Circular 09/2019/TT-BXD determination and management of construction investment costs

• Official number: 09/2019/TT-BXD
• Legislation Type: Circular
• Organization: The Ministry of Construction
• Signer: Bui Pham Khanh
• Issued Date: 26/12/2019

MINISTRY OF CONSTRUCTION -------	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ---------------
No. 09/2019/TT-BXD	Hanoi, December 26, 2019

CIRCULAR

INSTRUCTIONS ABOUT DETERMINATION AND MANAGEMENT OF CONSTRUCTION INVESTMENT COSTS

Pursuant to the Law on Construction No. 50/2014/QH13 dated June 18, 2014;

Pursuant to the Government's Decree No. 81/2017/ND-CP dated 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 dated August 14, 2019 on administration of investment and construction expenses;

Upon the request of the Director of the Construction Economics Department;

Minister of Construction hereby promulgates the Circular providing instructions on determination and management of construction investment costs.

Chapter I

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Article 1. Scope

This Circular shall provide instructions about the determination and management of costs of investment in construction projects funded by the state budget and non-budgetary state capital, and other public-private partnership (PPP) investment projects, including:    preliminary estimate of total investment, total investment, construction cost estimate, construction contract costs, construction norms, direct construction costs per unit, investment costs per unit and overall costs per construction component or part unit. 

Article 2. Subjects of application

1. Entities and persons involved in determination and administration of construction investment costs of investment and construction projects funded by state budget and non-budgetary capital, and other public-private partnership (PPP) investment projects.  

2. Entities and persons involved in the determination and management of construction investment costs of construction projects, and the determination of construction investment costs as a basis for discharge of financial obligations to the state of projects using other capital.

Chapter II

PRELIMINARY ESTIMATE OF TOTAL INVESTMENT, TOTAL INVESTMENT

Article 3. Components of the preliminarily estimated total investment, total investment

1. Contents of preliminarily estimated total investment, total construction investment prescribed in Clauses 2 and 4 of Article 4 of the Government’s Decree No. 68/2019/ND-CP dated August 14, 2019 regarding the management of construction investment costs (hereinafter referred to as Decree No. 68/2019/ND-CP), including construction, equipment, project management, construction investment consultancy and other costs shall be subject to the following specific regulations:

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b) Project management costs, including those prescribed in clause 2 of Article 21 in the Decree No. 68/2019/ND-CP, shall be expenses necessary for tasks of implementation of project management tasks from the project preparation phase to the project completion and operation stage, specifically including:

- Construction survey superintendence;

- Selection of architectural design or selection of architectural design plan for the construction project;

- Compensation, support and resettlement carried out on the part of the project owner/investor;

- Evaluation of feasibility study report or investment, and construction economic – technical feasibility report;

- Preparation, assessment, review and approval of engineering design, construction design drawing and construction cost estimate;

- Selection of contractors undertaking construction tasks;

- Management of construction quality, volume, quantity, progress, expense and contract;

- Management of construction communication system; acquisition and provision of data and information serving the investment and construction management task to meet needs of competent state authorities;

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- Formulation or revision of construction norms;

- Calculation of construction costs and price indices for construction works;

- Inspection of quality of building materials, components, products and installed equipment;

- On-demand quality inspection of construction parts, work items, entire construction work and specialized tests;

- Investment and construction cost control;

- Conversion of construction investment capital after completion, pre-acceptance test, commissioning, hand-over and operation of construction project;

- Acceptance testing, commissioning, payment and final settlement of project contract; payment and settlement of construction investment capital;

- Conduct and implementation of superintendence and evaluation of construction project;

- Project acceptance testing, commissioning and transfer;

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- Determination and updating of construction contract costs;

- Managerial tasks assigned to competent state authorities (if any);

- Other project management tasks.

c) Construction investment consultancy expenses include the costs prescribed in clause 2 of Article 23 in the Decree No. 68/2019/ND-CP which are necessary for carrying out construction investment consultancy activities at different stages in the order of construction investment, such as the project preparation stage, project implementation and construction completion for commissioning and operation of construction projects. These expenses are paid for the following specific works:

- Planning, conducting and superintending construction surveys.

