ Determination based on depreciation of materials, labor, construction machinery and equipment, and prices of relevant cost items

- Material cost, labor cost, and construction machinery and equipment cost constituting direct costs shall be determined based on volume of materials, labor, construction machinery and equipment, and prices of these cost items.

- Volume of materials, labor and construction machinery and equipment shall be determined based on construction job volume measured according to technical design drawings, blueprints or FEED, and techno-economic norms.

- Prices of construction materials shall be determined under guidance in Table 4.1 of Appendix No. 4 to this Circular.

- Prices of labor and construction machinery and equipment shall be determined under guidance of the Minister of Construction.

- Indirect costs, presumed taxable income and value-added tax must comply with guidance at Point a of this Clause.

3. Determination of equipment costs

a/ Equipment costs shall be determined under Point b, Clause 2, Article 9 of Decree No. 68/2019/ND-CP and the following provisions:

- Volume, quantities and types of equipment shall be determined according to technological and construction designs and the list of equipment in the approved project.

- Equipment procurement prices shall be determined according to market prices or price quotes of producers, manufacturers or ongoing works using similar equipment at the time of calculation.

- For equipment that needs to be manufactured, equipment costs shall be determined based on volume and quantities of to-be-manufactured equipment and manufacturing unit prices conformable with the characteristics and type of equipment under signed manufacture contracts or based on manufacturing price quotes chosen by project owners or manufacturing prices of similar equipment used by ongoing works by the time of calculation.

b/ Costs of equipment procurement management (including cost of supervision of equipment installation by suppliers), equipment installation supervision by contractors; cost of purchase of copyrighted software for use for work equipment and technological equipment of the project (if any); cost of training and technology transfer; and cost of manufacture of non-standard equipment (if any) shall be determined by estimation method or based on cost norms promulgated by competent state agencies.

c/ Cost of equipment installation shall be determined by estimation method as for construction cost estimates mentioned in Clause 2 of this Article.

d/ Costs of testing, calibration, training and technology transfer, and other related costs shall be determined by estimation method in conformity with performed jobs.

4. Determination of project management expenses

Project management expenses shall be determined based on percentile norms (%) promulgated by the Minister of Construction or by estimation method in conformity with the form, scope, location and duration of project management. The method of determination of project management expenses must comply with guidance of the Minister of Construction.

5. Determination of construction investment consultancy expenses

a/ Consultancy expense in construction cost estimates shall be determined based on percentile norms (%) or volume-based norms or by estimation method in conformity with volume and scope of consultancy jobs, and policies promulgated or announced by the Minister of Construction or competent state agencies. In case a number of construction investment consultancy jobs are performed before construction cost estimation, the expense shall be determined based on value of signed consultancy contracts in accordance with the State’s regulations.

b/ In case of hiring foreign consultants, consultancy expense shall be determined by estimation method in conformity with consultant use requirements in terms of quantity and quality, competent authorities’ regulations and international practices. The method of determination of expense of hiring foreign consultants must comply with guidance of the Minister of Construction.

c/ The method of determination of construction investment consultancy expense must comply with guidance of the Minister of Construction. Particularly, method of determination of construction survey cost must comply with guidance provided in Appendix No. 9 to this Circular.

6. Other costs shall be determined based on percentile norms (%) as guided by competent state agencies or by estimation method or based on value of signed contracts in accordance with law. In case conditions for determination of a number of other costs are not satisfied, such costs shall be approximated in work construction cost estimates.

For specialized construction works with special cost items or works funded by ODA, if there are other related costs specified in relevant treaties, such costs shall be added in cost estimates.

