CIRCULAR

GUIDING THE DETERMINATION AND MANAGEMENT OF EXPENSES FOR HIRING FOREIGN CONSULTANTS IN CONSTRUCTION ACTIVITIES IN VIETNAM

Pursuant to the Government’s Decree No. 36/2003/ND-CP dated April 4, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Construction;
Pursuant to the Government’s Decree No. 99/2007/ND-CP dated June 13, 2007, on management of expenses for work construction investment;
Pursuant to the Prime Minister’s Decision No. 131/2007/QD-TTg dated August 9, 2007, promulgating the Regulation on hiring foreign consultants in construction activities in Vietnam;
The Ministry of Construction guides the determination and management of expenses for hiring foreign consultants in construction activities in Vietnam as follows:

I. GENERAL PROVISIONS

1. This Circular applies to organizations and individuals related to the hiring of foreign consultants for the provision of consultancy services for work construction investment projects and construction planning schemes funded with state capital (state budget capital, including official development assistance (ODA) capital, credit capital of the State for development investment, credit capital guaranteed by the State and other investment capital of the State).

2. Organizations and individuals involved in the hiring of foreign consultants for the provision of consultancy services for work construction investment projects and construction planning schemes funded with capital of other sources are encouraged to apply the provisions of this Circular.

3. Consultancy services in construction activities for which foreign consultants may be hired include elaboration of construction plannings, construction surveys, elaboration of investment projects on work construction, work construction design, selection of contractors, supervision of work construction,

4. Expenses for hiring of foreign consultants are determined on the basis of the agreement between investors or agencies in charge of elaborating construction planning schemes and foreign consultants in consultant hiring contracts. The determined expenses must be enough to cover expenditures for hiring consultants and suitable to the hiring party's payment capacity, capital sources of the projects and capital sources used for elaboration of construction planning schemes, and the qualifications and types of to-be-hired consultants and, at the same time, ensure competitiveness and efficiency of work construction investment projects and feasibility of construction planning schemes. The determination of expenses must conform

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6. In case foreign consultants that are principal contractors hire domestic consultants to perform some tasks, expenses shall be agreed upon by the parties but the salaries of domestic consultants must not be lower than the salaries of Vietnamese experts working under contracts with international contractors winning bids in Vietnam as guided by the Ministry of Labor, War Invalids and Social Affairs or salaries of domestic consultants working for ODA-funded projects as guided by the Ministry of Finance.

7. When treaties to which the Socialist Republic of Vietnam has signed or acceded otherwise provide for the determination of expenses for hiring consultants, the provisions of these treaties prevail.

II. GUIDANCE ON DETERMINATION OF EXPENSES FOR HIRING FOREIGN CONSULTANTS

1. The determination of expenses for hiring foreign consultants when formulating work construction investment projects or elaborating construction planning tasks:

1.1. When formulating work construction investment projects or elaborating construction planning tasks, investors or agencies in charge of elaborating construction planning schemes shall determine (estimate) expenses for hiring foreign consultants in the projects' total investment amounts or construction planning tasks on the basis of the volume and kinds of consultancy jobs for which foreign consultants must be hired.

12. Depending on specific conditions of work construction investment projects or construction planning schemes, expenses for hiring foreign consultants shall be estimated within the projects' total investment amounts or construction planning tasks by one of the following methods:

a) According to expenses for consultancy jobs of similar work construction investment projects or similar construction planning schemes which have been performed by foreign consultants.

b) According to the proportion (%) of construction expenses and equipment expenses in the projects' total investment amounts or according to the unit price of each acreage (or population) unit of the construction planning schemes. The estimation of expenses for hiring foreign consultants in a pro rata basis is based on the scope and contents of consultancy jobs for which foreign consultants must be hired and information on consultancy expenses of similar work construction investment projects or similar construction planning schemes already performed by foreign consultants.

1.3. In case of hiring foreign consultants for formulation of work construction investment projects, expenses for hiring foreign consultants shall be estimated in the total expenses for project preparation.

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2.1. In case of bidding for selection of foreign consultancy contractors:

- Investors shall determine the price of bidding packages for hiring foreign consultancy on the basis of expenses for hiring foreign consultants already determined in the total investment amounts of work construction investment projects, which will serve as a basis for the selection of foreign consultancy contractors in accordance with the bidding law.

