Circular No. 05/2008/TT-BXD guiding the adjustment of prices and construction contracts due to fluctuations in raw material, fuel, and building material prices.

CIRCULAR

Guidelines for Adjusting Prices and Construction Contracts Due to Fluctuations in Raw Material, Fuel, and Building Material Prices

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Pursuant to Decree No. 17/2008/NĐ-CP dated February 4, 2008 of the Government on the Functions, Tasks, Authorities, and Organizational Structure of the Ministry of Construction;

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

Pursuant to the guidance of the Prime Minister in Document No. 164/TTg-CN dated January 29, 2008 regarding price adjustments and lump-sum contracts.

After consultation with the Ministry of Planning and Investment, the Ministry of Finance, and the Ministry of Construction, guidelines for adjusting raw material prices, fuel prices, and building material prices (hereinafter referred to as construction material prices) and construction contracts due to fluctuations in construction material prices beyond the control of the project owner and contractor are as follows:

1. Scope and Applicability

1.1. The adjustment of construction material prices shall apply to tender packages that have been or are currently being implemented under lump-sum contract pricing or fixed unit price contract pricing.

1.2. Adjustment of contract pricing forms for contracts that have already been implemented under lump-sum contract pricing or fixed unit price contract pricing to become adjusted price contract pricing due to fluctuations in construction material prices beyond the control of the project owner and contractor.

2. Principles of Adjustment

2.1. The adjustment of construction material prices shall be calculated for the volume of construction work from 2007 affected by fluctuations in construction material prices, increasing construction costs beyond the control of the project owner and contractor (hereinafter referred to as the volume of construction work affected by increased prices).

2.2. The volume of construction work affected by increased prices and the level of price adjustment shall be determined and the responsibility borne by the project owner and contractor.

2.3. When adjusting lump-sum contract pricing or fixed unit price contract pricing to adjusted price contract pricing, it is necessary to clearly define the scope of adjustment, adjustment methods, bases for adjustment, timing of adjustment... and only be counted from the time of price fluctuation determined by the project owner and contractor in accordance with the progress of implementation.

2.4. If the adjustment of construction material prices leads to exceeding the approved total investment amount and affects the investment efficiency of state-funded projects, the project owner shall report to the investment decision-maker for consideration and decision.

2.5. For construction projects implemented according to Decree No. 99/2007/NĐ-CP dated June 13, 2007 of the Government on Management of Construction Project Investment Costs, the adjustment of construction project investment costs shall be carried out in accordance with the provisions of Decree No. 99/2007/NĐ-CP and guiding documents implementing the Decree.

3. Methods for Adjusting Construction Material Prices

The adjustment of construction material prices shall be determined for each construction contract, each tender package, and the entire project. The additional cost due to the adjustment of construction material prices shall be determined based on the supplementary construction cost estimate and serve as the basis for adjusting contract prices, tender package prices, adjusting the construction project estimate, and adjusting the total investment amount.

Based on the specific content of each contract, the supplementary construction cost estimate may be determined using a material cost adjustment factor or by directly calculating the material cost offset. The supplementary construction cost estimate shall be determined as an appendix to this Circular.

4. Adjusting the Construction Project Estimate After Establishing the Supplementary Construction Cost Estimate

4.1. For tender packages that have been designated for tender and self-implemented projects, where there are results of selecting contractors but no construction contracts have yet been signed or the contracts are still being implemented (under lump-sum contract pricing or fixed unit price contract pricing), the project owner shall determine the supplementary construction cost estimate according to the guidance provided in Section 3 above to serve as the basis for adjusting the construction project estimate.

4.2. For tender packages, project components, or projects that have not yet selected contractors, the project owner shall adjust the estimate according to current regulations.

The adjusted construction project estimate shall be determined by adding the approved construction project estimate to the supplementary construction cost estimates.

5. Adjusting Tender Package Prices After Establishing the Supplementary Construction Cost Estimate

The project owner shall adjust the tender package price by adding the approved bid price to the supplementary construction cost estimate determined in Section 3.

