DECREE

ON MANAGEMENT OF WORK CONSTRUCTION INVESTMENT EXPENDITURES

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;
Pursuant to the November 26, 2003 Law on Construction;
At the proposal of the Construction Minister,

DECIDES:

Chapter I

GENERAL PROVISIONS

Article 1.- Subjects of application

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Organizations and individuals involved in the management of investment expenditures on construction of works financed by other capital sources are encouraged to apply this Decree.

Article 2.- Governing scope

This Decree provides for the management of work construction investment expenditures, including the total investment; work construction cost estimates; construction norms and prices; contracts in construction activities; payment and settlement of investment capital for construction of works financed by state capital, including state budget capital, official development assistance, development investment credit of the State, State-guaranteed credit and other investment capital of the State.

For works financed by official development assistance (referred to as ODA for short) sources, if the treaties concluded by competent agencies or organizations of the Socialist Republic of Vietnam contain provisions on work construction investment expenditure management different from those of this Decree, those treaties prevail.

Article 3.- Principles for management of work construction investment expenditures

1. The management of work construction investment expenditures must ensure the objectives and efficiency of investment projects on construction of works and objective requirements of the market economy.

2. The management of work construction investment expenditures is conducted for each construction work in accordance with stages of work construction investment, designing steps, types of capital sources and the States regulations.

3. The total investment and work construction cost estimates must be accurately and fully calculated and suit the duration of work construction. The total investment means the maximum expenditure, which an investor is allowed to use for investment in work construction.

4. The State performs the function of managing the work construction investment expenditures through the promulgation, guidance and inspection of the implementation of regulations on management of work construction investment expenditures.

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Chapter II

TOTAL WORK CONSTRUCTION INVESTMENT

Article 4.- Contents of total work construction investment

1. The total work construction investment (hereinafter referred to as total investment) means a projects estimated expenditure determined under the provisions of Clause 1, Article 5 of this Decree. The total investment serves as a basis for investors to formulate plans and manage capital when making investment in construction of works.

2. The total investment covers the construction expenses; the equipment expenses; the expenses for ground clearance compensation and resettlement; the project management expenses; the construction investment consultancy expenses; other expenses and reserve expenses.

3. The expenses of the total investment are specified as follows:

a/ The construction expenses include the expenses for construction of works, work items; expenses for demolition and dismantlement of old architectural objects; expenses for construction ground leveling and fill-up; expenses for construction of temporary and support facilities in service of the construction; makeshifts at construction sites for dormitory and construction administration purposes;

b/ The equipment expenses include expenses for procurement of technological equipment; expenses for training and technology transfer, if any; expenses for installation, experiment and adjustment; expenses for transportation and insurance; taxes and relevant charges;

c/ The expenses for ground clearance compensation and resettlement include expenses for compensation for houses, architectural objects and cultivation plants on land and other expenses; expenses for resettlement; expenses for organization of ground clearance compensation; expenses for use of land in the construction duration, if any; expenses for investment in construction of technical infrastructure, if any;

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e/ The construction investment consultancy expenses include expenses for consultancy on surveys, designing, construction supervision, verification and other construction investment consultancy expenses;

f/ The other expenses include working capital in the course of trial production for investment projects on construction for commercial purposes; loan interests in the construction duration and other necessary expenses;

g/ The reserve expenses include reserve expenses for arising work volumes and reserve expenses for drift of prices in the work construction duration.

Article 5.- Estimation of total investment

1. The total investment is determined by one of the following methods:

a/ Calculating it according to the projects base design, in which the construction expenses are calculated according to the volume mainly from the base design, the other volumes estimated and construction cost suitable to the market; the equipment expenses are calculated according to the equipment quantity and categories suitable to technological designs, the market prices of equipment and other elements, if any; the expenses for ground clearance compensation and resettlement are calculated according to the compensation and resettlement volume of the project and relevant state regulations; other expenses are determined by way of making estimates of provisional calculation in percentage (%) of the total construction and equipment expenses; the reserve expenses are calculated according to provisions of Clause 3 of this Article;

