Circular No. 03/2008/TT-BXD guiding the adjustment of construction project budgets

CIRCULAR

Guidelines for Adjusting Construction Project Budget Estimates

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

Pursuant to Decree No. 16/2005/NĐ-CP dated February 7, 2005 of the Government on Management of Investment Construction Projects; and Decree No. 112/2006/NĐ-CP dated September 29, 2006 of the Government amending and supplementing certain articles of Decree No. 16/2005/NĐ-CP on management of investment construction projects;

Pursuant to Decree No. 99/2007/NĐ-CP dated June 13, 2007 of the Government on Management of Investment Construction Costs;

Pursuant to Decree No. 03/2008/NĐ-CP dated January 7, 2008 of the Government amending and supplementing certain articles of Decree No. 99/2007/NĐ-CP dated June 13, 2007 on Management of Investment Construction Costs;

Pursuant to Decree No. 166/2007/NĐ-CP dated November 16, 2007 of the Government stipulating the minimum wage;

Pursuant to Decree No. 167/2007/NĐ-CP dated November 16, 2007 of the Government stipulating the regional minimum wage for workers employed by companies, enterprises, cooperatives, production cooperatives, farms, households, individuals, and other organizations in Vietnam that hire labor;

Pursuant to Circular No. 29/2007/TT-BLDTBXH dated December 5, 2007 of the Ministry of Labor, Invalids, and Social Affairs guiding the implementation of the general minimum wage and regional minimum wage for state-owned enterprises and limited liability companies wholly owned by the State with a capital contribution of 100%;

The Ministry of Construction guides the adjustment of construction project budget estimates from January 1, 2008, as follows:

Chapter I. GENERAL PROVISIONS

1. This Circular guides the adjustment of budget estimates for quantities actually performed from January 1, 2008, of construction projects, tender packages (hereinafter referred to collectively as construction project budget estimates) using state funds where the Investor has not yet decided to continue the management of investment construction costs according to Decree No. 99/2007/NĐ-CP dated June 13, 2007 of the Government. It is encouraged for construction projects funded by other sources to apply the provisions for adjusting budget estimates as guided in this Circular.

2. Adjust construction project budget estimates that have been established based on unit prices for building works, installation works, and construction survey works of provinces and centrally administered cities calculated according to the scale of wages in Table A.1.8 issued together with Decree No. 205/2004/NĐ-CP dated December 14, 2004 of the Government, with the minimum wage set at 450,000 VND/month as specified in the annex attached to this Circular.

3. For construction projects that have established individual unit prices or machinery work price lists with minimum wages already approved by the competent authority, they shall adjust according to the new general minimum wage and regional minimum wage based on the principles and methods guided in this Circular.

4. Adjust contract prices and settle quantities actually performed from January 1, 2008, according to the contract and conditions agreed upon in the contract. In cases where the contract stipulates that prices will not be adjusted throughout the execution period, the Investor and the construction contractor may negotiate supplementary contracts to ensure the rights of workers as prescribed.

5. For construction projects under investment construction projects implemented according to Decree No. 99/2007/NĐ-CP dated June 13, 2006 of the Government on Management of Investment Construction Costs, the Investor shall use contingency costs due to price escalation to adjust the cost structure in the construction project budget estimate.

Chapter II. SPECIFIC PROVISIONS.

The construction project budget shall be prepared based on the local construction unit price lists of provinces and centrally administered cities, calculated with a minimum wage rate of 450,000 VND/month according to salary grade A.1.8 issued together with Decree No. 205/2004/NĐ-CP dated December 14, 2004 of the Government, which shall be adjusted as follows:

1. Adjustment of Construction Cost Budget

1.1. Adjustment of Labor Costs

Labor costs in the construction cost budget prepared based on local construction unit prices shall be multiplied by the labor cost adjustment factor (KĐCNC) corresponding to the general minimum wage adjustment regime and regional minimum wage levels. The labor cost adjustment factor (KĐCNC) is determined by dividing the new general minimum wage level and regional minimum wage levels by the minimum wage already included in the unit price (450,000 VND/month).

1.2. Adjustment of Construction Machinery Costs

Construction machinery costs in the construction cost budget prepared based on local construction unit prices shall be multiplied by the construction machinery cost adjustment factor (KĐCMTC) corresponding to the general minimum wage adjustment regime, regional minimum wage levels, and fuel and energy prices at the time of January 2008.

The construction machinery cost adjustment factor (KĐCMTC) is determined by the weighted average method of costs by machinery group.

According to the above principle, the construction machinery cost adjustment factor (KĐCMTC) in the construction cost budget for each province and centrally administered city is attached as an appendix. Provinces and centrally administered cities with special construction structures will have their factors decided by the People's Committee of the province or city.

For construction projects that span multiple provinces and cities and have established separate machinery rates, the Project Owner shall calculate the adjustment factor and report it to the Investment Decision Maker for approval.

1.3. Other Cost Items Calculated as Percentage Rates in the Construction Cost Budget. Other cost items calculated as percentage rates in the construction cost budget include: other direct costs, common costs, pre-tax income, value-added tax, temporary housing at the site for living and construction management, as prescribed.

2. Some Other Cost Items These cost items such as project management fees for construction investment projects, feasibility study and design fees for construction projects are calculated as percentages as prescribed.

Labor cost adjustments in the construction survey budget shall be made according to the coefficients (KĐCNCKS) in Table 2 of the attached appendix. For the pre-tax construction cost budget for urban planning work, which is based on the urban planning cost standards issued pursuant to Decision No. 06/2005/QĐ-BXD dated February 3, 2005 of the Minister of Construction, it shall be multiplied by the urban planning cost adjustment coefficient KĐCQHXD = 1.25.

For the budget for implementing urban public services, adjustments shall be made based on specific conditions of each locality, guided by the provincial People's Committee.

Chapter III. IMPLEMENTATION

1. For construction projects under investment construction projects where the Investment Decision Maker has not yet decided to implement the transfer of construction investment cost management tasks according to Decree No. 99/2007/NĐ-CP dated June 13, 2007 of the Government:

1.1. Provincial People's Committees shall base their guidance on this Circular, the new general minimum wage levels, regional minimum wage levels, and salary allowances to adjust the construction project budgets for local construction projects funded by state budget funds.

The Department of Construction shall take the lead in coordinating with relevant agencies of the locality to determine the adjustment factor and submit it to the provincial People's Committee for issuance and application.

1.2. Ministries, economic groups, and state-owned corporations shall guide the adjustment of construction project budgets for investment construction projects within their investment decision-making authority according to the guidance provided in this Circular.

1.3. The Project Owner shall organize the implementation and approve the results of the construction project budget adjustment according to current regulations.

1.4. For construction projects that have established individual unit prices (construction project unit prices), the Project Owner shall base their determination of the adjustment of labor costs, construction machinery costs, and other costs (if any) in the construction project budget on the policies and principles of construction cost budget adjustment as stipulated in this Circular, taking into account the policies and systems permitted by the State for the project.

2. For construction projects under investment construction projects implemented according to Decree No. 99/2007/NĐ-CP dated June 13, 2007 of the Government on Construction Investment Cost Management, the adjustment of the construction project budget shall be carried out according to the guidance in Point 4, Section I of this Circular.

This Circular shall take effect fifteen days from the date of publication in the Official Gazette.