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THE MINISTRY OF
CONSTRUCTION
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SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No.
09/2008/TT-BXD
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Hanoi, April 17,
2008
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CIRCULAR
GUIDING THE ADJUSTMENT OF CONSTRUCTION PRICES AND CONTRACTS
IN RESPONSE TO FLUCTUATIONS IN PRICES OF RAW MATERIALS, FUELS AND CONSTRUCTION
MATERIALS
Pursuant to the Government s
Decree No. 17/ 2008/ND-CP of February 4, 2008, defining the functions, tasks,
powers and organizational-structure of the Ministry of Construction;
Pursuant to the Government s Decree No. 99/2007/ND-CP of June 13, 2007, on the
management of work construction investment expenses; and Decree No.
03/2008/ND-CP of January 7, 2008, amending and supplementing a number of
articles of Decree No. 99/2007/ND-CP of June 13, 2007, on the management of
work construction investment expenses;
Based on the Prime Ministers instruction in Document No. 164/TTg-CN of January
29, 2008, and Document No. 546/TTg-KTN of April 14, 2008, on the adjustment of
prices of raw materials, fuels and construction materials, and construction
contracts;
The Ministry of Construction
guides the adjustment of construction prices and contracts in response to
fluctuations in prices of raw materials, fuels and construction materials
(below referred to as construction material prices) as follows:
1. Subjects
and scope of application
1.1 This Circular guides die
adjustment of cost estimates, bidding package prices, total investment capital
and construction contracts of investors and contractors, applicable to state
budget-funded work construction investment projects in response to fluctuations
in construction material prices which are beyond the control of investors and
contractors.
1.2. Adjustment of construction
material prices applies to bidding packages which have been being executed at
package contractual prices or fixed unit price-based contractual prices.
1.3. To change the form of
contractual prices of contracts which have been performed from package
contractual prices or fixed unit price-based contractual prices to adjustable
price-based contractual prices in response to fluctuations in construction
material prices which are beyond the control of investors and contractors.
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2.1. Construction material
prices shall be adjusted for constniction and installation volumes performed
from 2007 which are affected by fluctuations in construction material prices
resulting in higher (lower) work construction costs which are beyond the
control of investors and contractors (below referred to as construction and
installation volumes affected by price hikes).
2.2. Adjustment of cost
estimates, bidding package prices, total investment capital and construction
contracts of investors and contractors should be closely combined with measures
to curb inflation, stabilize macro-economy and assure sustainable growth.
2.3. Investors and contractors
shall determine construction and installation volumes affected by price hikes
(cuts) and price adjustment levels on the principle of jointly sharing
interests and responsibilities.
2.4. Construction materials
eligible for price adjustment (increase or decrease) include all kinds of
petrol, oil, iron and steel (including steel cables and pipes), asphalt,
cement, sand, stone, gravel and brick, electric wires and cables, timber
(including timber falsework and door), and glass. If it is necessary to adjust
the prices of other construction materials in response to price fluctuations,
investors shall report it to ministers, presidents of provincial-level Peoples
Committees, presidents of economic groups, or chairmen of boards of directors
of state corporations for decision.
2.5. In changing package
contractual prices or fixed unit price-based contractual prices to adjustable
price-based contract prices, it is necessary to identify contents and the scope
of change, which may only be applied from the time of price fluctuation
determined by investors and contractors based on the implementation progress.
3. Methods
of adjusting construction material prices
3.1. Construction material
prices may be adjusted for each construction contract, each bidding package and
the w hole project. Additional expenses arising from the adjustment of
construction material prices shall be stated in estimates of additional
construction costs to serve as a basis for the adjustment of contractual
prices, bidding package prices, cost estimates of works and total investment
capital.
3.2. Additional construction
costs may.be estimated by directly calculating material expenses or using
adjustment coefficients of material expenses. Investors shall calculate
adjustment coefficients of material expenses or apply price indexes publicized
by the Ministry of Construction of the General Statistics Office. Additional
construction costs shall be estimated pursuant to the Appendix to this
Circular.
3.3. Additional construction
costs shall be estimated once on the basis of construction and installation
volumes affected by construction material price hikes (cuts) from 2007.
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4.
Adjustment of construction cost estimates of works after making additional
construction cost estimates
4.1. For bidding packages for
which contractors have been designated and will themselves implement the
projects or contractors have been selected but construction contracts have not
yet been signed or are being performed (at package contractual prices or fixed
unit price-based contractual prices), investors shall estimate additional
construction costs under the guidance in Section 3 above for use as a basis for
the adjustment of construction cost estimates of works.