7. Determination of contingency amounts

a/ Contingency amounts for newly arising job volumes shall be determined in percentage (%) of total construction costs, equipment costs, project management expense, construction investment consultancy expense and other costs.

b/ Contingency amounts for inflation shall be determined based on work construction period, bidding package implementation period, project implementation plan, contractor selection plan, capital allocation plan and construction price index (calculated by month, quarter, year) conformable to different types of construction works, taking into account domestic and international price fluctuations.

c/ For a construction investment project consisting of many works or having its contractor selection plan approved, contingency amounts in construction cost estimates (total cost estimates) are total contingency amounts of works or construction bidding packages, and remaining contingency amounts not yet allocated to works or construction bidding packages of the project. Contingency amounts allocated to different works of a project consisting of many works or construction bidding packages of a project having its contractor selection plan approved shall be determined based on nature of jobs, job performance period, technical requirements, practical conditions and other factors. The management of contingency amounts must comply with Article 15 of this Circular.

8. Methods of determination of construction costs, equipment costs, other costs and contingency amounts are provided in Appendices No. 2 and No. 3 to this Circular.

Article 10. Cost estimates of construction bidding packages

1. Cost estimates of a construction bidding package include:

a/ Cost estimate of construction bidding package;

b/ Cost estimate of material and equipment procurement bidding package;

c/ Cost estimate of equipment installation bidding package;

d/ Cost estimate of construction investment consultancy bidding package;

dd/ Cost estimate of engineering and construction (EC) bidding package;

e/ Cost estimate of engineering and procurement (EP) bidding package;

g/ Cost estimate of procurement and construction (PC) bidding package;

h/ Cost estimate of engineering, procurement, and construction (EPC) bidding package;

i/ Cost estimate of project formulation, engineering, procurement and construction (turn-key) bidding package;

k/ Cost estimates of other construction bidding packages.

Cost estimates of construction bidding packages shall be determined based on each bidding package and in conformity with a contractor selection plan. In case work construction cost estimates or total cost estimates are available, cost estimates of specific bidding packages are not required.

2. Items of cost estimates of construction bidding packages

a/ Cost estimate of a construction bidding package covers direct costs, indirect costs, presumed taxable income, value-added tax and contingency amounts for newly arising job volumes and inflation.

b/ Cost estimate of a material and equipment procurement bidding package covers cost of procurement of materials, work and technology equipment, and value-added tax; cost of manufacture of non-standard equipment (if any); expense for management of procurement of work equipment by contractors; expense for training and technology transfer (if any); cost of transportation and insurance and other charges (if any); other related costs; and contingency amounts for newly arising job volumes and inflation.

c/ Cost estimate of an equipment installation bidding package covers cost of equipment installation, testing and calibration, value-added tax, other related costs, and contingency amounts for newly arising job volumes and inflation.

d/ Cost estimate of construction investment consultancy bidding package covers expense for expert hiring, management expense, other costs, presumed taxable income, taxation and contingency amounts for newly arising volumes and inflation.

dd/ Cost estimate of an EC bidding package covers the cost estimates specified at Points a and d of this Clause.

e/ Cost estimate of an EP bidding package covers the cost estimates specified at Points b and d of this Clause.

g/ Cost estimate of a PC bidding package covers the cost estimates specified at Points a and b of this Clause.

h/ Cost estimate of an EPC bidding package covers cost items of engineering, material and equipment procurement and construction in the approved total construction investment.

i/ Cost estimate of a turn-key bidding package covers cost items in the approved total construction investment of the project specified at Point b, c, d, dd, e and g, Clause 4, Article 4 of Decree No. 68/2019/ND-CP.

k/ Items in cost estimates of other construction bidding packages shall be determined based on the scope of jobs of bidding packages.

3. Project owners shall determine cost estimates of bidding packages when having full capacity in accordance with law. In case they are incapable to determine cost estimates of construction bidding packages, project owners may hire cost management consultants that fully satisfy capacity conditions prescribed in the Decree on management of construction investment projects to do so.

