CIRCULAR No CIRCULAR No. 08/1999/TT-BXD OF NOVEMBER 16, 1999 GUIDING THE ELABORATION AND MANAGEMENT OF THE CONSTRUCTION EXPENSES FOR THE CONSTRUCTION WORKS OF INVESTMENT PROJECTS Pursuant to the Government�s Decree No. 52/1999/ND-CP of July 8, 1999 promulgating the Regulation on Investment and Construction Management; In order to apply the managerial mechanism to the construction works of investment and construction projects using the State budget capital, the State-guaranteed credit capital, the State�s development investment credit capital, the State enterprises� development investment capital, the self-mobilized capital of State enterprises and/or commercial credit capital not guaranteed by the State prescribed in Articles 10, 11 and 12 of Decree No. 52/1999/ND-CP, the Ministry of Construction hereby guides the elaboration and management of the construction expenses for the construction works of investment projects as follows: I. GENERAL PROVISIONS 1. The construction expense for the construction works of an investment project is the total expense needed for building a new construction work or renovating, expanding or technically equipping an existing construction work. Due to the characteristics of the production process and the characteristics of the construction products, each construction work shall require its own construction expense which is determined according to the size, characteristics, technical nature as well as technological requirements of the construction process. In each stage of the investment and construction process the construction expense is demonstrated through the norm of the total investment amount in the investment preparation stage, the total cost estimate of the construction work, the cost estimate of the construction items in the investment execution stage, the payment and settlement prices of the construction work�s investment capital when construction is completed and the project is put into exploitation and use. The total investment amount is the total amount of all investment and construction expenses (including the capital for initial production) and is the project�s maximum expense limit determined in the investment decision. The construction work�s total cost estimate and total value to be settled when construction is completed and the project is put into exploitation and use shall be within the limit of the total investment amount already approved or adjusted as prescribed in Article 25 of the Regulation on Investment and Construction Management issued together with the Government�s Decree No. 52/1999/ND-CP of July 8, 1999. 2. The expense for the construction of a work shall be determined on the basis of the work volume, the State�s system of economic and technical norms and criteria as well as policies and regimes compatible with the objective market factors in each period of time and be managed in accordance with the Regulation on Investment and Construction Management issued together with the Government�s Decree No. 52/1999/ND-CP of July 8, 1999. 3. All construction works of investment projects using the State budget capital, the State-guaranteed credit capital, the State�s credit capital for development investment, the development investment capital of State enterprises, the self-mobilized capital of State enterprises and/or the commercial credit capital not guaranteed by the State, shall have to comply with this Circular�s guidance on the elaboration and management of construction expenses. II. CONTENTS OF THE CONSTRUCTION EXPENSE FOR CONSTRUCTION WORKS IN DIFFERENT INVESTMENT STAGES 1. The total investment amount The total investment amount, which is analyzed, calculated and determined in the stage of making the feasibility study report (or the investment report) of the project, includes the expenses for the investment preparation (conducting survey, making and evaluating the project�s feasibility study report), the expense for preparation for the investment execution (land and crop compensation, relocation of inhabitants and projects on the construction ground, transfer of the land-use right..., survey, designing, elaboration and evaluation of the design, total cost estimate and bidding expense, completion of the investment procedures, building of roads, electricity and water supply systems in service of construction, the support area, workers� make-shift houses (if any), the expense for the investment execution and construction (construction and installation, procurement of equipment and other related expenses), the expense for production preparation to put the project into exploitation and use (the expenses for training, test run, trial production, hiring of specialists during the test run time), the initial working capital for production (for production projects), bank interests payable by the investor during the investment execution time, the insurance premium and the reserve expense. For group A projects and a number of projects which have special requirements permitted by the Prime Minister, apart from the above-mentioned contents, their total investment amount shall also include the expenses for project-related scientific and technological research. The detailed contents, the method and bases for the calculation of the total investment amount shall comply with the guidance of the Ministry of Planning and Investment. 2. The total cost estimate of a construction work The total cost estimate of a construction work is the total of expenses needed for the investment in building the construction work, which are calculated in detail in the technical designing or construction technical designing stage. The total cost estimate includes: construction and installation expenses, the equipment expense (including technology(ies), various kinds of non-standard equipment to be manufactured and/or processed (if any) and other equipment and facilities in service of production, working and daily-life activities), other expenses and the reserve expense (including the reserve expense for price inflation and for newly arising work volume). The expense items in the total cost estimate of a construction work include the following specific contents: 2.1. The construction and installation expense, including: - The expense for destruction and dismantling of old architectural objects (taking into account the value of recovered supplies and materials (if any) so as to reduce the investment capital); - The expense for leveling the construction ground; - The expense for building make-shift and support facilities in service of the construction (roads, electricity, water, workshops, etc...), make-shift houses at the construction site for accommodation as well as construction control (if any); - The expense for building construction items; - The expense for installing equipment (for equipment which needs to be installed); - The expense for major movement of the construction equipment and labor force (in cases of appointment of bidders, if any). 