CIRCULAR

GUIDING THE READJUSTMENT OF COST ESTIMATES OF CAPITAL CONSTRUCTION PROJECTS

Pursuant to Article 1 of the Government’s Decree No.10/2000/ND-CP of March 27, 2000 providing for the minimum wage level of 180,000 dong/month in enterprises;
Pursuant to the competent agencies’ decisions readjusting electricity, petrol and oil prices;
The Ministry of Construction hereby guides the readjustment of cost estimates of capital construction projects funded with capital sources defined in Articles 10, 11 and 12 of the Regulation on Investment and Construction Management promulgated together with the Government’s Decree No.52/1999/ND-CP of July 8, 1999, as follows:

I. READJUSTING THE VALUE OF CONSTRUCTION AND INSTALLATION COST ESTIMATES

1. Readjusting labor costs:

Labor costs included in the construction and installation cost estimates of construction projects, which are formulated according to the current capital construction unit prices set by the provinces and centrally-run cities, shall be readjusted with coefficient knc = 1.25 fold.

For construction projects, of which the cost estimates are formulated according to the current capital construction unit prices set by the provinces and centrally-run cities, and which are eligible for subsidiary wages, wage allowances and other preferential regimes and policies, not yet included in the unit prices, or enjoy itinerancy allowance at a level higher than 20%, or unstable production allowance at a level higher than 10%, such amounts shall be added to the labor costs under the guidance in the Appendix to this Circular.

2. Readjusting the costs of construction machines:

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3. General costs and pre-calculated taxable incomes:

- General costs: shall be calculated in percentage (%) against the labor costs already readjusted in the construction and installation cost estimates. These general costs are specified for each project type as classified in Table 2, Appendix 2 to the Construction Ministry’s Circular No.08/1999/TT-BXD of November 16, 1999.

- Pre-calculated taxable incomes: shall be calculated in percentage (%) prescribed for each project type classified in Table 2, Appendix 2 to the Construction Ministry’s Circular No.08/1999/TT-BXD of November 16, 1999 on the direct costs (with readjusted labor costs and construction machine costs) and the above-said general costs.

4. Output value added tax: shall be calculated at the value added tax rate(s) prescribed for construction and installation activities according to the current regulations on the pre-tax construction and installation cost estimates value with the above-said costs already readjusted.

The contents of cost items in the construction and installation cost estimates value of construction components are specified in the Appendix to this Circular.

II. READJUSTING OTHER COSTS AND EXPENSES IN THE TOTAL CONSTRUCTION PROJECT COST ESTIMATES

1. Readjusting the construction survey cost estimates:

The pre-tax construction survey cost estimates, which are determined according to the norms of construction survey cost estimates, issued together with the Construction Ministry’s Decision No.177/BXD-VKT of July 17, 1995 and Circular No.22/BXD-VKT of July 17, 1995 guiding the setting and management of construction survey costs, shall be readjusted with coefficient kks = 1.08 fold.

2. Readjusting the investment and construction consultancy costs; the construction project designing costs; the expenses for project management boards:

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Expenses for consultations on compilation of supplies and equipment procurement bidding dossiers, and for analysis and evaluation of supplies and equipment procurement bids, which are calculated in percentage (%) on the supplies and equipment value without value added tax according to provisions of the Construction Minister’s Decision No.45/1999/QD-BXD of December 2, 1999, shall be readjusted with coefficient ktvt = 1.11 fold.

Particularly for the urban construction planning work, the pre-tax cost estimates, which are determined on the basis of the urban construction planning price index promulgated together with the Construction Minister’s Decision No.502/BXD-VKT of September 18, 1996, shall be readjusted with coefficient khq = 1.07 fold.

III. ORGANIZATION OF IMPLEMENTATION

The readjustment of cost estimates of capital construction projects under this Circular’s guidance shall uniformly apply throughout the country as from January 1st, 2000. This Circular shall not apply to the readjustment of cost estimates of projects subject to international biddings organized in Vietnam and projects being constructed by foreign contractors in Vietnam.

- For the State’s important construction projects, which are allowed to formulate their own unit prices (projects’ capital construction unit prices), the project unit-pricing boards shall base themselves on the State’s regimes and policies allowing their application to such projects as well as the principles for readjusting cost estimates of capital construction projects under this Circular’s guidance, to determine the readjusting levels of labor costs, construction machine costs and other costs and expenses (if any) in the construction and installation cost estimates.

