Integrated document 14/VBHN-BXD 2020 instructions management of construction investment costs

• Official number: 14/VBHN-BXD
• Legislation Type: Integrated document
• Organization: The Ministry of Construction
• Signer: Nguyen Van Sinh
• Issued Date: 06/10/2020

MINISTRY OF CONSTRUCTION --------	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness --------------------
No. 14/VBHN-BXD	Hanoi, October 6, 2020

CIRCULAR

INSTRUCTIONS ABOUT DETERMINATION AND MANAGEMENT OF CONSTRUCTION INVESTMENT COSTS

Circular No. 09/2019/TT-BXD dated December 26, 2019 of the Minister of Construction, providing instructions about the determination of unit construction labor costs in effect from February 15, 2020 which is amended and supplemented by:

The Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, providing amendments and supplements to several Articles of 04 Circulars related to the management of construction investment costs in effect from September 5, 2020.

Pursuant to the Law on Construction No. 50/2014/QH13 dated November 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 Department1;

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Chapter I

GENERAL PROVISIONS

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

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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:

a) Construction and equipment costs shall be composed of those costs subject to regulations laid down in clause 2 and 3 of Article 8 in this Circular.

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;

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- 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;

- Assurance of construction safety and environmental sanitation;

- 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;

- Converting 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;

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- Project acceptance testing, commissioning and transfer;

- Protect groundbreaking or opening ceremony (if any), communication and advertising for construction project;

- 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. Below are specific regulations laid down in the new Law:

- 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;

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

- Providing construction design;

- 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);

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- Conducting specialized construction tests;

- Ensuring quality assurance for building materials, components, products and installed equipment to meet the project owner/investor’s needs (if any);

- 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:

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- (Compulsory) insurance for works during construction time;

- International quality register and surveying of works deformation (if any);

- 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 authorities2;

- 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;

- Depending on the specific conditions of specific construction projects, works or construction bids, 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; expenses for restoration of technical infrastructure affected by construction activities; 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).3

- 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.

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Article 4. Approach for 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.

2. For any project implemented in the form of turnkey contracts, construction costs and equipment expenses defined in the preliminary estimate of total construction investment shall be calculated according to the approach to determining costs based on construction work quantity mainly measured according to the preliminary design in combination with the approach to determining costs by using investment costs per unit or cost data of similar project, and in compliance with correct and adequate costing rules for estimation of costs for the turnkey bid.

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 bids 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 bids.

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. Approaches for determination of total investment

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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, construction unit prices, related regimes and policies.

b) Total investment is determined by using data on costs of similar construction works.

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.

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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. 4 Authority over review of total construction investment shall be subject to clause 2.4 and 3 of Article 6 in the Decree No. 68/2019/ND-CP.  Particularly for projects that only require economic-technical reports, the authority over the review shall be subject to clause 13 of Article 1 and point a of clause 2 of Article 3 in the Law on Amendments and Supplements to the Law on Construction.

3. The authority over approval of total construction investment shall be subject to clause 7 of Article 6 in the Decree No. 68/2019/ND-CP.

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.

2.5 Adjustment of total investment already approved shall be subject to clause 7 of Article 7 in the Decree No. 68/2019/ND-CP.  Adjusted total construction investment includes total construction investment already approved and the (increasing or decreasing) adjustment value. 

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

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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.

2. Construction costs shall be comprised of direct costs, indirect costs, pre-assessed taxable income and value-added taxes, and subject to the following specific regulations:

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, such as: 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.

-  (repealed)6

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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.

4. Project management costs shall be composed of those costs subject to regulations laid down in point b of clause 1 of Article 3 in this Circular.

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 price slippage 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

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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.

- Indirect costs calculated in percent (%) or estimated according to the instructions given in the section 3.1 of Appendix No. 3 hereto.

- 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 design 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.

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- 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.

- Indirect costs, pre-assessed taxable income and value added taxes shall be conformable to the instructions given in point a of this clause.

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.

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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

Project management costs shall be determined on the basis of percent (%) norms or by making cost estimates matching types of project management organization, scale, location and time of project management announced by the Minister of Construction. Approach for determination of project management costs shall follow the instructions issued by the Minister of Construction.