- Preparing pre-feasibility study report on construction investment (if any), report on recommendation of investment policies (if any), feasibility study report on construction investment or economic-technical report on construction investment;

- Reviewing basic design and technological design of the project;

- Reviewing compensation, support and resettlement plan;

- Holding an examination for a qualified architectural designer of the construction project;

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- Reviewing total construction investment, construction design and construction cost estimate;

- Making and appraising the request for expression of interest, request for prequalification, bid invitation, request for proposal, and evaluation of expression of interest, prequalification application, bid package and proposal for the purpose of selecting construction contractors;

- Reviewing results of selection of construction contractors;

- Superintending construction and equipment installation;

- Setting up and reviewing construction norms, construction costs and price indices;

- Assessing transport safety;

- Applying building information management system (BIM) (if any);

- Providing project management consultancy (in case of hiring of consultants);

- Conducting specialized construction tests;

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- Inspecting the quality of construction parts, work items and entire project (if any);

- Superintending and evaluating construction and investment projects (in case of hiring of consultants);

- Preparing the environmental impact assessment report in accordance with laws on environmental protection;

- Converting construction investment capital after completion, pre-acceptance test, commissioning, hand-over and operation of construction project;

- Performing other consulting works.

Particularly for construction survey costs, including direct costs, indirect costs, pre-assessed taxable income and value-added tax are determined and managed as construction costs specified in the construction estimate.

d) Other expenses, including expenses necessary for execution of construction investment projects, shall be determined according to regulations of competent state authorities by using economic-technical norms or estimate of costs according to the regimes or policies for execution of project-related tasks, comprising the followings:

- Demining of bombs and explosives;

- (Compulsory) insurance for works during construction time;

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- Audit, verification and approval for finalization of investment capital;

- Inspection of acceptance testing or commissioning during the construction and completion acceptance of work items and works of competent regulatory authorities (in case independent professionals are hired to collaborate in performing these tasks);

- Technical and scientific researches pertaining to the projects; initial working capital for the construction investment projects for the purpose of business and loan interest during the construction; the costs for trial running with and without load according to the technological process before the transfer and handover (after value of products recovered is taken away);

- Natural resources taxes, fees and charges in accordance with regulations in force;

- Others (if any).

2. In case where any project is subject to the requirement for preparation of the economic-engineering report on construction investment feasibility, details of total investment in construction works shall be subject to the provisions laid down in clause 3 of Article 4 in the Decree No.68/2019/ND-CP.

3. For any project using the official development assistance capital (shortly called ODA), in addition to the costs calculated in the preliminary estimate of total investment, this total investment shall be supplemented with other necessary cost items provided that it matches the particularity and characteristics of the construction investment project using this capital in accordance with the regulations of relevant laws.

Article 4. Approach to preliminary estimate of total investment

1. Preliminary estimated total investment shall be calculated under clause 1 of Article 5 in the Decree No. 68/2019/ND-CP.  In case there is no sufficient conditions for determination of the operational size, scale, capacity or service capability according to the preliminary design plan of the project, or these criteria have been determined despite none of available data on investment costs per unit, the preliminary estimate of total construction investment shall be made in reference to data about costs of projects similar in type and grade of works, operational size, capacity or service capability which are already completed or under construction, and shall be adjusted or supplemented with other necessary costs which are then converted to be relevant to the time of preliminary estimation of total investment, construction site, characteristics and nature of the project.

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3. Review and approval of the preliminary estimate of total investment shall be regulated as follows:

a) Review and approval of the preliminary estimate of total investment in projects using state budget capital and non-budgetary state capital shall be subject to regulations of laws on public investment and investment legislation.

b) Review and approval of the preliminary estimate of total investment in PPP projects shall be subject to laws on PPP.

4. Costs of turnkey bid packages shall be estimated under the provisions of clause 2 of Article 11 herein. Investment decision makers shall have authority to review and approve estimates of costs of turnkey bid packages.

5. Details about approaches to the preliminary estimate of total investment shall follow instructions given in the section 1 of Appendix No. 1 hereto.

Article 5. Approach to determination of total investment

1. Total investment shall be determined on the basis of the contents of feasibility study reports on construction investment, including basic designs, explanatory notes on basic designs, applicable standards and regulations, technological and engineering solutions and equipment; solutions to building architectural objects and main structures of construction works; solutions to construction work and major materials, construction conditions; project execution plans and other necessary requirements in accordance with the contents of feasibility study reports for investment and construction.

2. Total investment shall be calculated according to one of the approaches specified under clause 2 of Article 5 in the Decree No. 68/2019/ND-CP, specifically including:

a) Total investment is determined on the basis of construction work quantities calculated according to the basic design, project execution plan, guided construction measures, practical project execution conditions, other necessary requirements of specific projects, and set of norms, bills of lading, related regimes and policies.

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c) Total investment is determined according to investment costs per unit.

d) Total investment is determined by combining all of the approaches referred to in a, b and c of this clause.

