Circular No. 01/2006/TT-BXD guiding the preparation and management of investment construction costs for infrastructure projects under the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority Areas and Mountainous Regions for the period 2006-2010.

CIRCULAR

Guidelines for Establishing and Managing Investment Construction Costs for Infrastructure Projects under the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority Areas and Mountainous Regions

during the Period 2006-2010

and mountainous areas period from 2006 to 2010

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Pursuant to the Construction Law No. 16/2003/QH11 dated November 26, 2003 of the National Assembly of the Socialist Republic of Vietnam;

Pursuant to the Government Decree No. 16/2005/NĐ-CP dated February 7, 2005 on Project Management for Investment Construction Works and related guiding documents;

Pursuant to the Prime Minister's Decision No. 07/2006/QĐ-TTg dated January 10, 2006 approving the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority Areas and Mountainous Regions - Phase 2006-2010;

Pursuant to the Government Decree No. 36/2003/NĐ-CP dated April 4, 2003 defining the functions, tasks, authorities, and organizational structure of the Ministry of Construction;

After reaching consensus with the Committee for Ethnic Minorities Affairs and obtaining opinions from relevant ministries and sectors, the Ministry of Construction hereby issues guidelines for establishing and managing investment construction costs for infrastructure projects under the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority Areas and Mountainous Regions - Phase 2006-2010 as follows:

PART I

SCOPE OF APPLICATION

These Guidelines apply to the establishment and management of investment construction costs for infrastructure projects funded by sources within the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority Areas and Mountainous Regions - Phase 2006-2010 (hereinafter referred to as Program 135 Phase II) and are applicable to construction works requiring only an Economic and Technical Report with a total investment amount not exceeding 7 billion VND.

Other programs or projects outside Program 135 that integrate funds with Program 135 at a contribution rate less than 50% of the total investment amount and participate in constructing a single project shall apply these Guidelines. In cases where the contribution rate is ≥ 50% of the total investment amount, the application of these Guidelines shall be decided by the Chairman of the Provincial People's Committee.

These Guidelines shall not apply to other construction works.

PART II

ESTABLISHING AND MANAGING INVESTMENT CONSTRUCTION COSTS

The investment construction costs for infrastructure projects under Program 135 Phase II are determined based on the construction budget estimate (which simultaneously serves as the total budget estimate or total investment amount) according to the design drawings in the approved Economic and Technical Report. The construction budget estimate includes construction costs, equipment costs, other costs, and contingency costs. The establishment and management of investment construction costs shall comply with current national regulations and specific provisions as follows:

1. Construction Costs

Construction costs in the construction budget estimate are established for main works, auxiliary works, construction service works, and temporary camps. Construction costs are determined based on the budget estimate. The construction cost budget includes direct costs, general costs, pre-tax income, and value-added tax.

a) Direct costs include material costs, labor costs, machinery usage costs, and other direct costs.

- Material costs: Material costs are determined based on quantities according to the design drawings and unit prices of construction materials corresponding to the regional construction unit price list of the Province, adjusted for material price differences (if any). On-site extracted construction materials such as wood, bamboo, reeds, sand, gravel, pebbles, etc., must meet quality standards and be priced based on actual purchase prices consistent with the local construction material price level or according to the local finance-construction department's material price notification.

- Labor costs: Labor costs are determined based on quantities according to the design drawings and unit prices of construction labor corresponding to the regional construction unit price list of the Province, plus adjusted labor costs (if any). When local labor is contracted to perform part or all of the work, the costs for the contracted portion are agreed upon by both parties based on the direct labor costs in the construction cost budget.

- Machinery usage costs: Machinery usage costs are determined based on quantities according to the design drawings and unit prices of construction machinery corresponding to the regional construction unit price list of the Province, plus adjusted machinery costs (if any). For construction operations using machinery that can be replaced by manual labor, the costs for manual labor shall not exceed the machinery usage costs in the construction cost budget.

- Other direct costs: Other direct costs include water pumping costs, sediment dredging costs, material testing costs, labor and equipment transportation costs to and within the construction site, and other costs as stipulated generally. Other direct costs are allocated in the budget estimate and calculated at 1.5% of the total material, labor, and machinery costs mentioned above.

b) General costs include on-site production management and operation costs, worker service costs, on-site construction service costs, and other costs. General costs are calculated as a percentage of direct costs according to the type of work and are established according to Appendix 1 of this Circular. For construction volumes carried out by the commune itself, general costs are calculated at 50% of the general costs specified in Appendix 1 of this Circular.

c) Pre-tax income is calculated as a percentage of direct costs and general costs according to the type of work and is established according to the provisions in Appendix 1 of this Circular.

d) Value-added tax for construction work is calculated according to current regulations.

e) Temporary camp costs at the construction site are allocated in the budget estimate and calculated at 2% of the post-tax value of the construction cost budget. Volumes carried out by the people themselves are not included in temporary camp costs at the construction site.