- For new investment projects which are to be executed from the IInd quarter of 2000, the above-said regulatory coefficients shall be calculated as soon as the projects’ total investment capital is determined.

- For construction projects with work volumes carried forward from the preceding year to 2000, the investors shall determine the value of construction volumes already performed by the end of December 31, 1999 as well as the remaining construction volumes to be performed from January 1st, 2000, so as to apply the readjustment of cost estimates of capital construction projects according to this Circular’s provisions. Concretely as follows:

1. Cases where cost estimate value is allowed to be readjusted according to this Circular’s provisions:

1.1. Construction projects’ construction and installation work volumes left for continued performance from January 1st, 2000, which are subject to the form of bidder appointment or bidding under contracts with readjusted prices (except for the form of bidding under package contracts), but which have not been completed and tested for acceptance.

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1.3. For construction and installation work volumes which are newly created but not by the contractors (for the form of bidding under package contracts and contracts with readjusted prices), and for which the construction and installation cost estimate prices are set according to the current capital construction unit prices of the provinces and centrally-run cities, the regulatory coefficients prescribed by this guiding Circular shall apply.

1.4. For projects and project components with their total cost estimates and/or cost estimates having been approved by the authorities that have decided the investment therein, while the bidding therefor is not yet or being organized or bidder appointment is not yet or being made, the investors shall have to readjust such total cost estimates and/or cost estimates under this Circular’s guidance, then submit them to the competent authorities for re-approval.

2. Cases where cost estimate value is not allowed to be readjusted according to this Circular’s provisions:

2.1. Investment projects, with the construction being carried out in 2000 by the bidding mode of "package contracts" already approved by the authorities that have decided the investment.

2.2. Work volumes, being performed after January 1st, 2000, for which the pre-acceptance tests have been completed or final settlements have been made.

Any problems arising in the course of implementation shall be reported by the concerned ministries, branches and localities to the Construction Ministry for study and settlement.

FOR THE MINISTER OF CONSTRUCTION
VICE MINISTER




Nguyen Hong Quan

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APPENDIX

THE GENERAL INDEX OF CONSTRUCTION AND INSTALLATION COST ESTIMATES OF CONSTRUCTION PROJECT (Attached to the Construction Ministrys Circular No.02/2000/TT-BXD of May 19, 2000)

Ordinal number

Cost items

Calculation method

Result

I

Direct costs

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1

Materials cost

m

Σ Q^j x D^jvl + CL_vl

j=1

VL

2

Labor cost

F₁

...

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F₂

h_1n

h_2n

NC

3

Construction machine cost

m

ΣQ^j x D^jm x KMTC

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M

Total direct costs

VL + NC + M

T

II

General costs

P x NC

C

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Pre-calculated taxable incomes

(T + C) x Prescribed percentage

TL

Pre-tax construction and installation cost estimate value

(T + C + TL)

g_XL

IV

Output value added tax

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VAT

After-tax construction and installation cost estimate value

(T + C + TL) + VAT

G_XL

In which:

Qj: Construction and installation work volume number j;

Djvl, Djnc,

F1: Wage allowances (if any) calculated according to the minimum wage which have neither been calculated nor fully calculated into the construction unit prices;

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h1n: Coefficient demonstrating the correlation between the labor cost in the unit prices and the minimum wages of wage groups number n:

- Group I: h1.1 = 2.342

- Group II: h1.2 = 2.493

- Group III: h1.3 = 2.638

- Group IV: h1.4 = 2.796

h2n: Coefficient demonstrating the correlation between the labor cost in the unit prices and the grade wages of wage

- Group I: h2.1 = 1.378

- Group II: h2.2 = 1.370

- Group III: h2.3 = 1.363

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P: General cost norms (%);

TL: Pre-calculated taxable incomes;

Gxl: After-tax construction and installation cost estimates value;

CLvl: Difference in materials prices (if any);

TXLGTGT: Value added tax rate prescribed for construction and installation activities;

VAT: Total output value added tax amount (including input value added tax paid when materials, supplies, fuels, energy... are purchased, and value added tax amount that must be paid by the construction enterprise).-