3. Approaches prescribed in point b and c of clause 2 of this Article shall only be used for common construction works.

4. If there is none of regulations or bases for calculation of calculation of several cost items included as components of construction, equipment, project management costs, construction investment consultancy expenses, and other project expenses, at the time of determination of total investment, they may be added or estimated to become entries of total construction investment.

5. With respect to projects implemented in the form of an engineering-procurement-construction agreement (abbreviated as EPC); an engineering-construction agreement (abbreviated as EC); an engineering-procurement agreement (abbreviated as EP), construction and equipment expenses included in the total construction investment must be determined according to the approach specified at point a of clause 2 of this Article, which is adopted as the main one, together with other approaches.

6. Details of approaches to determination of total construction investment shall follow instructions given in the section 2 of Appendix No. 1 hereto.

Article 6. Subject matters of and authority over review and approval of total investment

1. Subject matters of total construction investment shall be subject to clause 1 of Article 6 in the Decree No. 68/2019/ND-CP.

2. Authority over review of total construction investment shall be subject to clause 3 and 4 of Article 6 in the Decree No. 68/2019/ND-CP.  Particularly for projects that only require economic-technical reports on use of non-budgetary state capital, authority over the review shall be subject to clause 5 of Article 1 in the Government’s Decree No. 42/2017/ND-CP dated April 5, 2017, amending and supplementing a number of articles of the Government’s Decree No. 59/2015/ND-CP dated June 18, 2015 on management of investment and construction projects.

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4. Sample reports on results of review and appraisal of total construction investment shall follow instructions given in Appendix No. 10 hereto.

Article 7. Adjustment of the preliminary estimate of total investment and total investment

1. Adjustment of the preliminary estimate of total construction investment shall be subject to regulations laid down in laws on public investment, laws on investment and laws on PPP.

2. Adjustment of total investment already approved shall be subject to clause 7 of Article 7 in the Decree No. 68/2019/ND-CP.

3. Sample reports on results of review and appraisal of the preliminary estimate of total construction investment and total construction investment shall be revised according to instructions given in Appendix No. 10 hereto.

Chapter III

CONSTRUCTION COST ESTIMATES

Article 8. Subject matters of construction cost estimates

1. Subject matters of a construction cost estimate shall be subject to Article 8 in the Decree No. 68/2019/ND-CP.  Cost components of a construction cost estimate shall be subject to specific regulations of clause 2 through clause 7 of this Article.

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a) Direct costs comprise costs of materials (including materials supplied by project owners/investors), labor costs, machinery and equipment costs.

b) Indirect costs comprise:

- Overall costs, including general administrative expenses; overhead and operating costs incurred at project sites; insurance costs paid by employers for employees’ benefits. 

- Temporary accommodation and office costs.

- Costs related to works with quantities which cannot be identified in designs, e.g. Costs of occupational safety, health for workers at construction sites and environmental health; costs of testing on materials of contractors; expenses for intra-construction site workforce movement; irregular water pumping, mud dredge or removal costs.

- Depending on the specific conditions of specific construction projects, works or construction bid package, indirect costs may be supplemented with additional indirect costs, including expenses for moving special-purpose machines and equipment to and out of the construction site; expenses for ensuring traffic safety for construction activities (if any); expenses for restoration of technical infrastructure affected by construction activities (if any); costs of material storage facilities (if any); expenses for construction of sheds or canopies for machines, machine foundations, electricity, compressed air  and water supply systems at construction sites, installation and dismantlement of several machines (such as cement concrete, asphalt concrete mixing plants, rail-traveling cranes, tower cranes, some other building machines and equipment of similar nature).

c) Pre-assessed taxable income (profits of construction enterprises calculated in advance in construction cost estimates).

d) Value added taxes regulated by the State.

3. Costs of equipment used for construction works or work items shall include cost items or entries specified in point b of clause 2 of Article 9 in the Decree No. 68/2019/ND-CP.

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5. Construction and investment consultancy costs shall be subject to point c of clause 1 of Article 3 herein.

6. Other costs included in the construction estimate shall be composed of those costs subject to regulations laid down in point d of clause 1 of Article 3 in this Circular. As for any project with various construction works, other costs included in the construction cost estimate shall not include loan interests incurred during the construction period; expenses for demining of bombs, mines and explosive objects; audit; review and approval of investment capital settlements; expenses for scientific and technological researches related to projects; initial working capital for construction investment projects for business purposes; expenses for the process of off-load or on-load commissioning tests according to the technological process before projects are transferred or handed over (minus the value of recovered products); fees, charges and some other costs charged to projects.

7. Contingencies shall include costs of provisions for factors of any additional work quantities and contingent costs against inflation elements that may exist during the construction period.