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. Approaches for determination of costs of hiring of foreign consultants shall follow the instructions issued by the Minister of Construction.

c) Approaches for determination of construction investment consultancy costs shall follow the instructions issued by the Minister of Construction. In particular, the approach for 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.

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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 price slippage 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.

c) For projects with many constructions works or projects in which the contractor selection plan is approved, contingent costs included in the construction estimate (total cost estimate) shall be the total contingency expense of the construction works or construction bids, and the remaining contingency expenses of the project that have not yet been allocated into specific construction works or construction bids belonging to the project. The contingent costs allocated to specific construction works of projects with various construction works or construction bids for projects with approved contractor selection plans shall be determined based on the nature of works and the length of time of execution, technical requirements, actual conditions and other factors. Management of contingent costs shall be subject to Article 15 herein.

8. Approaches for 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 procurement cost estimates

1. An estimate of construction procurement 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;

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

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

g) The estimate of costs of procurement of materials, equipment and construction work (PC);

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 procurement cost estimates.

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

2. Cost elements of a construction procurement cost estimate

a) A construction procurement cost 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 price slippage elements.

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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.

dd) The estimate of costs of procurement of engineering/design and construction work (EC) shall encompass those cost estimates specified in point a and d of this clause.

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 procurement costs shall be determined on the basis of the scope of respective procurement works.

3. Project owners/investors may make procurement cost estimates when they satisfy 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 procurement cost estimates.

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1. Bases for construction procurement cost 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 bids. In this case, costs incurred from construction bids 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.

b) For bids carried out before technical designs, construction drawings and FEED designs are approved, procurement cost estimates shall be determined based on the approved total construction investment and in accordance with contractor selection plans and requirements of the bidding documents or requests for proposals.

c) For bid packages developed for investment preparation purposes, procurement cost 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 procurement cost 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 procurement cost 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 procurement cost 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.

2.7 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, subject to the following specific regulations:

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b) In case where necessary, the investment decision maker must consider granting authorization to the investor to conduct the assessment and approval of the survey cost estimate and survey tasks.

c) If estimates of costs of preparations for formulation of technical/engineering designs, construction drawings shall be determined in percent (%) ratio or in the form of detailing of estimated costs under regulations in force, and have already been reviewed or approved as part of total investment, they shall not need to be reviewed or approved again.

3. Sample reports on assessment and review of construction tender 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:

a) In case of any adjustment of construction cost estimates made due to design adjustment leading to any change in construction geology, design load, structural solutions, materials used for building load-bearing structures, construction organization measures results in any effect on the safe bearing capacity, the construction authority must carry out the re-assessment of cost items affected by any adjustment in construction design.

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.

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1.8 Construction bid price refers to any cost necessary for execution of a bid.  a) Elements of construction bid costs shall be subject to regulations laid down in clause 2 of Article 10 in this Circular.

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

3.9 (repealed)

4.10 (repealed)

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:

a) The contingent costs for any additional quantities shall be calculated by the percentage (%) of the total cost of the bid package, exclusive of contingent costs. In case of quantities of specific work in the bid package are calculated in a specific and accurate manner, the project owner/investor shall decide the contingency rate for any factor leading to additional quantities which does not exceed 5%.

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.

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Article 15. Use of contingent costs12

The use of contingent costs shall be subject to the provisions of clause 4 of Article 7, clause 4 of Article 11 and clause 4 of Article 12 in the Decree No. 68/2019/ND-CP. During the project implementation process, project investors shall be authorized to decide how to use contingent costs falling within the amounts approved by investment decision makers upon the determination and update of each construction bid price.

Chapter IV

CONSTRUCTION NORMS AND DIRECT CONSTRUCTION COSTS PER UNIT

Section 1. CONSTRUCTION NORMS

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

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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.

3.13 (repealed)

Section 2. Direct construction costs

Article 18. Direct construction costs

1. Direct construction costs shall be subject to Article 16 in the Decree No. 68/2019/ND-CP, and shall be regulated as follows:

a) Detailed unit prices shall comprise complete and incomplete detailed ones.

b) General prices shall comprise complete and incomplete general ones.