b/ Calculating it according to the works flooring space and use capacity and the general construction cost by structural parts, flooring space, utility (hereinafter called the general construction cost), the corresponding investment capital ration for work construction at the time of project formulation with adjustment and addition of expenses not yet included in the general construction cost and the investment capital ration for determination of the total investment;

c/ Calculating it on the basis of figures of executed projects with similar econo-technical norms. Upon the application of this method, the figures of similar projects must be calculated in conversion to the time of formulating the projects and adjusting expenses not yet determined in the total investment;

d/ Combining the methods specified at Points a, b and c, Clause 1 of this Article.

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3. The reserve for arising work volume is calculated in percentage (%) of all the expenses specified at Points a, b, c, d, e and f, Clause 3, Article 4 of this Decree. The reserve for drift of prices is calculated on the basis of length of the work construction duration and the annual construction price indexes, suitable to types of construction works with possible fluctuation of domestic and world market prices taken into account.

Article 6.- Appraisal and approval of total investment

1. Appraisal of total investment constitutes a content of the appraisal of work construction investment projects. Contents of total investment appraisal include:

a/ The suitability of the method of determining the total investment with technical characteristics and nature as well as technological requirements of work construction investment projects;

b/ The completeness, reasonability and compliance with practical market requirements of the expense items in the total investment;

c/ The calculations on efficiency of work construction investment, risks, financial plans, loan capital repayment plans, if any;

d/ Determination of the total investment value, ensuring the efficiency of work construction investment.

2. Investment deciders shall decide on the organization of appraisal of the total investment or may hire organizations or individuals fully meeting the capability and experience conditions to verify. The appraisal charges or verification expenses are calculated into other expenses in the total investment. Organizations and individuals performing the appraisal or verification of the total investment shall bear responsibility before law for the reasonability and accuracy of the appraisal or verification results.

3. The total investment stated in an investment decision is approved by the investment decider.

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1. The approved total investment is adjusted only in the following cases:

a/ There appear force majeure circumstances: earthquakes, storms, floods, whirlwinds, tsunami, landslides; wars or war dangers, which exert direct impacts on construction works;

b/ The approved planning is adjusted, thus directly affecting the total investment in work construction;

c/ The investment deciders change or adjust the work sizes upon emergence of new elements which bring about higher socio-economic efficiency.

2. Competence to adjust total investment:

a/ For construction works financed by state budget capital: Investors shall report to and ask for permission of investment deciders before adjusting the total investment;

b/ For construction works financed by State-guaranteed credit sources, development investment credit capital of the State and other investment capital of the State: Investors may make decisions by themselves and take responsibility for the adjustment of the total investment.

3. The difference between the adjusted total investment and the approved total investment must be appraised according to the provisions of Article 6 of this Decree.

Chapter III

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Article 8.- Contents of work construction cost estimates

1. The work construction cost estimates (below referred to as work cost estimates) are determined according to specific construction works and serve as a basis for investors to manage work construction investment expenditures.

2. The work cost estimates are formulated on the basis of work volumes determined according to technical designs or construction drawing designs, the works tasks to be performed and work construction unit price, the expenditure norms calculated in percentage (%) (below referred to as percentage norms) necessary for the performance of such work volumes and tasks.

3. The work cost estimate contents include the construction expenses, equipment expenses, project management expenses, construction investment consultancy expenses, other expenses and reserve expenses.

Article 9.- Work cost estimation

1. Work cost estimates are formulated as follows:

a/ The construction expenses are estimated for the works, principal work items, tasks of specific works and determined by cost estimation. For supporting works, temporary works in service of construction, makeshifts for dormitory and construction administration, the construction expenses are determined by way of cost estimation or percentage norms;

The construction expenses include direct expenses, general expenses, pre-calculated taxable incomes and value-added tax, expenses for construction of makeshifts at construction sites for dormitory and construction administration;

b/ The equipment expenses in the work cost estimates include expenses for equipment procurement, including expenses for training and technology transfer, if any; expenses for equipment installation, expenses for experiment, adjustment and other relevant expenses, if any;