Article 9. Construction costing approaches

1. Construction cost estimate shall be made, subject to clause 1 of Article 9 in the Decree No. 68/2019/ND-CP.

2. Determination of construction costs

Construction costs may be specific to cost details or determined by consolidating costs according to the approaches specified at point a and b below:

a) Construction costs shall be determined by construction quantities and unit prices

- Direct costs, including: Building material, labor, machinery and equipment costs shall be determined on the basis of construction work quantities and unit construction prices.

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- Pre-assessed taxable income calculated in percent (%) ratio to direct costs and indirect costs specified in instructions given in the Table 3.11 of Appendix No. 3 hereto.

- Value added taxes regulated by the State.

- Construction quantities which are taken off or measured based on engineering design drawings or construction design drawings or FEED designs and guidelines for technical matters and required works to be performed at construction works. Construction quantity takeoff approach shall be subject to instructions issued by the Minister of Construction.

- Unit prices at which construction costs are calculated may be detailed/broken-down or general prices corresponding to construction quantities which are taken off or measured based on engineering design drawings or construction drawings or FEED designs and guidelines for technical matters and required works to be performed at construction works. Subject matters of and approaches to determination of construction costs shall be subject to Article 18 herein.

b) Construction costs calculated in proportion to material, labor, machinery and equipment costs and values of corresponding cost elements

- Building material, labor, machinery and equipment costs constituting direct costs shall be determined by quantities or volumes of materials, labor, machinery and equipment and values of these cost elements.

- Quantities of materials, labor, machinery and equipment may be determined on the basis of quantities of construction workload taken off by using engineering designs, construction drawings or FEED designs and economic-technical norms.

- Material costs shall be determined according to the instructions given in Table 4.1 of Appendix No.4 hereto.

- Labor, machinery and equipment costs shall be determined according to the instructions issued by the Minister of Construction.

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3. Determination of equipment costs

a) Equipment costs shall be calculated under point b of clause 2 of Article 9 in the Decree No. 68/2019/ND-CP, and the following regulations:

- Weight, quantity and type of equipment shall be determined by consulting technological, construction designs and list of equipment items contained in approved projects.

- Costs of purchase of equipment shall be calculated at market prices or according to quotations provided by suppliers, manufacturers or construction works with similar equipment that have been and are being carried out during the period relevant to the calculation period.

- For equipment to be manufactured or processed, these costs shall be determined on the basis of the volume and quantity of equipment to be manufactured and processed and their unit prices suitable to the nature and type thereof according to the signed manufacturing or processing contracts, or based on the manufacturers' quotations selected by the project owners/ investors, or prices at which similar equipment are manufactured or processed for construction works that have been or are being executed during the period relevant to the calculation period.

b) Costs of procurement management (including supplier’s costs of superintendence of equipment installation), and equipment installation supervision by contractors; costs of purchase of copyrights to software used for construction equipment and technological equipment of the project (if any); costs of training and technology transfer; costs of processing and manufacturing of non-standard equipment (if any), shall be determined by cost estimates or based on cost norms issued by competent state authorities.

c) Installation costs shall be detemined by making estimates in the same way as construction cost estimates prescribed in clause 2 of this Article.

d) Testing, calibration, training, technology transfer and other associated costs shall be determined by making estimates appropriate for workloads to be performed.

4. Project management costs

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5. Determination of construction investment consultancy costs

a) Consultancy costs included in construction cost estimates shall be determined on the basis of percentage norms (%), quantity-based norms or by making cost estimates appropriate to work quantities, scope, regimes or policies promulgated or announced by the Minister of Construction, or issued or released by competent state authorities. In case where several construction consulting works are carried out before making construction cost estimates, these costs shall be determined by values of consultancy contracts already signed in conformance to regulations of the State.

b) In case foreign consultants need to be hired, consultancy costs shall be determined by making cost estimates tailored to the consultancy needs (in terms of quantity and quality), regulations of competent state authorities and international conventions. Approach to determination of costs of hiring of foreign consultants shall follow the instructions issued by the Minister of Construction.

c) Approach to determination of construction investment consultancy costs shall follow the instructions issued by the Minister of Construction. In particular, the approach to determination of construction survey costs shall be subject to the instructions given in Appendix No. 9 hereto.

6. Other expenses shall be determined on the basis of the percentage (%) under the guidance of competent state authorities or by making cost estimates or the values of signed contracts in accordance with the provisions of law. In case where there is any insufficiency in conditions for determination of several other costs, they shall be estimated during the process of making construction cost estimates.

For some specialized construction works with specific cost elements or ODA-funded construction works, if other relevant expenses are specified under applicable treaties, these costs must be added to their construction cost estimates.

