Circular No. 06/2008/TT-BXD guiding the management of costs for urban public services

CIRCULAR

Guidelines for Managing Costs of Urban Public Services

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Pursuant to Decree No. 17/2008/NĐ-CP dated February 4, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Construction;

Pursuant to Decree No. 31/2005/NĐ-CP dated March 11, 2005 of the Government on production and supply of public goods and services;

Pursuant to Decision No. 06/2005/QD-BTC dated January 18, 2005 of the Minister of Finance on the issuance of the Regulation on Pricing of Assets, Goods, and Services.

To enhance the efficiency of state budget capital utilization, improve the quality of urban public services, and encourage organizations and individuals from all economic sectors to participate in providing urban public services, the Ministry of Construction hereby provides guidelines for managing costs of urban public services as follows:

I-GENERAL PROVISIONS

1. Objectives and Scope of Application

1.1. The management of costs of urban public services shall be applied to the following service activities:

- Collection, transportation, and landfill disposal of waste;

- Maintenance dredging of drainage systems;

- Maintenance of public lighting systems;

- Maintenance and development of green spaces.

1.2. For certain urban public services such as non-landfill waste processing, cemetery management, park management, zoo management, and other urban public service activities, the People's Committee of provinces and centrally-administered cities shall base their regulations on the guidance provided in this Circular, adapting them to the specific conditions of each locality.

1.3. All organizations and individuals managing and using state budget capital to provide the aforementioned urban public services must comply with the provisions of this Circular.

2. General Principles for Managing Costs of Urban Public Services

2.1. The costs of urban public services established according to this Circular serve as the basis for relevant state authorities to determine the budget estimates for urban public service costs and form the foundation for negotiating, reviewing, and deciding on the prices of urban public services implemented through bidding, ordering, or assigning plans to organizations and individuals to carry out urban public services.

2.2. The establishment and management of costs of urban public services must ensure accuracy, comprehensiveness, rationality, and suitability with actual conditions and the requirements of the market mechanism.

II. BUDGET ESTIMATE OF COSTS FOR URBAN PUBLIC SERVICES

The budget estimate of costs for urban public services includes material costs, labor costs, vehicle and equipment usage costs, general management costs, and standard profit. The budget estimate of costs for urban public services is determined as follows:

1. Quantity of each type of urban public service activity

The quantity of each type of urban public service activity is determined based on plans or urgent tasks assigned by competent state authorities.

2. Unit price of each type of urban public service activity

The unit price of each type of urban public service activity includes direct costs related to materials, labor, and vehicle and equipment usage. Direct costs are specifically determined as follows:

2.1. Material costs are the primary and secondary material costs incurred during the provision of urban public services. Material costs are calculated according to the formula:

The material price must be reasonable and consistent with the market price level, based on quotations from manufacturers, supplier information, or prices already applied to similar quality works, or prices announced by localities, and must ensure competitiveness (material costs included in the unit price do not include value-added tax).

2.2. Labor costs are the total direct labor costs for providing urban public services and are determined as follows:

The daily wage rate of workers corresponding to each skill level is accurately and comprehensively calculated including wages, wage supplements, and allowances (including wage subsidies). The labor cost is determined based on the minimum wage level set by competent state authorities to ensure that the wage of workers takes into account the prevailing wage levels in the labor market, the specific working conditions, the financial capacity, and the payment ability of the locality.

2.3. Vehicle and equipment usage costs are the direct costs of using vehicles and equipment to provide urban public services:

The corresponding hourly rate of each type of vehicle and equipment is determined according to the guidance provided in Circular No. 07/2007/TT-BXD dated July 25, 2007 of the Ministry of Construction on the method of determining the hourly rates of construction machinery and equipment or from the hourly rates of vehicles and equipment stipulated by localities.

3. General management costs are enterprise management costs, direct management service costs (including tools), costs for serving workers, interest payments on bank loans and other credit institutions, meal costs between shifts, fees and charges, rental costs for assets and factory premises (if any), audit fees, and other expenses.

The general management costs in the budget for urban public services shall be reviewed and decided by the People's Committee of the province or centrally governed city with a ratio not exceeding 70% of direct labor costs, determined based on specific conditions of each locality and type of urban public service work; For urban public service work volumes where machine and equipment usage costs exceed 60% of direct costs, the general management costs shall be calculated at a ratio not exceeding 5% of the machine and equipment usage costs.

In cases with special characteristics, if the ratio of general management costs exceeds the above ratio, it shall be reviewed and decided by the People's Committee of the province or centrally governed city.

4. The standard profit margin shall be calculated at a ratio not exceeding 5% of the direct costs and general management costs in the budget price for implementing urban public services.