4.2. For bidding packages, work
items or works for which contractors have not yet been selected, investors
shall adjust their cost estimates according to current regulations.
4.3. The adjusted construction
estimate of a work shall be determined by adding additional construction cost
estimates to the approved construction cost estimate of the work.
5.
Adjustment of bidding package prices after making additional construction cost
estimates
Investors shall adjust bidding
package prices by adding additional construction cost estimates determined
under Section 3 above to approved successful bids. If the adjusted price of a
bidding package does not exceed the approved price, the investor may decide to
approve that price. If the adjusted price of a bidding package exceeds the approved
price but does not result in an excess of the total investment capital, the
investor may decide to approve and shall report it to the investment decider.
If the adjusted price of a bidding package results in an excess of the approved
total investment capital, the adjustment of total investment capital must
follow the guidance in Section 6 of this Circular.
6.
Adjustment of total investment capital after making additional construction
cost estimates
The investor shall, based on
adjusted construction estimates or adjusted bidding package prices, adjust the
total investment capital. If the adjusted total investment capital exceeds the
approved total investment capital, the investor shall report it to the
investment decider for consideration and decision. Ministers, heads of
ministerial-level or government-attached agencies, presidents of
provincial-level Peoples Committees, presidents of economic groups, or chairmen
of boards of directors of state corporations may decide on die adjustment of
total investment capital of projects in which the investment is decided by the
Prime Minister.
7.
Modification of contracts after making additional construction cost estimates
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7.2. For bidding packages for
which contractors have been selected but contracts have not yet been signed, the
investor shall negotiate and sign a contract on the basis of additional
construction cost estimates, successful bids, the bid invitation dossier and
the bid dossier.
7.3. In case of change of
package contract prices or fixed unit price-based contractual prices into
adjustable price-based contractual prices, the investor shall report to the
investment decider on the contents and scope of change for approval before
adjustment. Adjustable price-based contractual prices comply with the guidance
in the Construction Ministrys Circular No. 06/2007/TT-BXD of July 25, 2007,
guiding construction contracts.
Ministers, heads of
ministerial-level or government-attached agencies, presidents of
provincial-level Peoples Committees, presidents of economic groups, or chairmen
of boards of directors of state corporations shall decide on the modification
of contracts for projects for which bidding plans are approved by the Prime
Minister.
8.
Organization of implementation
8.1. Investors shall consider
and decide on the adjustment of cost estimates, bidding package prices and
construction contracts in order to ensure the effective execution of projects.
For projects approved by the Prime Minister, ministers, heads of
ministerial-level or government-attached agencies, presidents of
provincial-level Peoples Committees, presidents of economic groups, or chairmen
of boards of directors of state corporations shall decide on adjustments.
8.2. For construction investment
projects funded with the local budget, the investor shall calculate and adjust
cost estimates, bidding package prices and contracts and bear responsibility
for such calculation and adjustment; provincial-level Peoples Committees shall
prescribe the application of construction unit prices, machine shift and
construction equipment prices, and construction material prices. If notified or
publicized prices are no longer suitable or unavailable, the investor shall
base on prices in valid documents and invoices, which are suitable to market
prices.
8.3. Pending the completion of
adjustment procedures, the investor shall advance to the contractor the price
difference as guided in this Circular at the contracts advance level for the
unperformed volume and temporarily pay 80-90% of the price difference of the
performed volume in order to prevent damage for the contractor and negative
impacts on the work or project construction progress.
An advance or temporary-payment
dossier comprises a written application for advance (or temporary) payment,
adjusted contract (contract annex) and additional construction cost estimates.
8.4. If adjusted construction
material prices result in the change in the project group, investors may
continue executing these projects under regulations applicable to them before
the adjustment (without having to carry but again procedures for project
formulation, appraisal and approval).
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8.6. For works and bidding
packages performed in the form of adjustable price-based contracts under the
Governments Decree No. 16/2005/ND-CP of February 7, 2005, and Decree No.
112/2006/ND-CP of September 29, 2006, on management of work construction
investment projects, if the delay in the contract performance is not at
contractors fault, the volumes performed from 2007 may be adjusted in price
under the guidance of this Circular.
8.7. Ministries,
ministerial-level agencies, government-attached agencies, provincial/ municipal
Peoples Committees, economic groups and state corporations shall direct, guide,
inspect and supervise investors and contractors in adjusting construction
material prices, costs estimates, bidding package prices, total investment
capital and contracts in strict accordance with this Circular; and request
investors not to let the adjustment of construction expenses affect the
construction progress and, at the same time, to speed up the progress of construction
of works, especially of important national ones.