2.2 The equipment expense, including: - The expense for procurement of technological equipment (including non-standard equipment to be manufactured or processed (if any), other equipment in service of production, working and daily-life activities of the construction work (including equipment which needs or does not need to be installed); - The expense for transport from the port(s) or the place(s) of purchase to the construction site, the expense for storage at warehouses and/or storing yards or containers storage (if any) at the Vietnamese port (for imported equipment), the expense for preservation and maintenance of equipment in the warehouses and/or storing yards at the construction sites; - Taxes and insurance premiums for construction equipment. 2.3. Other expenses, including: Due to the particular characteristics of these expenses, the contents of each expense shall be categorized according to the various stages of the investment and construction process. Specifically: a/ In the investment preparation stage: - The expense for making the pre-feasibility study report for Group A projects or Group B projects (if the level competent to decide investment have a written request therefor), the feasibility study report for common projects and projects which only make investment reports; - The expense for project propagation and/or advertisement (if any); - The expense for scientific and technological research pertaining to the project (for Group A projects and some projects with special requirements permitted by the Prime Minister); - Fee for evaluation of the feasibility study reports of investment projects. b/ In the investment execution stage: - The expense for construction commencement of the construction work (if any); - The expense for compensation and implementation organization during the process of making land and crop compensation, relocation of inhabitants and projects on the construction site; expenses for resettlement and rehabilitation work (for construction works of investment projects that require resettlement and rehabilitation); - Land rental or land use right transfer fee; - The expense for construction survey, construction work�s design, the expense for experimental model (if any), the expense for compilation of bidding dossiers, analysis and appraisal of the results of bidding for construction and installation, procurement of equipment; the expenses for construction supervision and equipment installation and other consultancy expenses...; - The expense for the project management board; - The expense for security protection and environmental protection during the construction process (if any); - The expense for inspection and evaluation of the construction quality (if any); - The expense for making and evaluating the unit prices of the cost estimate; the expense for management of the construction work; - The work construction�s insurance premium; - Land administration fee; - Fees for evaluation of the technical design or technical-construction design, the total cost estimate of the construction work, the bidding results. c/ In the stage of completion of construction and putting the project into exploitation and use - The expense for compiling the dossiers on the completion of the construction work; capital conversion; verification and approval of the construction work�s final settlement; - The expense for dismantling make-shift and support facilities in service of construction, and make-shift houses (after deducting the recovered value), etc. - The expense for cleaning up the construction, organizing the test operation before acceptance, the inauguration and hand-over of the construction work; - The expense for training technical workers and production managerial staff; - The expense for hiring operation and production specialists during the test run period (if any); - The expense for raw materials, energy and labor for the non-loaded and loaded test run process (after deducting the recovered value of products), etc. 2.4. The reserve expense: - The reserve expense is an amount to be used only as reserve capital for work volumes arising due to changes in design at the investor�s request which is approved by the competent level, for unforeseeably arising work volume, and for price inflation during the project implementation course. 3. The construction and installation cost estimate for construction items The construction and installation cost estimate for construction items is the expense needed for completing the volume of construction and installation work of the construction items, which is calculated on the basis of the construction drawing design or the technical-construction design. The construction and installation cost estimate for construction items consists of: 3.1. The before-tax value of the construction and installation cost estimate, including: The material cost, the labor cost, the expense for construction machines, the general expense and the pre-calculated taxable income. 3.2. The after-tax value of the construction and installation cost estimate, including: the before-tax value of the construction and installation cost estimate and the output value-added tax amount. 4. The payment price 4.1. For cases of bidding, the payment price shall be effected according to the construction tempo and the bid-winning price (for package contracts) or according to the bid-winning unit price and the conditions recorded in the contract between the investor and the construction enterprise (for contracts involving price adjustments) 4.2. For cases where appointment of bidders is permitted, the payment price shall be effected according to the value of the approved cost estimate of each construction item or the entire construction work on the basis of the volume and quality tests before acceptance in each period of payment. 5. The settled investment capital The settled investment capital is the total of all lawful expenses already paid during the investment and construction process. The detailed contents of the settled investment capital shall comply with the guidance of the Ministry of Finance. III. BASES FOR ELABORATING THE CONSTRUCTION EXPENSE FOR THE CONSTRUCTION WORK IN THE INVESTMENT EXECUTION STAGE In order to determine all the necessary expenses in the investment execution stage according to the contents stated at Points 2 and 3, Section II above, the following necessary documents must be based on: 1. The pre-feasibility study report (if any) and the feasibility study report or the investment report approved by the competent authorities. 