Article 11. Grounds for and methods of determination of cost estimates of construction bidding packages

1. Grounds for determination of cost estimates of construction bidding packages

a/ In case a construction investment project has its contractor selection plan approved by a competent person, its construction cost estimates may be determined based on costs of each construction bidding package.  In this case, costs of a construction bidding package shall be determined by a method similar to that of determination of items of construction cost estimates provided in Article 10 of this Circular.

b/ For bidding packages implemented before technical designs, blueprints and FEED are approved, their cost estimates shall be determined based on the approved total construction investment in conformity with a contractor selection plan and requirements of bidding dossier or dossier of requirements.

c/ For bidding packages to make investment preparations, their cost estimates shall be determined based on tentative tasks and jobs that need to be performed and cost estimates of investment preparations and in conformity with a contractor selection plan and requirements of bidding dossiers or dossier of requirements.

d/ For turn-key bidding packages, their cost estimates shall be determined based on the approved preliminary total construction investment in conformity with the approved prefeasibility study report or investment policy, and preliminary designs and their scope stated in the approved contractor selection plan, and requirements of bidding dossier or dossier of requirements. If the approved prefeasibility study report or investment policy and preliminary designs are not sufficient for determination of cost estimates of turn-key bidding packages, project owners shall specify preliminary designs, requirements, standards and technical regulations applicable to bidding packages so as to determine appropriate costs of bidding packages.

2. The method of determination of cost estimates of construction bidding packages is guided in Section 2 of Appendix 2 to this Circular.

Article 12. Appraisal, verification and approval of construction cost estimates

1. Appraisal contents of construction cost estimates must comply with Clause 2, Article 10 of Decree No. 68/2019/ND-CP.

2. The competence to appraise and approve construction cost estimates must comply with Clauses 3 and 4, Article 10 of Decree No. 68/2019/ND-CP. Particularly, cost estimates for turnkey bidding packages and mixed bidding packages (EPC, EC, EP or PC bidding packages) shall be appraised and approved by investment deciders before selecting contractors.

3. The form of a report on appraisal and verification results of construction cost estimates is provided in Appendix 10 to this Circular.

Article 13. Adjustment of construction cost estimates

1. Approved construction cost estimates shall be adjusted in the cases specified in Clauses 1 and 3, Article 11 of Decree No. 68/2019/ND-CP and are prescribed as follows:

a/ In case of adjustment of construction cost estimates due to a design change in terms of geology, design load, structural solutions, materials of load-bearing structures or construction organization measures affecting the load-bearing safety of works, cost items affected by the adjustment shall be re-appraised by specialized agencies in charge of construction.

b/ In case of adjustment of cost structure due to inflation; adjustment of volume according to the appraised or approved design, or a design change that does not fall into the cases specified at Point a of this Clause, re-appraisal by specialized agencies in charge of construction is not required. Project owners shall organize appraisal and approval of adjusted costs after obtaining the investment deciders’ approval.

c/ Investment deciders shall approve adjusted construction cost estimates for the case of adjustment of cost estimates specified at Point a of this Clause. In case of adjustment of structure of construction cost estimates in a techno-economic report under Point b of this Clause, project owners shall approve adjusted construction cost estimates.

2. Methods of determining adjusted construction cost estimates are guided in Section 3, Appendix 2 to this Circular.

Article 14. Prices of construction bidding packages

1. Price of a construction bidding package means all costs payable to implement such bidding package, including direct and indirect costs, presumed taxable income, taxes and charges as prescribed by law and contingency amounts for additional volumes and contingency amounts for inflation for the volumes falling within the scope of the bidding package in the approved contractor selection plan.

2. Bases for determining the price of a construction bidding package are specified in Clause 2, Article 12 of Decree No. 68/2019/ND-CP.

3. The direct expense of a bidding package price shall be determined on the basis of construction cost estimate or cost estimate of work construction or cost estimate of construction bidding package.

4. The indirect expense of a construction bidding package price shall be determined in conformity with the contents and scope of the jobs of each bidding package.