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c/ The project management expenses include expenses necessary for investors to organize the project management. The project management expenses are determined by percentage norms;

d/ The construction investment consultancy expenses include expenses for consultancy on construction investment project formulation, designing, construction supervision, verification consultancy and other construction investment consultancy expenses. The construction investment consultancy expenses are determined by percentage norms or estimation;

e/ Other expenses include expenses not yet specified at Points a, b, c and d, Clause 1 of this Article and are determined by estimation or percentage norms;

f/ The reserve expenses for arising work volumes are calculated in percentage of all the expenses specified at Points a, b, c, d and e, Clause 1 of this Article. The reserve expenses for drift of prices are calculated on the basis of the length of the work construction duration and annual construction price indexes suitable to types of construction works.

2. For small-sized works only requiring the formulation of econo-technical reports, the total investment is the work cost estimates.

3. For projects with many works, investors may determine the total cost estimates of the projects to serve the project management. The total cost estimates of projects are determined by way of aggregating all estimates of works under the projects.

Article 10.- Verification and approval of work cost estimates

1. Investors shall organize the verification of work cost estimates before approval. The verification covers:

a/ Examination of the consistency of the key estimated volume with the designed volume;

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c/ Determination of value of work cost estimates.

2. If investors have no conditions or capability to conduct the verification, they may hire organizations or individuals that satisfy the capability and experience conditions to verify the work cost estimates. Consultancy organizations and individuals verifying work cost estimates are answerable to law and investors for the verification results.

3. Investors approve work cost estimates after making verification and are answerable to law for the approval of work cost estimates. Approved work cost estimates serve as a basis for determining bidding package prices, construction costs and as a basis for negotiation and conclusion of contracts with, and payment to, contractors in case of appointment of contractors.

4. Works or work items financed by state budget capital must be accompanied with approved designs and cost estimates when their construction starts.

Article 11.- Adjustment of work cost estimates

1. Work cost estimates are adjusted in the following cases:

a/ The cases provided for in Clause 1, Article 7 of this Decree;

b/ Cases the alteration or supplementation of designs, which does not contravene the base design, is permitted or the structure of expenses in the cost estimate changes but does not exceed the approved work cost estimate, including reserve expenses.

2. Investors organize the verification and approval of adjusted work cost estimates.

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CONSTRUCTION NORM AND WORK CONSTRUCTION PRICES

Article 12.- Construction norms

1. The construction norms include econo-technical norms and percentage norms.

2. The econo-technical norms serve as a basis for formulation of work construction unit prices, general construction prices.

3. The percentage norms are used for determination of costs of some types of job, expenses in construction investment, including construction investment consultancy, supporting works, site preparation, general expenses, pre-calculated taxable incomes and a number of other jobs and expenses.

Article 13.- Formulation and management of construction norms

1. The Construction Ministry shall guide the methods of formulating construction norms, establishes and promulgates construction norms.

2. Based on the methods of formulating the construction norms as provided for in Clause 1 of this Article, ministries and provincial-level Peoples Committees shall organize the establishment and promulgation of construction norms for particular works and jobs of their respective branches or localities.

3. For construction activities already included in the system of promulgated construction norms which are, however, not suitable to construction methods and conditions or technical requirements of the works, investors, contractors and consultancy organizations shall adjust such norms properly for application to the works.

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5. Investors may hire consultancy qualified and experienced organizations to guide, formulate or adjust the construction norms defined in Clauses 3 and 4 of this Article. The consultancy organizations shall bear responsibility for the rationality and accuracy of these construction norms.

6. The application of new construction norms defined in Clause 4 of this Article to the formulation of unit prices for payment to works financed by state budget capital must be agreed upon by competent state management agencies.

Article 14.- System of work construction prices

1. The work construction price system covers work construction unit prices and general construction prices. A work construction unit price is formulated for a specific work. The general construction price is synthesized from work construction unit prices.

2. The work construction price system is used for determination of construction expenses in the total investment and work cost estimates.