- Foreign consultancy contractors shall propose expenses for the provision of construction consultancy services calculated in a percentage of construction expenses and equipment expenses in the projects' total investment amounts or the person-per-month (person-per-day, person-per-hour) estimates, which, however, must be suitable to work contents, quality schedule and other requirements of bidding dossiers.

- Expenses for hiring foreign consultants shall be determined based on the results of selection of contractors and results of negotiations between investors and foreign consultancy contractors, which, however, must not exceed the approved prices of bidding packages.

2.2. In case of appointment of foreign consultancy contractors:

- Investors or agencies in charge of elaborating construction planning schemes shall base on the estimated expenses in the projects' total investment amounts or construction planning tasks to determine the prices of bidding packages which will serve as a basis for the appointment of foreign consultancy contractors in accordance with current regulations.

- Foreign consultancy contractors shall propose expenses for the provision of construction consultancy in a percentage of construction expenses and equipment expenses in the projects' total investment amounts or the unit price for each acreage (population) unit of construction planning schemes or according to the person-per-month (person-per-day, person-per-hour) estimates in conformity with the requirements of bidding dossiers (kinds of consultancy tasks, forms of hiring consultants, qualifications of consultants, work volume and implementation schedule and other requirements). Person-per-month (person-per-day, person-per hour) estimates are determined under the guidance in the Appendix to this Circular.

- Investors or agencies in charge of elaborating construction planning schemes shall consider and evaluate expenses proposed by foreign consultants according to requirements of bidding dossiers, requirements of consultancy jobs and forms of hiring consultants. In case foreign consultants propose expenses for the provision of consultancy services according to person-per-month (person-per-day, person-per-hour) estimates, investors or agencies in charge of elaborating construction planning schemes shall evaluate these estimates for submission to the investment deciders (or authorized persons for projects or construction planning schemes decided by the Prime Minister) for approval. Provincial/municipal People's Committees shall approve the person-per-month (person-per-day, person-per-hour) estimates for the elaboration of construction planning schemes in their localities.

- The prices of contracts on hiring foreign consultants shall be determined based on the results of negotiations between investors or agencies in charge of elaborating construction planning schemes and foreign consultancy contractors.

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- In case of hiring foreign consultants, expenses may cover wholly or partially such expenses as those for salaries and travel expenses of experts, expenses for working offices, some related expenses and payable taxes. Expenses for salaries travel expenses of experts, expenses for working offices and some other related expenses shall be determined under the guidance in this Circular. The payable taxes include value added tax and some other taxes, if any, which are determined according to current regulations.

III. MANAGEMENT OF EXPENSES FOR HIRING FOREIGN CONSULTANTS

1. Foreign consultants shall supply adequate documents to prove the grounds for determination of expenses for the provision of consultancy services and other information relating to expenses for similar construction consultancy services they have provided. The levels of experts' base salary and expenses calculated based on base salaries, such as social expenses, management expenses, insurance expenses and other allowances and profits, must be shown in the audited reports on the results of financial activities of consultancy organizations in preceding years or performed contracts on the provision of similar consultancy services and relevant regulations. Investors or agencies in charge of elaborating construction planning schemes shall appraise these documents, when

2. When expenses for hiring foreign consultancy agreed by the involved parties through negotiations are higher than expenses already estimated in the projects' total investment amounts or construction planning tasks, investors or agencies in charge of elaborating construction planning schemes shall report the case to investment deciders (or authorized persons for projects decided by the Prime Minister), for investment projects, or the authorities which have approved planning schemes, for construction planning tasks (or agencies in charge of elaborating construction planning schemes, for construction plannings schemes approved by the Prime Minister), for consideration and decision on the adjustment of expenses for hiring foreign consultants.

3. Foreign consultancy shall be selected in accordance with the bidding law and under contracts between investors or agencies in charge of elaborating construction planning schemes and foreign consultancy contractors. Apart from contents prescribed by the law on contracts, these contracts must clearly show the number of months, days or hours for their performance, number and qualifications of experts, implementation schedules and products.

4. Investors or agencies in charge of elaborating construction planning schemes shall supervise the performance of contracts on hiring foreign consultants, ensuring implementation schedule, work volume and the quality of construction consultancy services in accordance with signed contracts.