5. The contingency amount in the price of a construction bidding package shall be determined in accordance with the nature of the jobs, implementation duration and contractual form of the bidding package, including:

a/ The contingency amount for additional volumes shall be calculated in percentage (%) of the total cost of the bidding package without such contingency amount. For bidding packages with a specific and accurate volume of jobs, the project owners shall decide on the contingency amount for the additional volume, which must not exceed 5%.

b/ The contingency amount for inflation shall be determined on the basis of the implementation period of the bidding package and the construction price index, which must suit the nature and type of jobs of the construction bidding package, taking into account the possibilities of domestic and international price fluctuations.

c/ Depending on each construction bidding package, the level of contingency amount in the price of such bidding package must not exceed the contingency amount in the approved total preliminary investment, total investment, construction cost estimate and cost estimate of the bidding package.

d/ The methods of determining the contingency amount of a construction bidding package are similar to those of determining the contingency amount in the total investment and construction cost estimate.

6. The costs of prices of construction bidding packages shall be determined or updated corresponding to the price levels applied as of the time of 28 days before the date of bid closure. In case the updated price of a construction bidding package is higher than the approved bidding package or construction cost estimate, thus resulting in the excess of the total construction investment of a project, the project owner shall adjust the category and origin of supplies and equipment to meet the quality and technical requirements with rational prices so as not to result in the excess of the total investment and report such to the investment decider for decision. The investment decider shall decide to use contingency amounts upon determining or updating the price of a bidding package.

Article 15. Use of contingency amounts

The use of contingency amounts must comply with Clause 4, Article 11 of Decree No. 68/2019/ND-CP and the following provisions:

The investment decider shall decide on use of contingency amounts of a project and construction cost estimate. The project owner shall, within contingency amounts approved by the investment decider, decide on the use of such amounts as suitable to characteristics, nature, implementation period and specific conditions of each construction bidding package.

Chapter IV

CONSTRUCTION NORMS AND WORK CONSTRUCTION PRICES

Section 1

CONSTRUCTION NORMS

Article 16. System of construction norms

1. Construction norms include basic norms, norms of work construction cost estimates and cost norms as provided in Articles 13 and 14 of Decree No. 68/2019/ND-CP.

2. Methods of determining construction norms must comply with the guidance provided in Appendices 6, 7 and 8 to this Circular.

Article 17. Management of construction norms

The management of construction norms must comply with Article 15 of Decree No. 68/2019/ND-CP, specifically as follows:

1. New construction norms are construction cost estimate norms that have not yet been included in the issued construction norm system, or construction norms already named in the issued construction norm system while other construction technologies are used.

2. Adjusted construction norms are norms with wastage components and norm values of issued construction norms adjusted to suit construction conditions or construction measures or technical requirements of specific works, or all of these three elements.

3. Upon using the construction norms defined in Clauses 1 and 2 of this Article to determine the construction unit price that is higher than the construction unit price with application of issued norms, the project owner shall report them to the investment decider or Minister of Construction, the minister of the ministry managing specialized construction works or chairperson of the provincial-level People’s Committee, for construction investment projects in which the investment is decided by the Prime Minister, and reach agreement with the Ministry of Construction before applying these norms.

Section 2

WORK CONSTRUCTION PRICES

Article 18. Work construction prices

1. Work construction prices must comply with Article 16 of Decree No. 68/2019/ND-CP, specifically as follows:

a/ Detailed construction unit prices include complete and incomplete detailed construction unit prices.

b/ General construction prices include complete and incomplete general construction prices.

2. Cost items constituting work construction prices

a/ Cost items constituting detailed construction unit prices:

- Incomplete detailed construction unit prices include direct costs of materials, labor, and construction machinery and equipment.

- Complete detailed construction unit prices include direct costs, indirect costs and presumed taxable income.

b/ Cost items constituting general construction prices:

- Incomplete general construction prices include direct costs of materials, labor and construction machinery and equipment, which shall be summarized from detailed construction unit prices specified at Point a of this Clause.