Article 15.- Formulation of work construction unit prices

1. The work construction unit prices are formulated on the basis of econo-technical norms and the following expenses:

a/ The prices of construction materials determined as suitable to standards, categories and quality of materials used for specific construction works. The construction materials prices are determined on the basis of the market prices notified by supplying organizations of producers, suppliers, or the prices applicable to other works of similar standards and quality. The prices of materials transported to construction sites are calculated by the method of formulating work construction unit prices;

b/ The prices of construction labor are determined according to the popular labor market price in each region or province and according to branch or occupation. The construction labor prices are calculated on the basis of the minimum wage level promulgated by competent state agencies; capital sources and payment capability of investors and other requirements;

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2. For construction works financed by ODA capital, employing foreign laborers and using imported supplies, materials and construction equipment, and subject to other particular requirements, the construction unit prices are formulated with addition of expenses under practical and particular conditions of the works.

Article 16.- Management of work construction prices

1. Investors base themselves on the method of formulating the work construction unit prices, technical requirements and specific construction measures of works to organize the formulation of work construction unit prices and general construction prices for use as bases for determination of the total investment and work construction cost estimates in order to manage the work construction investment expenditures.

2. Work construction investors may hire qualified and experienced consultancy organizations or individuals to perform jobs or part of jobs related to the formulation of work construction prices. The consultancy organizations and individuals shall bear responsibility before investors and law for the reasonability and accuracy of work construction prices they have formulated.

3. Provincial-level Peoples Committee shall base themselves on the requirements of work construction investment expenditure management to guide the formulation and management of construction prices for construction works in their localities.

Article 17.- Construction price indexes

1. The construction price indexes are indicators of fluctuation of work construction prices in a given period and serve as a basis for the determination of the total investment and the management of work construction investment expenditures. The construction price indexes are determined according to types of works, regions and promulgated by each time.

2. The Construction Ministry shall promulgate the construction price indexes and methods of formulating the construction price indexes. Construction investment consultancy organizations fully meeting the capability conditions shall determine and promulgate construction price indexes for application reference.

Article 18.- Consultancy on construction investment expenditure management

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2. An organization providing consultancy on construction investment expenditure management must have at least three persons possessing the certificate of construction valuation engineer. Organizations providing consultancy on management of work construction expenditures are classified into two grades as follows:

a/ Grade 1: Having at least 5 grade-1 construction valuation engineers;

b/ Grade 2: Having at least 3 grade 2- construction valuation engineers or one grade-1 construction valuation engineer.

3. Individuals independently providing consultancy on management of construction investment expenditures must possess certificates of construction valuation engineer.

4. Organizations and individuals providing consultancy on management of construction investment expenditures can only provide consultancy within their prescribed operation scopes and bear responsibility before law and investors for their consultancy activities.

5. The Construction Ministry defines the scopes of operation of individuals and organizations providing consultancy on management of construction investment expenditures and grades of construction valuation engineers, guides the training, the grant and management of certificates of construction valuation engineers.

Chapter V

CONTRACTS IN WORK CONSTRUCTION ACTIVITIES

Article 19.- Contracts in construction activities

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2. Construction contracts cover the following principal contents: jobs and tasks to be performed; types of guarantee; quality and other technical requirements of jobs; implementation duration and progress; contractual prices and payment modes; pre-acceptance test and hand-over conditions; warranty duration; liability for contractual breaches; contractual adjustment; other agreements according to types of contract; languages used in contracts.

3. Construction contracts shall be concluded only when the principals complete the selection of contractors according to regulations and the contracting parties have concluded the process of negotiations on contracts.

4. The construction contracts include the following major types:

a/ The consultancy contract means a construction contract for the performance of one, several or all consultancy jobs in construction activities;

b/ The equipment and material supply contract means a construction contract for supply of materials, technological equipment for a work construction investment project;

c/ The construction contract means a construction contract for the execution of construction, equipment installation for work, work items or construction parts according to work construction designs;

d/ The engineering-provision-construction contract (the EPC contract) means a construction contract for the performance of all jobs from designing, supply of materials and equipment to construction of works, work items;

e/ The turn-key contract means a construction contract for the package performance of all jobs: project formulation; designing; supply of materials and equipment; work construction.