7. Determination of contingent costs

a) Contingent costs for any work quantity subject to changes shall be calculated by the percentage (%) of the summation of construction expenses, equipment expenses, project management costs, construction investment consultancy expenses and other costs.

b) The contingent costs against inflation factors shall be determined on the basis of the time of execution of construction works, the duration of bidding package execution, project implementation plan, contractor selection plan, capital allocation plan and construction price indices (calculated in months, quarters and years) suitable to the type of construction works, taking into account domestic and international price fluctuations.

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8. Approaches to determination of construction costs, equipment costs, other costs and contingent costs shall follow specific instructions given in Appendix No. 2 and No. 3 hereto.

Article 10. Construction tender estimates

1. An estimate of construction tender costs shall include:

a) The estimate of costs of procurement of construction work;

b) The estimate of costs of procurement of building materials, equipment and technological accessories;

c) The estimate of costs of procurement of equipment installation work;

d) The estimate of costs of procurement of construction consultancy work;

dd) The estimate of costs of procurement of engineering/design and construction work (EC);

e) The estimate of costs of procurement of engineering/design work and building materials and equipment (EP);

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h) The estimate of costs of procurement of design/engineering work, materials, equipment and construction work (EPC);

i) The estimate of costs of procurement of project formulation work, procurement of design/engineering work and procurement of construction work (turnkey);

k) Other construction tender estimates.

Construction tender estimates shall be specific to bid packages and appropriate to contractor selection plans. In case where there have already been construction cost estimates or total estimates, tender estimates shall not be required.

2. Cost elements of a construction tender estimate

a) A construction tender estimate shall comprise the following costs, such as direct costs, indirect costs, pre-assessed taxable income, value-added taxes, contingent costs offset against elements giving rise to quantities and inflation elements.

b) The estimate of costs of procurement of materials and equipment shall include the following expenses, such as procurement of building materials, equipment and technological accessories, value added taxes; costs of production and processing of non-standard equipment (if any); costs of management of procurement of building equipment incurred by contractors; costs of training and technology transfer (if any); transportation, insurance costs and other types of charges (if any); other related costs; contingent costs offset against elements giving rise to quantities and inflation factors.

c) The estimate of costs of procurement of equipment installation work shall comprise the following costs, such as installation, testing and calibration costs, value-added taxes, other related costs, and contingent costs offset against elements giving rise to quantities and inflation elements.

d) The estimate of costs of procurement of construction investment consultancy work shall comprise the following costs, such as consultant costs, administrative overhead costs, other costs, pre-assessed taxable income, taxes and contingent costs offset against elements giving rise to quantities and inflation elements.

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e) The estimate of costs of procurement of engineering/design work and building materials and equipment (EP) shall include the cost estimates specified in point b and d of this clause.

g) The estimate of costs of procurement of building materials and equipment, and construction work (PC) shall include the cost estimates specified in point b and d of this clause.

h) The estimate of costs of procurement of design/engineering, procurement of building materials and equipment, procurement of equipment and construction work (EPC) shall include cost items related to design/engineering work; procurement of building materials, equipment and construction work which are included in the approved total construction investment. 

i) The estimate of costs of procurement of project formulation work – design/engineering - procurement of building materials, equipment and construction work (turnkey) shall comprise cost items or entries of the total construction investment of the project specified in point b, c, d, dd, e and g of clause 4 of Article 4 in the Decree No. 68/2019/ND-CP.

k) Costs of other estimates of construction tender costs shall be determined on the basis of the scope of respective procurement works.

3. Project owners/investors may make tender estimates when they satisfy competency and qualification requirements prescribed by law. In case of lack of competence, project owners/investors shall be authorized to hire cost management advisory bodies that meet competency and qualification requirements set out in regulations laid down in Decrees on administration of investment and construction projects to make construction tender estimates.

Article 11. Construction tender estimation bases and approaches 

1. Bases for construction tender estimates shall be regulated as follows: 

a) With respect to investment and construction projects with contractor selection plans already approved by competent persons, construction cost estimates may be made on the basis of costs of specific construction bid packages. In this case, costs incurred from construction bid packages shall be determined according to the approach similar to the approach to determination of cost elements of cost estimates prescribed under regulations laid down in Article 10 herein.

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c) For bid packages developed for investment preparation purposes, tender estimates shall be made on the basis of the tasks, work outlines to be performed and cost estimates for the investment preparation work, suitable to contractor selection plan, requirements of bidding documents or request for proposals.

d) For turnkey bid packages, the tender estimate shall be determined on the basis of the approved total construction investment appropriate for the pre-feasibility study report, the approved investment policy, preliminary design and scope of bid package according to the approved contractor selection plan, requirements of bidding documents or request for proposal. If the pre-feasibility study report, approved investment policy or preliminary design does not form a sufficient basis to determine the turnkey tender estimate, the project owner/investor must clarify the preliminary design, requirements, regulations and standards applied to the bidding package to determine the costs of the respective bid packages.