III. CONTRACTS FOR URBAN PUBLIC SERVICES

1. A contract for urban public services is a civil contract (hereinafter referred to as the contract), which involves the implementation of urban public services through a contract between the local administrative authority and organizations or individuals providing such services. An urban public service contract is a written agreement between the tenderer and the contractor regarding the establishment, modification, or termination of rights and obligations of the parties to perform one, several, or all urban public service tasks. The contract is a legal document binding the rights and obligations of the parties involved in the contract; Disputes among the parties involved in the contract shall be resolved based on the signed and effective contract; Disputes not resolved within the contract shall be settled according to relevant laws.

2. Contract Price

The contract price is the amount of funds that the tenderer commits to pay to the contractor to carry out the volume of work according to the quality requirements, schedule, and other requirements stipulated in the contract. In the contract, both parties must clearly state the contents of the contract price, including tax and fee items, and the responsibilities of the parties in fulfilling their tax and fee obligations.

Both parties shall base on the tender invitation documents, bid documents, cost estimates, purchase orders, and plans approved by competent state authorities, and the results of contract negotiations to determine the contract price. The contract price has the following forms:

2.1. Lump-sum contract price (including lump-sum form and percentage form as prescribed in the Bidding Law) is a contract price that does not change throughout the contract execution period for works within the scope of the signed contract, except for cases permitted to adjust as specified in the contract (if any); The lump-sum contract price applies to works or packages with clearly defined quantities, quality, and time of execution, or in some cases where the quantity cannot be determined but the contractor has sufficient capability, experience, and documentation to calculate and determine the lump-sum price and accept related risks.

2.2. Fixed unit price contract (including unit price form and time-based form as prescribed in the Bidding Law) is a contract price determined based on provisional quantities of work and fixed unit prices for each item in the contract, which remain unchanged throughout the contract execution period, except for cases permitted to adjust as specified in the contract (if any); The fixed unit price contract applies to works or packages where the quantity cannot be accurately determined at the time of signing the contract but the unit prices can be determined, and the contractor has sufficient capability, experience, and documentation to calculate and determine the fixed unit price and related risks. The fixed unit price remains unchanged throughout the contract execution period, except for cases permitted to adjust as clearly stated in the contract.

2.3. Adjustable price contract is a contract price where the quantity of work and unit price for work in the contract may be adjusted in cases specified in the contract.

The adjustable price contract applies to works or packages where, at the time of signing the contract, the quantity of work to be performed or cost factors to determine the unit price cannot be accurately determined.

The adjustable price contract (at the time of signing, the contract price is only provisional) will be adjusted when conditions are met to determine the quantity and unit price according to the provisions of the contract.

2.4. Combined contract price is a contract price determined according to the forms prescribed in points 2.1, 2.2, and 2.3 above.

IV. IMPLEMENTATION ORGANIZATION

1. The Ministry of Construction shall publish consumption norms for materials and labor days to implement a unit volume of urban public service work; Regularly or urgently inspect the management of urban public service costs according to the content of this Circular in localities nationwide.

2. The People's Committee of the province or centrally governed city shall be responsible for:

- Organizing the development of norms to announce or issue for urban public service works in the locality that are not included in the system of urban public service cost estimate norms announced by the Ministry of Construction or are already included in the system of urban public service cost estimate norms but are not suitable for the technical procedures and specific conditions of the locality.

- Directing and stipulating the application of norms, unit prices, preparing and approving the budget cost price for urban public service works in the locality;

- Organizing the restructuring of State-owned companies performing public service tasks under its management according to Chapter III of Decree No. 31/2005/NĐ-CP dated March 11, 2005 of the Government on production and supply of public goods and services;

- Building preferential policies and incentives for organizations and individuals participating in urban public service works to implement the policy of socialization of urban public service works in the locality; - Annually sending published or issued norms and unit prices in the year to the Ministry of Construction for monitoring and management.

3. For urban public service works whose service prices have been established and relatively stable in the locality, the competent authority may use these prices and supplement market price fluctuation factors (if any) to prepare the budget for urban public service costs.

4. Encourage investors to invest in constructing new urban areas that have already been put into partial or full operation but have not yet been handed over to the urban authorities for implementation in accordance with this Circular.

5. The transitional handling shall be carried out as follows: Contracts that have been signed and are still being implemented, or cost estimates (urban public service prices) that have been approved by the competent authority do not need to be adjusted or re-approved; In cases where it is necessary to implement the provisions of this Circular, the People's Committee of the province or centrally governed city shall consider and decide.

6. This Circular takes effect fifteen days from the date of publication in the Official Gazette and replaces Circular No. 17/2005/TT-BXD dated November 1, 2005 of the Ministry of Construction on Guidelines for the Method of Establishing and Managing Budgeted Prices for Urban Public Service Costs.

During the implementation process, if there are any difficulties, localities are requested to report to the Ministry of Construction for guidance on resolution./.