Article 20.- Construction contract dossiers

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2. The documents accompanying a construction contract constitute an integral part of the contract. Depending on the scale and nature of jobs, the documents accompanying the construction contracts comprise all or some of the following documents:

a/ Notice on contract winning or contractor appointment document;

b/ Contractual conditions ( exclusive and common conditions of the contract);

c/ The contractors proposals;

d/ Technical instructions, reference conditions;

e/ Design drawings;

f/ Written amendments and supplements;

g/ Contract performance security, down-payment guarantee and other guarantees, if any;

h/ Other relevant documents.

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Article 21.- Construction contract prices

A construction contract price is an amount of money paid by a principal to a contractor for the performance of a work volume under the progress, quality and other requirements provided in the construction contract. Depending on the characteristics and nature of construction works, the contracting parties shall agree on the construction contract prices in one of the following form:

1. The package contract price:

a/ The package contract price means a contract price, which remains unchanged throughout the course of contract performance, excluding cases of permitted adjustment provided for in the contract, if any;

b/ The package contract price is applied to the following cases:

Works or bidding packages with work volumes, quality or implementation duration being clearly identified or in a number of cases with work volume being unidentifiable but the contractors have full capability, experience and documents for calculation and determination of the package prices and accept risks related to the determination of the package prices.

Bidding packages or consultancy jobs are ordinary and simple, for which the contract prices are determined in percentages of the value of works or work volumes.

2. Contract prices based on fixed unit prices:

a/ The fixed unit price-based contract price is a contract price determined on the basis of temporarily calculated work volume and the unit price of each contractual job is fixed and remains unchanged throughout the course of contract performance, except cases of permitted adjustment provided for in contracts, if any;

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c/ The fixed unit prices remain unchanged throughout the course of contract performance, except for cases of permitted adjustment clearly stated in the construction contracts.

3. Contract prices based on adjusted prices:

a/ The adjusted price-based contract price is a contract price, where work volume and unit price for contractual jobs are allowed for adjustment in cases provided for in the contract;

b/ The adjusted price-based contract price applies to works or bidding packages, which, at the time of concluding the contract, have no conditions for accurate determination of work volumes to be performed or expenses for determination of unit prices for performance of jobs;

c/ The adjusted prices will be adjusted when all conditions for determination of work volume and execution unit prices prescribed in the contracts are fully met.

4. The combined contract price is a contract price determined in the forms specified in Clauses 1, 2 and 3 of this Article. The combined contract price applies to large-sized works or bidding packages with complicated techniques and prolonged implementation duration. The principal and the contractor base on types of contractual jobs to reach agreement on, and determine types of jobs to which the package contract price, the fixed unit price- based contract price or the adjusted price-based contract price is applied.

Article 22.- Adjustment of unit prices in construction contracts

The adjustment of unit prices in construction contracts must be stated in such contracts and made in the following cases:

1. Upon conclusion of contracts, temporarily calculated unit prices were used for jobs or work volumes for which the principal and the contractor, at the time of contract conclusion, had not yet acquired full conditions for accurate determination of the unit prices and agreed to adjust them when conditions permit.

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3. The unit prices which the investor and contractor agreed to consider and readjust after given durations as from the time the contracts are performed and which are clearly stated in the contracts.

4. When the prices of fuel, supplies and equipment stated in the contracts greatly fluctuate, directly affecting the contract performance or when the state changes relevant policies, which must be reported to competent persons for consideration and decision.

5. When there appear force majeure circumstances provided for in the contracts.

Article 23.- Adjustment of construction contract prices

1. The construction contract prices are adjusted only in the following cases:

a/ Addition of jobs not specified in the signed contracts;

b/ It is so provided for in Article 22 of this Decree;

c/ There appear price fluctuations prescribed in the contracts. The grounds for price fluctuation calculation are determined within 28 days before the contractor submits the payment dossiers.