2. Approach to determination of construction tender estimate shall follow the instructions given in the section 2 of Appendix No. 2 hereto.

Article 12. Assessment, review and approval of construction cost estimates

1. Subject matters of the review of construction cost estimate shall be subject to clause 2 of Article 10 in the Decree No. 68/2019/ND-CP.

2. Authority over the review and approval of construction cost estimates shall be subject to clause 3 and 4 of Article 10 in the Decree No. 68/2019/ND-CP.  Particularly for turnkey tender estimates and mixed bid packages (EPC, EC, EP, PC), the tender estimate must be appraised and approved by the investment decision maker before contractor selection.

3. Sample reports on assessment and review of construction cost estimates shall follow the instructions given in the Appendix No. 10 hereto.

Article 13. Adjustment and revision of construction tender estimates

1. The approved construction cost estimate may be adjusted or revised under clause 1 and 3 of Article 11 in the Decree No. 68/2019/ND-CP, and the following regulations:

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b) In case of adjustment in the cost structure due to inflation, construction quantity adjustment according to the design already assessed, approved, or change in design adjustment, is not falling into the situation specified in point a of this clause, the re-assessment by the construction authority shall not be needed . The project owner/investor shall be responsible for carrying out the assessment and approval of cost items subject to adjustment after receipt of consent from investment decision makers.

c) The investment decision maker shall be accorded authority to approve adjusted construction cost estimates in the case of adjustment in cost estimates as provided in point a of this clause.  In case of adjustment in the cost structure of the construction cost estimate according to the economic-technical report as provided in point b of this clause, the project owner/investor shall be authorized to approve the adjusted construction cost estimate.

2. Approach to making the adjusted construction cost estimate shall follow the instructions given in the section 3 of Appendix No. 2 hereto.

Article 14. Construction contract costs

1. Construction contract costs shall comprise all of the following costs necessary for executing bid packages, including direct costs, indirect costs, pre-assessed taxable income, taxes, fees prescribed by law, contingent costs offset against additional quantities and inflation elements of work quantities falling within bid packages in the approved contractor selection plan.

2. Bases for construction contract costs shall be calculated under clause 2 of Article 12 in the Decree No. 68/2019/ND-CP.

3. Direct costs of construction bid package shall be determined on the basis of construction cost estimate or project cost estimate or construction contract costs.

4. Indirect costs of construction bid package shall be determined to be appropriate for work contents and scope of each bid package.

5. Contingent costs included in an item of the construction contract costs shall be determined to match work characteristics, execution duration and form of the bid package, including:

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b) The contingent costs offset against inflation elements shall be determined on the basis of the execution duration of the bid package and the construction price indices appropriate for the nature and type of work of the construction bid package, taking into account the possibilities of variation in domestic and international prices.

c) Depending on each construction bid package, the level of contingent cost included the construction contract costs must not exceed the level of contingent cost included in the preliminarily estimated total investment, total investment, construction cost estimate or tender estimate which has already been approved.

d) Approach to determination of contingent costs for construction bid packages shall be similar to the approach to determination of contingent costs included in total investment or construction cost estimate.

6. Costs included as part of construction contract costs must be determined and updated to adapt to the price level defined 28 days before the tender closing date. In case the updated construction contract costs are higher than the approved tender estimate or construction cost estimate, and exceed the total construction investment, the project owner/investor must adjust the category and origin of materials and equipment to meet the quality and technical requirements so that these construction contract costs are appropriate so as not to exceed the total investment amount, and must report on such adjustment to the investment decision maker. The investment decision maker shall be authorized to use provisions when determining or updating construction contract costs.

Article 59. Use of contingent costs or provisions

Use of contingent costs or provisions shall be subject to clause 4 of Article 11 in the Decree No. 68/2019/ND-CP, and the following regulations:

The investment decision maker shall be authorized to use contingent costs or provisions of projects and construction cost estimates. Within the extent of contingent costs or provisions approved by investment decision makers, project investors/owners shall be authorized to decide how to use them to match characteristics, nature, execution period and specific conditions of each construction bid package.

Chapter IV

CONSTRUCTION NORMS AND DIRECT CONSTRUCTION COSTS PER UNIT

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Article 16. Set of construction norms

1. The set of construction norms shall be comprised of basic norms, construction estimate norms and cost norms, subject to Article 13 and Article 14 in the Decree No. 68/2019/ND-CP.