- Complete general construction prices include direct costs, indirect costs and presumed taxable income, which shall be summarized from detailed construction unit prices specified at Point a of this Clause.

3. Prices of cost items in work construction prices

a/ Price of construction materials means the price of a unit of materials conformable with its unit of calculation in the construction norm (price for 1 m3 of sand, 1 kg of steel or 1 construction brick, etc.) announced by a competent state agency or according to the market price.

b/ Construction unit labor cost means the price calculated for a workday of a worker personally engaged in construction, which shall be determined under the Minister of Construction’s guidance.

c/ Construction machine shift and equipment price means an average cost determined for a work shift, which shall be determined under the Minister of Construction’s guidance.

4. Grounds for determination of work construction prices

a/ Detailed construction unit prices shall be determined on the basis of corresponding construction norms and prices of cost items or determined according to market prices at the time of calculation.

b/ General construction prices shall be determined on the basis of summarization of detailed construction unit prices or determined according to market prices at the time of calculation.

5. Methods of determining work construction prices and prices of construction materials must comply with the guidance provided in Appendix 4 to this Circular.

Article 19. Management of work construction prices

The management of work construction prices must comply with Article 17 of Decree No. 68/2019/ND-CP, specifically as follows:

1. Provincial-level People’s Committees shall assign provincial-level Departments of Construction to assume the prime responsibility for, and coordinate with related agencies in, based on the Minister of Construction’s guidance, determining and announcing prices of construction materials, construction unit labor costs, construction machine shift and equipment unit prices, and construction price indexes for use as a basis for managing work construction prices under Clause 2, Article 35 of Decree No. 68/2019/ND-CP.

2. Project owners, consultants (on formulation of investment projects, engineering and verification) and appraisal units shall select construction materials that are common, environmentally friendly, energy-efficient and popular in the market upon preparing prefeasibility study reports, feasibility study reports or construction designs and determining construction investment costs, while ensuring cost saving, investment efficiency and satisfaction of requirements of projects.

3. In case it is required to select or import specific construction materials not popular in the market to meet architectural or structural requirements or other requirements of a project, such shall be clearly stated in prefeasibility study reports, feasibility study reports or technical design explanations, construction drawing designs or front-end engineering designs and be accepted or approved by the investment decider.

Chapter V

CONSTRUCTION INVESTMENT RATIO AND GENERAL CONSTRUCTION PRICES OF CONSTRUCTION STRUCTURE PARTS

Section 1

INVESTMENT RATIO OF WORK CONSTRUCTION

Article 20. Contents of investment ratio of work construction

1. Investment ratio of work construction (below referred to as investment ratio) means necessary cost level for a unit of calculation (area, volume, length, etc.) or service capacity, etc., as designed to determine construction investment costs.

2. Investment ratio includes costs of construction, equipment, management of construction investment project, construction investment consultancy and other cost items. Investment ratio includes value-added tax on above-mentioned costs.

Investment ratio does not include expenses for performance of a number of jobs according to specific requirements of a project/construction work, specifically as follows:

a/ Expenses for compensation, support and resettlement, including compensations for land, houses, construction works on land, assets attached to land or on water surface and other compensations as prescribed by law; support amounts paid upon land recovery by the State; resettlement expense; expenses for organization of compensation, support and resettlement; expenses for land use and lease during the construction period (if any); expenses for relocation of and reimbursement for built technical infrastructure facilities (if any) and other relevant expenses;

b/ Loan interests during the construction investment period (for loan-funded projects);

c/ Initial working capital (for construction investment projects for production and business purposes);

d/ Contingency amounts in total investment (for additional volumes and inflation during the project implementation period);

dd/ A number of project-specific expenses, including expenses for environmental impact assessment and handling of the project’s impacts on the environment; international quality inspection registration and construction work deformation observation; construction quality inspection; special reinforcement of foundation of construction works; and hiring of foreign consultants.