2. Within the bidding package prices stated in the approved bidding plans, the adjustment of construction contract prices must be clearly stated in the construction contracts by the principal and the contractor.

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4. Where the adjusted construction contract price exceeds the price of a bidding package stated in the approved bidding plan, investors shall report thereon to persons competent to consent before approving the adjusted contractual prices.

5. The adjustment of construction contract prices of a project must not exceed the total investment in the project already approved by competent authorities.

Article 24.- Advance of capital for performance of construction contracts

1. The advance of work construction investment capital must be stipulated in construction contracts and effected immediately after the contracts take effect. The advance levels of work construction investment capital are provided as follows:

a/ For consultancy contracts, the minimum capital advance level is 25% of the contractual price;

b/ For construction contracts, the minimum capital advance level is 10% of the contractual price, for contracts valued at over VND 50 billion; 15%, for contracts valued at between VND 10 billion and 50 billion, and 20%, for contracts valued at below VND 10 billion.

c/ For materials and equipment supply contract, the advance level is not lower than 10% of the contractual price, depending on the contractual values;

d/ For EPC contracts, the advance of capital for purchase of equipment is based on the supply progress stated in the contracts; other jobs such as engineering, the elaborated minimum advance level is 15% of the value of such contractual jobs.

2. The advance of capital for ground clearance is made under the ground clearance plans.

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Article 25.- Construction contract payment

1. The contractual payment must accord the types, prices and terms of contracts concluded by the contracting parties. The number of payments, the payment period and payment conditions must be clearly stated in the contracts.

2. For package contract prices: the payment is made in percentage (%) of the contractual price or prices of completed works, work items corresponding to the payment periods stated in the contracts after the payment dossiers are examined and certified by investors. The contractor will be fully paid with prices of the contracts signed with the principal and adjusted money amounts (if any) after the completion of the contracts and the pre-acceptance test and hand-over of works.

3. For fixed unit price-based contract prices: the payment is made on the basis of the completed work volume (including arising volume, if any) tested and accepted in the payment periods and the unit prices corresponding to such works stated in contracts or contract annexes.

4. For adjusted price-based contract prices: the payment is made on the basis of the completed work volume (including arising volume, if any) tested and accepted in the payment periods and unit prices already adjusted under the contracts. Where upon the mature of payment periods, there still lack conditions for adjustment of unit prices, the unit prices temporarily calculated when the contracts were signed will be used for making the payment and the payment value will be adjusted upon the availability of unit prices adjusted under the contractual provisions.

5. Where the combined contractual price is applied as provided for in Clause 4, Article 21 of this Decree, the payment shall correspondingly comply with the provisions of Clauses 2, 3 and 4 of this Article.

6. The advance capital is recovered gradually through payments. The recovery of advance capital starts immediately after the first payment and concludes when the paid work volume reaches 80% of the contract value. For the ground clearance, the recovery of advance capital will conclude after the completion of the ground clearance.

7. Within 10 working days after the contractor submits the valid payment dossiers, investors shall make payment for the performed work volume to the contractor. For construction works financed with state budget capital, within 3 working days after the receipt of complete and valid payment dossiers of the contractor, the investors must complete all procedures and transfer the payment requests to capital-allocating or -lending agencies. In the year of construction completion or the year of work commissioning, investors shall make payments to contractors for the completed work volume minus the money amounts retained for work warranty according to regulations.

Article 26.- Construction contract payment dossiers

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a/ The written record on acceptance of the work volume performed in the payment period with certifications of representatives of the contractor, the principal and the supervision consultant, if any;

b/ The written certification of the volume increase or decrease over the contract with certification of representatives of the contractor, the principal and the supervision consultant, if any;

c/ The list of proposed payments based on the completed work volume, which has been certified, and the unit price stated in the contract;

d/ The contractors payment proposal, clearly stating the completed work volume and completed value, the increase (decrease) value against the contract, the advanced value, the value proposed for payment in the period.