2. Approaches to determination of construction norms shall follow the instructions given in the Appendix No. 6, 7 and 8 hereto.

Article 17. Management of construction norms

Management of the set of construction norms shall be subject to Article 15 in the Decree No. 68/2019/ND-CP, and the following regulations:

1. New construction norms are construction estimate norms that have not yet been included in the issued construction norm set or construction norms already have their names in the issued construction norm set, but have other construction technologies.

2. Adjusted construction norms are the norms adjusted in terms of depreciation components, norm values of the construction norms that have already been issued in conformity with construction conditions or measures or technical requirements of specific works or all of these three elements.

3. When using the construction norms mentioned in clause 1 and 2 of this Article for determining the bills of lading, but higher than the bills of lading to which the issued norms are applied, project owners/investors must report to the investment decision makers or the Minister of Construction or the Minister of the Ministry in charge of specialized construction works, the Presidents of the provincial People's Committees authorized to undertake construction and investment projects under the Prime Minister’s central decision-making authority shall seek agreement with the Ministry of Construction before putting these norms to use.

Section 2. DIRECT CONSTRUCTION COSTS PER UNIT

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1. Direct construction costs per unit shall be subject to Article 16 in the Decree No. 68/2019/ND-CP, and the following regulations:

a) Detailed/breakdown bills of lading shall comprise complete and incomplete detailed bills of lading.

b) General bills of lading shall comprise complete and incomplete general bills of lading.

2. Cost items constituting direct construction costs per unit

a) Cost items constituting detailed bills of lading:

- Incomplete detailed bills of lading shall include direct costs related to materials, labor, machinery and equipment costs.

- Complete detailed bills of lading shall include direct, indirect costs and pre-assessed taxable income.

b) Cost items constituting direct construction costs per unit shall be regulated as follows:

- Costs included in incomplete general bills of lading shall include direct costs related to materials, labor, machinery and equipment costs, and shall be sourced from detailed bills of lading prescribed in point a of this clause.

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3. Unit prices of items constituting direct construction costs per unit

a) The price of constructional materials is the price of a unit of materials suitable to the unit calculated in the construction norm (the price for 1 m^3 of sand, 1 kg of steel, 1 building brick, ...) which is announced by state authorities, or the market price.

b) Unit cost of construction labor is the price per one day of work of a direct construction worker and is determined under the guidance of the Minister of Construction.

c) The price of machine shift and building equipment is the average price per a work shift and is determined under the guidance of the Minister of Construction.

4. Bases for determination of direct construction costs per unit

a) Detailed construction unit costs are determined on the basis of construction norms and prices of respective cost elements or determined at the market prices suitable to the time of calculation.

b) Costs of general bills of lading are determined with reference to detailed bills of lading or determined at the market prices suitable to the time of calculation.

5. Approach to determination of unit construction costs and material costs shall be subject to the instructions given in Appendix No. 4 hereto.

Article 19. Management of direct construction costs per unit

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1. Provincial-level People's Committees shall assign provincial-level Construction Departments to assume the prime responsibility for, and cooperate with concerned agencies in, based on the guidance of the Minister of Construction, determining and announcing construction material costs, unit costs of construction labor, construction machine shift and equipment, and construction price indices as a basis for management of direct construction costs per unit as prescribed in clause 2 of Article 35 in the Decree No. 68/2019/ND-CP.

2. Project owners/investors, consultancy bodies (providing counsels on formulation of investment projects, design, review), and assessment units, shall be responsible for selecting common, environmentally friendly, energy-efficient and popular construction materials on the market when preparing pre-feasibility study reports, feasibility study reports, construction designs and determining construction investment costs to ensure cost efficiency, investment efficiency and conformance to project requirements.

3. If any project is subject to architectural, structural or other requirements under which specific construction materials that are particular, not popular in the market, or are imported, must be selected, they must be clarified in pre-feasibility study, feasibility study reports or explanatory notes on technical designs, construction drawings, and FEED designs, and must be accepted or approved by investment decision makers.

Chapter V

INVESTMENT COSTS PER UNIT AND OVERALL COSTS PER CONSTRUCTION COMPONENT OR PART UNIT

Section 1. INVESTMENT COSTS PER UNIT

Article 20. Investment costs per unit

1. Investment costs per unit (hereinafter referred to as unit investment costs) refer to the amount of costs necessary per a unit of measure (e.g. area, volume, length, etc.), service capacity or capability, etc. according to designs for determination of construction investment costs.

2. Unit investment costs shall include such costs as construction, equipment, construction and investment project management, construction investment consultancy and other costs. They shall also include value-added taxes on the aforesaid costs.