8.8. Adjustment of construction
cost estimates according to new wage levels complies with the guidance in the
Construction Ministrys Circular No. 07/2006YTT-BXD of November 10, 2006, and
Circular No. 03/2008/TT-BXD of January 25, 2008. guiding the adjustment of
construction cost estimates.
8.9. Investors shall report to
investment deciders for consideration and decision the transition of
construction investment projects under Decree No. 99/2007/ND-CP on the
management of construction investment expenses (including total investment
capital, construction cost estimates, construction norms and prices,
construction contracts, and payment and finalization of construction investment
capital). Ministers, heads of ministerial-level or government-attached
agencies, presidents of provincial-level Peoples Committees, presidents of
economic groups, or chairmen of boards of directors of state corporations shall
decide on the transition of projects approved by the Prime Minister.
8.10. For construction contracts
for which full payment has been made in 2007 (full payment of contractual
prices, including the value of signed contracts and added value, if any, in
2007), excluding warranty expenses as prescribed, construction material prices
are not allowed to be adjusted.
9.
Implementation effect
9.1. This Circular takes effect
15 days after its publication in CONG BAO and replaces the Construction
Ministrys Circular No. 05/2008/TT-BXD of February 22, 2008. guiding the adjustment
of construction prices and contracts in response to fluctuations in prices of
raw materials, fuels and construction materials.
9.2. Investors of construction
projects funded with capital of other sources are encouraged to adjust
construction prices and contracts in accordance with this Circular.
Problems arising in the course
of implementation should be reported to the Ministry of Construction for
synthesis, study and settlement.
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FOR THE MINISTER
OF CONSTRUCTION
VICE MINISTER
Dinh Tien Dung
APPENDIX
(Attached
to the Construction Ministrys Circular No. 09/2008/TT-BXD of April 17, 2008)
1. Table of additional
construction cost estimates
No.
Expense
items
Method
of calculation
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I
DIRECT EXPENSES
or
Gvl x P x K
VL
2
Other direct expense
VL
x percentage
TT
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Direct expenses
VL+TT
T
II
General expense
T
x percentage
C
III
Pre-calculated taxable
income
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TL
Pre-tax construction cost
(T+C+TL)
Gbs
IV
Value-added tax
Gbs
x TGTGT-XD
GTGT
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Post-tax construction cost
GBS
+ GTGT
GXDBS
2. Formula of adjusting material
expense by offsetting direct material expense
VL
=
Of which:
Qj is the volume of the ith
material in the construction and installation volume affected by price
fluctuation and may be determined on a resular basis (monthly or quarterly) or
according to the take-over test phase.
CLj is the difference between
the price of the ith material at the time of adjustment and the construction
material price quoted in tne contract or bidding package cost estimate.
The construction material price
at the time of adjustment is that announced by a competent state agency or the
publicized price.
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In case a competent state agency
fails to notify or publicize a timely or practical construction material price
or the price of a construction material is not included in die material price
notice or announcement, the investor and contractor shall base themselves on
valid documents and invoices to determine the consuuction material price and
bear responsibility for its truth fulness and accuracy.
Valid documents and invoices are
those prescribed by the Ministry of Finance. If such invoices are impractical
for some construction materials, contracts, lists of materials or handwritten documents
which fully indicate names, addresses and signatures of the suppliers of
construction materials, may be used instead.
3. Formula of adjusting
consuuction material expense based on adjustment coefficient of material
expense
VL
= GVL x P x K
Of which:
GVL is the direct material
expense in the contract.
P is the proportion of the
expense for the material with an increased price to the direct material expense
of the contract.
K is the coefficient of increase
of the construction material price at the time of adjustment compared to the
contractual price of the construction material subject to price hike. The
investor shall calculate the coefficient of increase of the construction
material price or apply the price index publicized by the Ministry of Construction
or the General Statistics Office.
4. Other expenses
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C
= NC x percentage of other direct expense x KNCC
NC is the labor cost
constituting a direct expense of a construction and installation volume with
adjusted material price.
KNCNC is the general expense
calculated based on the labor cost, for the construction and installation
volume for which the general expense is calculated based on the labor cost.
The proportions of general
expense and pre-calculated taxable income are those set in the contract,
bidding package or cost estimate.
Value-added tax shall be
calculated according to state regulations.