Circular No. 02/2008/TT-BXD guiding the establishment and management of investment costs for construction projects of infrastructure under the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority and Mountainous Areas for the period 2006-2010.

CIRCULAR

Guidelines for Establishing and Managing Investment Construction Costs for Infrastructure Projects

under the Socio-Economic Development Program

in Particularly Difficult Communes in Ethnic Minority and Mountainous Areas

                                                   ________________________________

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. 99/2007/NĐ-CP dated June 13, 2007 on Management of Investment Construction Costs for Construction Projects and related guiding documents;

Pursuant to the Government Decree No. 36/2003/NĐ-CP dated April 4, 2003 on the Functions, Tasks, Authorities, and Organizational Structure of the Ministry of Construction;

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 and Mountainous Areas - Phase 2006-2010;

The Ministry of Construction guides the establishment and management of investment construction costs for infrastructure projects under the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority and Mountainous Areas - Phase 2006-2010 as follows:

Part I:

SCOPE OF APPLICATION

This Circular provides guidelines for establishing and managing investment construction costs for infrastructure projects funded by sources within the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority and Mountainous Areas - Phase 2006-2010 (hereinafter referred to as Program 135 Phase II) and applies to construction projects that only require preparation of an Economic and Technical Report with a total investment value below seven billion dong.

This Circular does not apply to other construction projects.

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 project budget estimate (which is also the total investment amount) according to the construction drawings in the approved Economic and Technical Report. The construction project budget estimate includes construction costs, equipment costs, project management board costs, investment consulting costs, other costs, and contingency costs of the project. The establishment and management of investment construction costs for construction projects shall be carried out in accordance with current national regulations and specific provisions as follows:

1. Construction Costs

Construction costs in the construction project budget estimate are established for main projects, auxiliary projects, temporary projects serving construction, or parts, works, tasks of the project, and sub-projects, and are determined through budget estimates.

For auxiliary projects, temporary projects serving construction, or simple and common projects, the construction cost budget estimate may also be determined based on unit construction costs in the unit investment cost of construction projects or by percentage-based cost norms (hereinafter referred to as percentage norms).

The construction cost budget estimate for construction projects and sub-projects is established in accordance with the guidance provided in Appendix 1 of this Circular.

In cases where construction costs are calculated for each part, work, or task of the project or sub-project, the construction costs in the project or sub-project budget estimate are the aggregate of the costs of these parts, works, or tasks.

The investor bases the nature and special conditions of the project, published systems of norms, and the method of establishing construction unit prices as guided in Appendix 4 of Circular No. 05/2007/TT-BXD dated July 25, 2007 of the Ministry of Construction on Establishing and Managing Investment Construction Costs for Construction Projects to establish and decide on applying construction unit prices or using the system of construction unit prices announced by the People's Committee of the province as the basis for determining the budget estimate and managing investment construction costs.

The construction cost budget estimate includes direct costs, general costs, pre-tax income, value-added tax, and costs for temporary housing at the site for living and construction management.

a) Direct costs include material costs, labor costs, machinery usage costs, and other direct costs; they are determined according to the guidance provided in Point 2.2.1.1 of Circular No. 05/2007/TT-BXD dated July 25, 2007 of the Ministry of Construction on Establishing and Managing Investment Construction Costs for Construction Projects;

b) General costs: general costs include production management and operation costs at the site, worker service costs, construction site service costs, and other enterprise costs. General costs are calculated as a percentage of direct costs (or a percentage of labor costs) based on the type of project and are established according to the provisions in Appendix 2 of this Circular. For construction volumes done by the commune itself, general costs are calculated as 50% of the general cost level specified in Appendix 2 of this Circular;

c) Pre-tax income: it is calculated as a percentage of direct costs and general costs based on the type of project specified in Appendix 2 of this Circular;

d) Value-added tax: value-added tax for construction work is calculated according to current regulations;

e) Costs for temporary housing at the site for living and construction management: it is calculated as 2% of the total direct costs, general costs, and pre-tax income.

The volume of work done by the people themselves shall not include temporary site accommodation costs.

The volume of work done by the people using labor, materials, and resources sourced locally, as well as the volume of works funded by public contributions, shall be separately budgeted without including pre-tax income, value-added tax, and temporary site accommodation costs in the budget estimate.

The construction cost budget table shall be prepared according to Table 1.2 of Appendix 1 of this Circular.

2. Equipment Costs : including equipment purchase costs, installation costs, and testing/calibration costs (if applicable).

Equipment costs shall be determined in accordance with the guidelines set forth in Point 2.2.2 of Circular No. 05/2007/TT-BXD dated July 25, 2007, issued by the Ministry of Construction on the preparation and management of construction investment costs.

The equipment cost budget for the project shall be prepared according to Table 1.4 of Appendix 1 of this Circular.

3. Project Management Board Costs :

- For projects where the district level is the Project Owner: The project management board cost shall be 2.7% of the total construction and equipment costs in the approved Technical and Economic Report;

- For projects where the commune level is the Project Owner: The project management board cost shall be 2.2% of the total construction and equipment costs in the approved Technical and Economic Report;

Expenses related to program management and activities of the Program Steering Committee at various levels of local government administration do not fall within the scope of project management board costs and shall not be included in the project implementation costs.