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a) Compensation, support and resettlement costs, including costs of compensation for land, houses, fixtures or property attached to land, built on water surface and other compensation prescribed by laws; financial support from the state in case of land expropriation; resettlement costs; administrative costs for compensation, support and resettlement activities; land use fees and rents during the construction period (if any); costs of relocation and return for technical infrastructure already developed after investment and construction (if any) and other related costs;   

b) Loan interest incurred during the investment and construction period (with respect to projects using loans);

c) Initial working capital (with respect to investment and construction projects developed for manufacturing and business purposes);

d) Contingencies or provisions included in total investment (for work quantities that may arise and for inflation elements during the project execution period).

dd) Several costs of particular nature specific to projects, including environmental impact assessment and treatment of impacts from projects on environment; register of international quality and monitoring of project deformation; costs of project quality inspection; special reinforcement related to project foundations; expenses for hiring foreign consultants.

Article 21. Principles of determination of investment costs per unit

1. Typical construction works selected for calculation must be conformable to construction standards, construction regulations, regulations on classification and grading of construction works, may tend to be invested in and constructed and must be suitable to the scientific, technological and socio-economic development tendency at the time of calculation;

2. As for specific groups and types of construction works, typical construction works must be chosen to correspond to classifications and grading of construction works in accordance with regulations in force;

3. Technical instructions and construction standards applied to calculation of unit investment costs must be adequate and explicit;

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5. Data and figures used for determination of unit investment costs must ensure reliability and must be aligned with the design phase;

6. Units of measure used for calculation of unit investment costs must match types of construction works.

Article 22. Approach to determination of unit investment costs

Approach to determination of unit investment costs shall be subject to the instructions given in Appendix No. 5 hereto.

Section 2. OVERALL COSTS PER CONSTRUCTION COMPONENT OR PART UNIT

Article 23. Details of overall costs per construction component or part unit

1. Overall costs per construction component or part unit shall comprise all costs necessary for completion of a quantity of a group or type of construction works, or part of the construction structure. 

2. These costs per a part of the construction structure shall be comprised of direct costs, indirect costs, pre-assessed taxable income and value-added taxes.

Article 24. Principles of calculation of overall costs per construction component or part unit

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2. List of construction works classified by parts of the construction structure must be consistent, scientific and easy to use. Selected parts of the construction structure must have full information about symbols, size and quantity to serve the takeoff of quantities from design documentation;

3. Data and figures used for calculation of unit investment costs must ensure reliability and must be aligned with the design phase;

4. These costs per parts of the construction structure must be calculated sufficiently and ensuring constituent costs are rational; ensuring that these costs are typical and general;

5. Technical instructions and construction standards applied to calculation of unit investment costs must be adequate and explicit;

6. Units of measure for construction costs per a part of the construction structure must be selected in accordance with type of calculation.

Article 25. Approach to determination of overall costs per construction component or part unit

Approach to determination of overall costs per construction component or part unit shall be subject to the instructions given in Appendix No. 5 hereto.

Chapter VI

IMPLEMENTATION PROVISIONS

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Determining and managing construction investment costs in the transitional period shall be subject to regulations laid down in clause 1 and 2 of Article 36 in the Decree No. 68/2019/ND-CP, including the following specific regulations:

1. Construction investment projects that have been carried out are those projects that have obtained investment decisions and have works commenced after they are approved, such as surveys intended for construction design after basic design; selection of contractors for implementation of construction design after basic design.

2. Investment and construction projects already approved but not yet commencing are those projects obtaining investment decisions from competent authorities, but having the works specified in clause 1 of this Article which have not yet commenced.

3. If construction investment projects are prone to adjustment in total investment and construction estimate such adjustment in construction norms, construction costs or construction contract costs made 28 days prior to the bid opening date prescribed in documents in force at the adjustment date shall be subject to decisions by investment decision makers on the basis of conformance to effectiveness, progress and cost efficiency principles.   

4. With respect to construction bid packages which have already been closed, of which contractors have already been selected, or on which agreements have already been signed, requirements set forth in documentation for invitation for bid, bid documents, terms and conditions of signed agreements must be obeyed. 

Article 27. Entry into force

1. This Circular shall enter into force from February 15, 2020, replacing the Circular No. 06/2016/TT-BXD dated March 10, 2016, providing instructions about estimation and management of construction investment costs.

2. In the course of implementing this Circular, if there is any difficulty that arises, persons and entities may send feedbacks to the Ministry of Construction to seek approval of any possible solutions./.

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PP. MINISTER
DEPUTY MINISTER




Bui Pham Khanh