5. Expenses for hiring foreign consultants shall be paid according to signed contracts and relevant regulations.

6. Investors or agencies in charge of elaborating construction planning schemes may hire capable consultancy organizations or individuals to determine expenses for hiring foreign consultants.

In case of appointment of foreign consultancy contractors, investors or agencies in charge of elaborating construction planning schemes may hire capable consultancy organizations to appraise cost estimates before submission for approval.

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IV. ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect 15 days after its publication in CONG BAO.

2. Ministers, heads of ministerial-level agencies, presidents of provincial/municipal People’s Committees, boards of directors of state corporations and economic groups, and heads of concerned units shall implement this Circular.

3. Any problems arising in the course of implementation should be promptly reported to the Ministry of Construction for study and settlement.

FOR THE MINISTER OF CONSTRUCTION
VICE MINISTER




Dinh Tien Dung

APPENDIX

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1. A person-per-month (person-per-day, person-per-day) estimate includes:

- Expenses for experts;

- Other expenses;

- Taxes;

- Contingency expenses.

2. The above expenses are determined as follows:

2.1. Expenses for experts are determined according to types and number of experts and their working time (person-per-month), expenses for experts' base salary and expenses based on base salary;

- Types, number and working time of experts (person-per-month) are determined based on the volume of work to be done, work quality and schedule requirement and each expert's capability to handle work.

- Expenses for experts' base salary are determined based on the salary levels actually paid to experts. Experts' actual salary levels are based on the audited reports on the results of financial activities of consultancy organizations in preceding years or the performed contracts on the provision of similar consultancy services and other relevant regulations.

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+ Social expenses are expenses related to the responsibility to make contributions to the social insurance fund according to regulations of the countries where foreign consultants register their business activities. Social expenses are calculated in a percentage of experts' base salary. Social expenses are based on regulations of the countries where foreign consultants register their business activities.

+ Management expenses are expenses for salaries of managers and assistants and expenses for the regular operation of foreign consultancy organizations. Management expenses are calculated in a percentage of expenses for experts' base salary based on the percentage actually paid by consultancy organizations as stated in the audited reports on the results of financial activities in preceding years and the performed contracts on the provision of similar consultancy services.

+ Insurance' expenses are expenses related to the responsibility to provide insurance for consultancy products and other compulsory insurance. Insurance expenses are calculated in a percentage of expenses for experts' base salary. Insurance expenses are determined according to actual operation results of consultancy organizations and other relevant regulations.

+ Other allowances of experts such as allowances for international work, allowances for living away from home and other allowances, if any. These allowances are determined in a percentage of expenses for experts' base salary.

+ Profits are amounts estimated to ensure the development of consultancy organizations in the course of doing production and business activities. Profits are determined in a percentage of expenses for experts' base salary.

2.2. Other expenses include travel expenses for experts, expenses for working offices, expenses for meetings and workshops, and other expenses, if any.

Other expenses are determined as follows:

+ Travel expenses include expenses for international travel and expenses for travel within Vietnam. The number of international trips and types of vehicles must suit actual work demands. In case of travel by air, expenses for air tickets must be lower than the prices of first-class tickets. Expenses for travel within Vietnam must be determined based on work demands, types of vehicles and prices for hiring vehicles in Vietnam.

+ Expenses for working offices in Vietnam are determined on the basis of the office space necessary for consultants, time for performance of consultancy jobs and prices for hiring working offices in Vietnam.

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- Other expenses such as expenses for international communication, expenses for sending and receiving documents or using facilities as required by consultancy services, and other technical services. These expenses are determined based on actual demands for the performance of consultancy jobs of each project.

2.3. Taxes include value added tax and other payable tax amounts determined according to Vietnamese regulations and regulations of the countries where foreign consultants register their business activities.

2.4. Contingency expenses are expenses estimated for jobs unexpectedly arising in the performance of consultancy services, with the inflation factor taken into consideration. Contingency expenses must not exceed 10% of expenses for experts plus other expenses.

3. Depending on the characteristics of production and business activities of each foreign consultancy organization, expenses for experts' salary may cover several or all expenses calculated based on experts' base salary stated at Clause 2.1, Point 2 of this Appendix.