Part on the volume of work done by the people using local labor and materials extracted on-site, the volume of works funded by people's contributions shall be separately budgeted and not included in pre-tax income, value-added tax, and temporary camp costs in the budget. The construction project cost estimate table shall be prepared according to the provisions set out in Appendix 2 of this Circular.

2. Equipment costs: Equipment costs include procurement costs, installation costs, and testing/calibration costs (if applicable).

Procurement costs include: purchase price, transportation costs to the construction site, storage costs, warehousing costs, preservation and maintenance costs at the site warehouse, taxes, and equipment insurance premiums. Procurement costs are determined based on the quantity and type of each piece of equipment or the entire set of equipment for the project and the unit price of each piece of equipment or the entire set of equipment for the project.

Installation and testing/calibration costs (if applicable) include direct costs (materials, labor, construction machinery, other direct fees), common costs, pre-tax income, and value-added tax. These costs are estimated as construction project costs.

3. Other costs

a) Economic and technical report preparation costs:

The cost for preparing the economic and technical report is calculated as a percentage of the total construction and equipment costs in the approved economic and technical report, and is specified as follows for different types of projects:

- Civil works: Community living houses, health stations, markets, commercial stores, agricultural extension centers, dormitory housing and auxiliary facilities serving boarding students, community service areas, medical clinics, schools, and other civil works at 4.07%.

- Electrical works: Power lines, substations, low-voltage power supply to villages and other electrical works at 4.1%.

- Transportation works: Rural roads from villages to commune centers and inter-village roads, bridges, culverts, and other transportation works at 3,5 %.

- Small water conservancy works at 3.91%.

- Domestic water supply works at 3,75%.

If the economic and technical report uses standard designs or models issued by authorized agencies, the cost for preparing the economic and technical report is calculated at the aforementioned rate multiplied by an adjustment factor of 0.6.

b) Fees for reviewing the economic and technical report, design drawings, and construction estimates: These fees are determined as follows:

The fee for reviewing the economic and technical report is determined according to the regulations of the Ministry of Finance.

The cost for reviewing the construction design drawings and estimates within the economic and technical report is calculated at 0.3% of the construction costs (excluding value-added tax) in the approved investment construction costs for all types of projects, of which the cost for reviewing the construction estimate is 50% of the aforementioned cost standard.

c) Construction survey costs: Costs related to construction surveys such as drilling geological exploration, soil and rock sampling, and mapping current conditions of the construction area are determined based on the volume of work and the construction survey unit prices issued by the Provincial People's Committee.

d) Land clearance compensation and resettlement costs:

Land clearance compensation and resettlement costs are determined according to the local compensation prices issued by the Provincial People's Committee.

e) Project Management Board costs:

- For District-level Project Management Boards: The project management board cost is 2.7% of the total construction and equipment costs in the approved economic and technical report.

- For Commune-level Project Management Boards: The project management board cost is 2.2% of the total construction and equipment costs in the approved economic and technical report.

Expenses related to program management and activities of the Program Steering Committee at various levels of local government do not fall under project management board costs and are not included in project implementation costs.

f) Costs for selecting contractors for construction and equipment suppliers: Costs for selecting contractors for construction and equipment suppliers are not more than 0.4% of the construction costs (excluding value-added tax) in the approved investment construction costs. Of this, the cost for preparing tender documents is 40% of the aforementioned cost standard.

g) Construction supervision costs and equipment installation supervision costs:

The cost for hiring consulting firms to supervise construction is calculated at 2.7% of the construction costs (excluding value-added tax) in the approved investment construction costs.

The cost for Village Supervision Boards is calculated at 1% of the construction costs (excluding value-added tax) in the approved investment construction costs.

The cost for supervising the installation of equipment applies uniformly at 1% of the equipment costs (excluding value-added tax) in the approved investment construction costs.

h) Costs for auditing, approving final accounts, and capital investment auditing: are calculated according to the regulations of the Ministry of Finance.

Costs for remaining tasks: Selecting survey and consulting contractors; supervising construction surveys; quality inspection of works; conversion costs of investment capital; cost of establishing norms and unit prices (if any), and other costs, the Investor prepares a cost estimate for these items and submits it for review and approval by the investment decision-maker but not exceeding 1.5% of the construction costs.

4. Contingency costs: Contingency costs in the construction project cost estimate are calculated at 5% of the total construction costs, equipment costs, and other costs.

The consolidated construction project cost estimate table is prepared according to the model provided in Appendix 3.

PART III

IMPLEMENTATION

- This Circular takes effect 15 days after its publication in the Official Gazette and replaces Circular No. 12/2000/TT-BXD dated October 25, 2000, of the Ministry of Construction on guiding the management of construction investment costs for infrastructure projects under Program 135.

During implementation, if issues that require supplementation or amendment are discovered, it is recommended that relevant localities and units promptly reflect such matters to the Ministry of Construction for study and resolution./.