For state-funded projects, if the tender package price after adjustment does not exceed the approved tender package price, the project owner shall decide to approve it. If the tender package price after adjustment exceeds the approved tender package price but does not exceed the total investment amount, the project owner shall decide to approve it and submit the result for reporting to the investment decision-maker. If the tender package price after adjustment causes the approved total investment amount to be exceeded, the project owner shall report to the investment decision-maker for consideration and decision.

6. Adjusting the Total Investment Amount After Establishing the Supplementary Construction Cost Estimate

For state-funded projects, when adjusting construction material prices causes the approved total investment amount to be exceeded and affects the investment efficiency of the project, the project owner shall report to the investment decision-maker for consideration and decision. In cases where the project is decided upon by the Prime Minister, the decision shall be made by the Minister, head of a ministry equivalent to a ministry, head of a government agency, Chairman of the People's Committee of a province, Chairman of an Economic Group, or Chairman of the Board of Directors of a State-owned Corporation.

7. Adjusting Contracts After Establishing the Supplementary Construction Cost Estimate

7.1. For contracts that have already been signed, based on the supplementary construction cost estimate and the content of the signed contract, the project owner and contractor shall sign an additional contract price agreement as the basis for contract payment.

7.2. For tender packages that have selection results but no contracts have yet been signed, the project owner shall base the supplementary construction cost estimate and the bidding documents, tender documents to negotiate and sign the contract.

7.3. In cases where the form of the contract price is adjusted from a lump sum contract price or a fixed unit price contract to an adjustable contract price form, the project investor shall report to the investment decision-maker (regarding the adjustment contents such as: scope of adjustment, adjustment method, basis for adjustment, timing of adjustment...) for approval before implementation. The construction contract content is regulated by Circular No. 06/2007/TT-BXD dated July 25, 2007, guiding construction contracts issued by the Ministry of Construction.

For projects using state capital whose bidding plans are approved by the Prime Minister, the Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, Chairpersons of provincial People's Committees, Chairpersons of State Economic Groups, and Chairpersons of State Corporation Councils shall make the decision.

8. Implementation organization

8.1. The project investor shall organize the acceptance and confirmation of the increased quantities of construction works affected by rising prices, organize the calculation and bear responsibility for the accuracy of supplementary construction cost estimates, adjusted estimates, tender prices, and adjusted total investment amounts corresponding to each period of material price fluctuations to serve as the basis for supplementing construction costs due to material price fluctuations.

8.2. For construction contracts that have been fully paid in 2007, the material prices will not be adjusted according to the guidance provided in this Circular.

8.3. Ministries, ministerial-level agencies, government-affiliated agencies, provincial People's Committees, centrally governed cities, State Economic Groups, and State Corporations shall organize the direction, guidance, and inspection of investors and contractors to strictly implement the adjustment of material prices, estimates, tender prices, total investment amounts, and contracts as stipulated in this Circular; Direct investors not to allow adjustments in construction costs to affect construction progress, while accelerating the construction progress of projects, especially national key projects.

8.4. Adjustments to construction project budgets according to the new wage system shall be implemented in accordance with the guidelines set out in Circulars No. 07/2006/TT-BXD dated November 10, 2006, and Circular No. 03/2008/TT-BXD dated January 25, 2008, issued by the Ministry of Construction on adjusting construction project budgets.

8.5. The transition of investment and construction projects according to the provisions of Decree No. 99/2007/NĐ-CP on the Management of Investment Construction Costs (including total investment amount, construction project budget, construction norms and prices, construction contracts, payment, and final settlement of investment construction costs) shall be reported by the project investor to the investment decision-maker for consideration and decision. For projects using state capital whose bidding plans are approved by the Prime Minister, the Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, Chairpersons of provincial People's Committees, Chairpersons of State Economic Groups, and Chairpersons of State Corporation Councils shall make the decision.

8.6. This Circular shall take effect fifteen days after its publication in the Official Gazette.

During the implementation process, if there are any difficulties, they should be reflected to the Ministry of Construction for consolidation and research to resolve.