2. For cases of contractual payment at package contract prices: The written record certifying the volume at Point a, Clause 1 of this Article, means the certification of completion of works, work items, construction jobs suitable to designs (certification of detailed completed volume is not required).

Article 27.- Unit prices of work volume arising outside construction contracts

1. The work volumes arising outside a construction contract include:

a/ The work volume added to the prescribed work volume, for contracts to which the mode of package contract price is applied;

b/ The work volume without unit price or the work volume with unit price, which is arising, added volume, for contracts to which the mode of fixed unit price- or adjusted price-based contract price prescribed in Clauses 2 and 3, Article 21 of this Decree, is applied.

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3. For arising work volume larger than 20% of the corresponding work volume stated in the contract or arising work volume without contract unit price, the contractor and the principal shall agree to determine it according to the principles specified in the contract regarding the unit prices of arising work volumes.

4. For the added work volume outside the work volume prescribed by the contract to which the mode of package contract price is applied, the additional value will be included in cost estimate. The principal and the contractor shall negotiate and agree to sign a contract on addition of this arising value.

5. Investors may approve unit prices for the arising work volumes, make payments for arising volumes and take responsibility for such approval and payments. For works financed by state budget capital, investors shall report thereon to investment deciders before approving the unit prices of the arising work volumes and making payments for the arising volumes.

Article 28.- Construction work insurance and work warranty

1. The insured objects, insurance sums, insurance duration and insurance liabilities of the principal and the contractor must be clearly stated in construction contracts.

2. Insurance for construction works and assets of the principal will be purchased by the principal. Where this insurance premium has been already included in the contract-winning price, the contractor shall buy the insurance.

3. The contractor shall buy necessary insurances to secure his/her activities.

4. The principal and the contractor shall agree on and provide for in the contract the warranty conditions and duration and the parties liabilities for construction work warranty as well as the money amounts retained for performance of work warranty obligations. If agreed by the principal, the contractor may pay work warranty guarantee instead of the money amounts to be retained by the principal for work warranty.

Article 29.- Rewards, fines and settlement of contractual disputes

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2. The reward level must not exceed 12% of the value of the over-fulfilled contractual portion; the fine level must not exceed 12% of the value of the breached contractual portion.

3. Disputes between contracting parties must be settled through negotiation and conciliation between the parties or settled by arbitrators or courts according to provisions of law.

Article 30.- Construction contract settlement

1. The principal and the contractor shall settle their construction contract within 30 days after the contractor has fulfilled contractual obligations (except for the work warranty obligation according to regulations) and proposed the contract settlement.

2. The contractor shall make the contract settlement and send it to the principal. The contract settlement must clearly determine the value of the signed contract, the value already paid, the value to be paid and other obligations to be performed by the principal under the contractual provisions. The principal shall examine and make settlement with the contractor and take responsibility for the contractual value already settled.

3. Immediately after fulfilling the work warranty obligations under provisions of the signed contract, the principal (or investor) shall repay the money amounts retained for work warranty (if any) to the contractor and settle the contract, terminating all obligations between the contracting parties.

Chapter VI

PAYMENT, SETTLEMENT OF WORK CONSTRUCTION INVESTMENT CAPITAL

Article 31.- Payment of work construction investment capital

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2. Investors (or their lawful representatives) bear responsibility before law for the value of their payment proposals made to the capital-allocating or -lending agencies. In the course of making construction investment capital payments, if detecting errors or irrationalities in the value of payment proposals of investors (or their lawful representatives), the investment capital-allocating or -lending agencies shall immediately notify the investors thereof for the latter to make explanations, supplementation and completion of the dossiers.

3. Investors may demand compensations or file lawsuits to administrative or economic tribunals to claim compensations for the damage caused to them due to the delayed payment by investment capital- allocating or - lending agencies. The investment capital- allocating or - lending organizations and investors are strictly forbidden to set illegal regulations on payment of construction investment capital.