2. Cost items constituting direct construction costs

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- Incomplete detailed unit prices shall include direct costs related to materials, labor, machinery and equipment costs.

- Complete detailed unit price shall include direct, indirect costs and pre-assessed taxable income.

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

- Incomplete general prices 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.

- Complete general prices shall include direct, indirect costs and pre-assessed taxable income, and shall be sourced from detailed bills of lading prescribed in point a of this clause.

3. Cost elements constituting direct construction costs

a) The price of building materials is the price of a unit of materials suitable to the unit calculated in the construction norm (the price for 1 m3 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 cost 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.

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a) Detailed unit prices 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) General prices are determined by consolidating detailed unit prices or determined at the market prices suitable to the time of calculation.

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

Article 19. Management of direct construction costs

Management of direct construction costs shall be subject to Article 17 in the Decree No. 68/2019/ND-CP, and the following regulations:

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

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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.

They shall not exclude costs of several works to meet particular requirements of construction projects/works, specifically including:

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);

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Article 21. Principles of the 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;

4. Unit investment costs must be calculated to ensure constituent costs are adequate and reasonable; ensure that they are typical or general;

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

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

Article 22. Approaches for determination of unit investment costs

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

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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 determination of overall costs per construction component or part unit

1. Typical construction works selected for calculation must be conformable to construction standards, construction regulations, regulations on classification and grading of construction works, and must be developed popularly at the time of calculation;

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 period;

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;

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

Approaches for 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

Article 26. Transition provisions

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.   

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Article 27. Entry into force14

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 document, if there is any difficulty that arises, persons and entities may send feedbacks to the Ministry of Construction to seek their approval of any possible solutions./.

THIS IS TO CERTIFY THE CONSOLIDATED DOCUMENT
PP. MINISTER
DEPUTY MINISTER




Nguyen Van Sinh

1 The Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, providing amendments and supplements to several Articles of 04 Circulars related to the management of construction investment costs in effect from September 5, 2020, has the following basis for its promulgation:

“Pursuant to the Law on Construction dated June 18, 2014.

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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 the management of investment and construction costs.

In compliance with the Government’s Resolution No. 84/NQ-CP dated May 29, 2020, regarding tasks and measures to relieve business and production difficulties, speed up the disbursement of public investment capital as well as assure social security in the context of the Covid-19 pandemic;

Upon implementation of the Government’s Resolution No. 108/NQ-CP dated July 17, 2020 on several tasks and measures to mitigate difficulties and problems arising from the implementation of the Decree No. 68/2019/ND-CP regarding the management of investment and construction costs.

Upon the request of the Director of the Construction Economics Department.”

2 The expression “(in case of needing to hire professionals for the purpose of cooperation in implementation)” shall be repealed under the provisions of point a of clause 7 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^3 This regulation shall be supplemented under the provisions of clause 1 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^4 This regulation shall be amended and supplemented under the provisions of clause 2 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^5 This regulation shall be amended and supplemented under the provisions of clause 3 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

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^7 This regulation shall be amended and supplemented under the provisions of clause 4 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^8 This regulation shall be amended and supplemented under the provisions of clause 5 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^9 This regulation shall be amended and supplemented under the provisions of clause 7 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^10 This regulation shall be repealed under the provisions of point c of clause 7 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^11 This regulation shall be repealed under the provisions of point c of clause 7 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^12 This regulation shall be amended and supplemented under the provisions of clause 6 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^1^3 This regulation shall be repealed under the provisions of point c of clause 7 of Article 1 in the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, in effect from September 5, 2020.

^1^4 Article 5 of the Circular No. 02/2020/TT-BXD dated July 20, 2020 of the Minister of Construction, providing amendments and supplements to several Articles of 04 Circulars related to the management of construction investment costs in effect from September 5, 2020, has the following regulations:

“Article 5. Effect

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2. Transitional provisions

a) If construction bids have invitations for bid or requests for proposals have been issued, but have not yet been closed before the effective date of this Circular, investment decision makers may consider issuing decisions on application of regulations laid down in this Circular for implementation.

b) If construction bids have already been closed before the effective date of this Circular, requirements set forth in invitations to bid, requests for proposals, bid packages and proposals must be observed/”.