4. Investment and Construction Consulting Costs :

a) Cost of preparing the Technical and Economic Report:

The cost of preparing the Technical and Economic Report shall be calculated as a percentage (%) of the total construction and equipment costs in the approved Technical and Economic Report and shall be specified according to each type of project as follows:

- Civil works: Community activity houses, health stations, markets, commercial stores, agricultural extension centers, dormitory buildings and auxiliary facilities serving boarding students, community service areas, health 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%; %;

In cases where the Technical and Economic Report uses typical designs or standard designs issued by authorized agencies, the cost of preparing the Technical and Economic Report shall be calculated based on the aforementioned rate multiplied by an adjustment factor of 0.6.

b) Cost of reviewing the construction design drawings and budget estimates:

The cost of reviewing the construction design drawings and budget estimates included in the Technical and Economic Report shall be calculated as 0.3% of the construction costs (excluding value-added tax) in the approved construction investment costs for all types of projects, with the cost of reviewing the construction budget estimates being 50% of the aforementioned cost standard.

c) Construction Survey Costs:

Construction survey costs such as drilling geological surveys, sampling and testing soil and rock samples, and mapping the current status of the construction area shall be determined by preparing a budget estimate.

d) Tendering Costs for Construction Contractors and Equipment Suppliers:

The tendering costs for construction contractors and equipment suppliers shall not exceed 0.4% of the construction costs (excluding value-added tax) in the approved construction investment costs. Among these, the cost of preparing tender documents shall be 40% of the aforementioned cost standard.

e) Construction Supervision Costs and Equipment Installation Supervision Costs:

The cost of hiring construction supervision consultants shall be calculated as 2.7% of the construction costs (excluding value-added tax) in the approved construction investment costs.

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

The cost for the Commune-level Supervision Board shall be calculated as 1% of the construction costs (excluding value-added tax) in the approved construction investment costs.

g) Project Management Consulting Costs (if applicable): If it is necessary to hire a project management consulting firm, the cost shall be determined based on the budget estimate based on the management content and workload hired by the Project Owner and the policies stipulated within the prescribed project management board cost limit as stated in Section 3 above. The Project Owner shall approve this budget estimate and bear full legal responsibility for their decision.

The budget estimate content shall follow the guidance provided in Appendix 3 of this Circular. The Project Owner shall approve this budget estimate and bear full legal responsibility for their decision.

h) Costs for remaining consulting services: Costs for selecting survey and consulting firms, survey supervision costs, quality inspection costs, capital conversion costs, cost estimation and unit price compilation for construction projects (if applicable), and other consulting costs, the Project Owner shall prepare and approve these budget estimates but shall not exceed 1.5% of the construction costs and shall bear full legal responsibility for their decision. The budget estimate content shall follow the guidance provided in Appendix 3 of this Circular.

5. Other Costs :

a) Fees for reviewing the Technical and Economic Report: Determined according to the regulations of the Ministry of Finance;

b) Costs for reviewing, approving final accounts, and auditing investment capital: Determined according to the regulations of the Ministry of Finance;

c) Construction insurance costs: Determined according to the regulations of the Ministry of Finance;

d) Other costs: If there are no regulations or if they cannot be immediately calculated, they may be temporarily included in the construction budget estimate for preliminary funding.

6. Contingency Costs :

Contingency costs are funds reserved for unforeseen work volumes and inflation factors during the construction period, and shall be calculated at a maximum of 10% of the total construction costs, equipment costs, project management board costs, investment and construction consulting costs, and other costs.

The consolidated budget estimate for construction projects shall be prepared according to the model provided in Table 1.1 of Appendix 1 of this Circular.

Part III:

IMPLEMENTATION

1. Other programs and projects outside Program 135, if integrated with Program 135 with a contribution ratio < 50% of the total investment amount and participating in the construction of the same project, shall apply this Circular. In cases where the contribution ratio is ³ 50% of the total investment amount, the application of this Circular shall be decided by the Chairman of the Provincial People's Committee.

2. The Provincial People's Committee shall base on the guidance provided in this Circular and other relevant documents to organize and guide the preparation and management of construction investment costs; at the same time, they shall guide and stipulate the application of investment capital rates, construction norms, construction unit prices, and construction price indices for projects under Program 135 managed by localities.

3. The transition implementation shall follow Article 36 of Decree No. 99/2007/ND-CP dated June 13, 2007, of the Government on the Management of Construction Investment Costs (Decree No. 99/2007/ND-CP). Where it is deemed necessary to implement regulations on the preparation and management of construction investment costs for projects under Program 135 including: total investment amount; construction project estimates; construction norms and unit prices; contracts in construction activities; payment and settlement of construction investment funds according to the provisions of Decree No. 99/2007/ND-CP and guiding documents for the Decree, the Investor Decision Maker shall consider and decide to expedite progress and reduce unnecessary administrative procedures but must ensure that implementing these regulations does not reduce the effectiveness of the implementation of construction investment projects.

This Circular shall take effect fifteen days from the date of publication in the Official Gazette and shall replace Circular No. 01/2006/TT-BXD dated May 17, 2006, of the Ministry of Construction on guidelines for the preparation and management of construction investment costs for infrastructure projects under the Socio-Economic Development Program for Particularly Difficult Communes in Ethnic Minority and Mountainous Areas for the period 2006-2010.

During the implementation process, if issues that are not suitable and require supplementation or modification are discovered, localities and related units are requested to promptly reflect them to the Ministry of Construction for research and resolution./.