Article 32.- Settlement of work construction investment capital

1. The settled investment capital means the total lawful expenditures invested in the construction  and commissioning of works. Lawful expenditures mean expenditures made within the scope of approved design and cost estimates, including adjusted or added portions or the expenditures made in strict accordance with signed contracts and with provisions of law. For works financed by state budget capital, the settled investment capital must lie within the total investment limits already approved by competent authorities.

Depending on the size, nature and construction duration of works, investors may settle the construction investment capital for each work item or the entire work immediately after this work item or work is completed and put into exploitation and use at the request of investment deciders.

2. Investors shall compile dossiers on settlement of investment in completed works, work items for submission to investment deciders for approval, within 12 months for national important projects and group-A projects, 9 months for group-B projects and 6 months for group-C projects, as from the time the works are completed and put to use. Six months after the issuance of decisions approving the settlement of investment capital for completed projects, investors shall settle debts and settle the projects accounts at investment capital-paying,
-lending or -allocating agencies.

3. For construction works financed with ODA capital sources, investors shall unified the investment capital according to the regulations of the State and the regulations of donors, if any.

Chapter VII

STATE MANAGEMENT OF WORK CONSTRUCTION INVESTMENT EXPENDITURES

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The Construction Ministry is the body responsible for performing the unified state management of work construction investment expenditures and has the responsibilities:

1. To guide the formulation and management of construction investment expenditures, including the total investment, work construction cost estimates, work construction norms and prices; the methods of measuring and separating work volumes; and the methods of determination of prices of construction machine and equipment working shifts.

2. To announce the construction norms, investment capital ration, construction price indexes, methods of determining the construction price indexes; to guide contracts on work construction and other contents defined in this Decree.

3. To inspect and examine the implementation of provisions on management of work construction investment expenditures.

Article 34.- The Finance Ministry

1. To guide the payment and settlement of work construction investment capital.

2. To guide and promulgate expenditures on consultancy insurance, construction work insurance.

3. To inspect and examine the settlement and final settlement of state budget-financed projects.

Article 35.- Ministries and provincial-level Peoples Committees

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2. Provincial-level Peoples Committees guide the setting and management of work construction prices in their respective provinces or cities; inspect the implementation of provisions on management of work construction investment expenditures in their localities.

Chapter VIII

IMPLEMENTATION PROVISIONS

Article 36.- Transitional handling

1. Work construction investment projects, which have been approved before the effective date of this Decree but not yet implemented or are being implemented, comply with the provisions on management of construction investment expenditures of the Governments Decree 16/2005/ND-CP of February 7, 2005, on management of work construction investment projects, Decree 112/2006/ND-CP of September 29, 2006, amending and supplementing a number of articles of Decree 16/2005/ND-CP on work construction investment projects, and other relevant legal documents.

In case of necessity to adjust the total investment under the provisions of this Decree, investment deciders shall consider and decide on the adjustment and ensure the non-interruption of the implementation of work construction investment projects.

2. Work construction investment projects, which have been formulated and appraised but not yet approved before the effective date of this Decree, comply with the provisions of this Decree.

3. Organizations and individuals performing the jobs of consultancy on management of work construction investment expenditures may carry on their activities until December 31, 2008. As from January 1, 2009, these organizations and individuals shall fully satisfy the conditions prescribed in this Decree if they continue providing consultancy on management of work construction investment expenditures.

Article 37.- Implementation effect

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Article 38.- Organization of implementation

1. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, presidents of provincial/municipal Peoples Committees, and relevant organizations and individuals shall implement this Decree.

2. This Decree replaces the provisions on management of work construction investment project expenditures, on contracts in construction activities of the Governments Decree 16/2005/ND-CP of February 7, 2005, on management of work construction investment projects, and Decree 112/2006/ND-CP of September 29, 2006, amending and supplementing a number of articles of Decree 16/2005/ND-CP of February 7, 2005, and the provisions in other legal documents, which are contrary to this Decree.

3. The Construction Ministry shall assume the prime responsibility for, and coordinate with relevant ministries and branches in, guiding the implementation of this Decree.

ON BEHALF OF THE GOVERNMENT
PRIME MINISTER




Nguyen Tan Dung