Article 21. Principles of determination of construction investment ratio

1. Typical construction works selected for calculation of construction investment ratio must be conformable with construction standards, construction technical regulations or sectoral standards and regulations on classification and grading of construction works, which are capable of being invested and follow scientific, technological and socio-economic development trends at the time of determination of construction investment ratio;

2. For each category or type of construction works, typical construction works shall be selected in accordance with regulations on classification and grading of construction works;

3. Technical instructions and construction standards applied to calculate investment ratio must be sufficient and clear;

4. The investment ratio must fully and reasonably take into account constituent expenses that are typical and general;

5. Figures and data used to determine investment ratio must be reliable and suitable in the stage of engineering;

6. The unit of calculation used for investment ratio shall be selected in conformity with the type of a construction work.

Article 22. Methods of determination of construction investment ratio

Methods of determining construction investment ratio must comply with the guidance provided in Appendix 5 to this Circular.

Section 2

GENERAL CONSTRUCTION PRICES OF CONSTRUCTION STRUCTURE PARTS

Article 23. Items of general construction prices of construction structure parts

1. General construction prices of construction structure parts include all necessary costs to complete a volume of a group or type of construction jobs or structural parts of a construction work.

2. General construction prices of construction structure parts include direct costs, indirect costs, presumed taxable income and value-added tax.

Article 24. Principles of determination of general construction prices of construction structure parts

1. Typical construction works selected for calculation of general construction prices of construction structure parts must be conformable with construction standards, construction technical regulations or sectoral standards and regulations on classification and grading of construction works, and commonly invested at the time of determination of prices;

2. The list of construction jobs based on construction structure parts must be uniform, scientific and convenient for use. Selected construction structure parts must have sufficient information on symbols, dimensions and quantities for measurement from the design dossier;

3. Figures and data used for calculation of general construction prices of construction structure parts must be reliable and conformable with the stage of engineering;

4. General construction prices of construction structure parts must fully and reasonably take into account constituent costs that are typical and general;

5. Technical instructions and construction standards applied to calculate general construction prices of construction structure parts must be sufficient and clear;

6. The unit of calculation of general construction prices of construction structure parts shall be selected in conformity with the type of calculation jobs.

Article 25. Methods of determination of general construction prices of construction structure parts

Methods of determination of general construction prices of construction structure parts must comply with the guidance provided in Appendix 5 to this Circular.

Chapter VI

ORGANIZATION OF IMPLEMENTATION

Article 26. Transitional handling

The determination and management of construction investment costs in the transitional period must comply with Clauses 1 and 2, Article 36 of Decree No. 68/2019/ND-CP, specifically as follows:

1. Implemented construction investment projects mean projects for which investment decisions have been issued and relevant jobs have been performed after these projects are approved, e.g., surveys have been carried out to serve construction engineering after the front-end engineering design; or contractors have been selected to perform construction designs after the front-end engineering design.

2. Construction investment projects approved but not yet implemented mean projects the investment in which has been decided by a competent authority but the jobs specified in Clause 1 of this Article have not yet been carried out.

3. For construction investment projects with adjusted total investment or construction cost estimates, the adjustment and update of construction norms and prices and prices of bidding packages as of the time of 28 days before the date of bid opening under  legal documents in force by the time of adjustment shall be decided by investment deciders while ensuring efficiency, implementation progress and cost saving of projects.

4. Construction bidding packages for which bids have been closed, contractors selected and contracts signed must comply with contents of bidding dossiers and bid dossiers and signed contracts.

Article 27. Effect

1. This Circular takes effect on February 15, 2020, and replaces Circular No. 06/2016/TT-BXD of March 10, 2016, guiding the determination and management of construction investment costs.

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

* The appendices to this Circular are not translated.