2. The technical design dossier, the construction drawing design or the technical-construction design. 3. The construction and installation work volume calculated according to the design and compatible with the list of basic construction unit prices. 4. The list and quantity of technological equipment (including non-standard equipment to be manufactured and processed (if any)), other equipment which needs or does not need to be installed according to the requirements of the production technology(ies) of the construction work to serve production, working and daily-life activities. The design consultancy organizations shall be accountable for the degree of completeness, accuracy and reasonability of the contents stated at Points 3 and 4 above. 5. The price calculated per one area unit or one use capacity unit of the common construction items: It is the criterion for determining the average construction and installation expense for completion of an area unit or use capacity unit or structure unit of each common type of house or construction item built according to a typical design or an economically reasonable design. This price level shall be calculated on the basis of the before-tax value of the cost estimate of various construction and installation operations or structures within a house or construction item (civil, industrial, communications, irrigation, etc.), excluding expenses not directly for construction and installation operations within a house or construction item such as expenses for building roads, water supply and drainage, electricity outside the house... and expenses for the equipment of the house or construction item. 6. The basic construction unit price: The basic construction unit price, issued by the provincial-level People�s Committees, includes direct expenses for materials, labor and the expense for the use of construction machines calculated per separate construction and installation work volume or a construction and installation structure part and determined on the basis of the basic construction cost estimate. For important construction works of the State involving large construction volumes and complicated technical requirements, which are permitted to make their own unit prices, these unit prices can be set on the basis of the basic construction unit price and compatible with the design steps issued by the competent authorities. 7. The equipment prices shall be determined according to the bidding results, the competitive sale offers on the procurement of equipment, or the market commercial information. 8. The transport freight, loading and unloading costs, storage expenses according to the guidance of the Government Pricing Committee. 9. The limits of expenses, charges and fees calculated in percentage % or according to price indices, including: - The expense for compensation for land and crops, relocation of inhabitants and projects on the construction ground, the expense for the resettlement and rehabilitation work (for construction works of investment projects requiring the resettlement and rehabilitation) shall comply with the Government�s regulations, the guidance of the Ministry of Finance and competent agencies. - Land rental or the land use right transfer fee shall comply with the Government�s regulations and the competent agencies� guidance. - The common spending limits, the survey cost, the design expense, the expense for the project management board, the expense for investment and construction consultancy, the evaluation fees (for the feasibility study report, technical design or technical-construction design, total cost estimate, cost estimate of the construction work...) shall comply with the guidance of the Ministry of Construction, the Ministry of Finance and other competent agencies. - The land administration fee, other fees, taxes, insurance premium... shall comply with the guidance of the Ministry of Finance. 10. The relevant regimes and policies issued by the Ministry of Construction and other competent agencies. IV. METHOD OF ELABORATING THE CONSTRUCTION EXPENSES FOR CONSTRUCTION WORKS IN THE INVESTMENT EXECUTION STAGE 1. The total cost estimate of a construction work The total cost estimate of a construction work shall be determined according to the following principle and method: - For construction works with high technical requirements, complicated foundation structure, the construction geological and hydro-geological conditions, which require the technical design (deployment design) before the construction drawing design (detailed design), the total cost estimate shall be drawn up according to the technical design. - For projects with simple or common technical requirements or model design, which require the technical design only, the total cost estimate shall be elaborated according to the technical-construction design. 1.1. The construction and installation expense 1.1.1. For construction items which require the technical design before the construction drawing design, the construction and installation expense shall be determined on the basis of the construction and installation volume stated in the technical design and the basic construction unit prices of various construction and installation operations or structures which are elaborated in conformity with the technical design. 1.1.2. For construction items which only require the technical-construction design, the construction and installation expenses shall be determined on the basis of the construction and installation volume stated in the technical-construction design and the basic construction unit price issued by the provincial-level People�s Committee of the locality where the work is constructed. 1.1.3. For common construction items, the construction and installation expenses shall be determined on the basis of the total floor area or the design capacity of the construction items and the price per area unit or use capacity unit of the construction item as mentioned at Point 5, Section III above. 1.1.4. For construction items of the support facilities, make-shift houses of construction workers in service of construction and installation of the construction works of investment projects already decided by the competent level in the total investment amount, the construction and installation expense for these construction items shall be calculated as follows: 1.1.4.1. Regarding the construction

Circular 08/1999/TT-BXD