Circular No. 07/2006/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, issued by 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, issued by the Government on the management of investment construction project programs; and Decree No. 112/2006/NĐ-CP dated September 29, 2006, issued by the Government amending and supplementing certain articles of Decree No. 16/2005/NĐ-CP dated February 7, 2005, issued by the Government;
Pursuant to Decree No. 94/2006/NĐ-CP dated September 7, 2006, issued by the Government on adjusting the minimum wage level.
The Ministry of Construction hereby issues guidelines for adjusting construction project budget estimates from October 1, 2006, as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

Article 1. These guidelines apply to the adjustment of construction project budget estimates for projects funded by state capital, established according to local unit price lists issued by provinces and centrally-administered cities that comply with current national norms. Projects funded by other sources are encouraged to apply the provisions for adjusting budget estimates as outlined in these guidelines.

Article 2. Adjustments to the construction cost budget estimate and the construction survey budget estimate established according to basic construction unit prices and construction survey unit prices of provinces and centrally-administered cities, calculated based on the salary scale A6 issued together with Decree No. 26/CP dated May 23, 1993, of the Government, shall be made using the minimum wage levels specified in the annex to these guidelines for each period.

Article 3. For projects that establish their own unit prices or machinery rate tables, which are approved by the competent authority, adjustments shall be made based on the principles and methods outlined in these guidelines.

Chapter II. ADJUSTING CONSTRUCTION PROJECT BUDGET ESTIMATES.

Article 1. Construction project budget estimates and construction survey budget estimates established according to construction unit price lists of provinces and centrally-administered cities, calculated at a minimum wage of 350,000 VND/month and salary grades according to the A.1.8 salary scale issued together with Decree No. 205/2004/NĐ-CP dated December 14, 2004, of the Government, shall be adjusted as follows:

1.1 Adjustment of construction cost budget estimates.

1.1.1 Adjustment of labor costs.

Labor costs in the construction cost budget estimate established according to local unit prices shall be multiplied by an adjustment factor (KNC) corresponding to the general minimum wage adjustment system.^ĐCThe adjustment factor (KNC) shall be determined for each province or centrally-administered city, or for each project when the project uses a wage mechanism and specific wage policies.

When labor costs in the budget estimate are based on local unit prices established at a minimum wage of 350,000 VND/month, the adjustment factor (KNC) equals the new general minimum wage divided by the minimum wage already included in the unit price (350,000 VND/month).^ĐC1.1.2 Adjustment of construction machinery costs.

Construction machinery costs in the construction cost budget estimate established according to local unit prices shall be multiplied by an adjustment factor (KMTC) corresponding to the general minimum wage adjustment system.^ĐCThe adjustment factor for construction machinery costs (KMTC) shall be determined for each province or centrally-administered city, or for each project when the project has its own machinery rate table and equipment rental rates.

When construction machinery costs in the budget estimate are calculated based on local unit prices with machinery rate tables established at a minimum wage of 350,000 VND/month and fuel and energy costs at the time of calculation, the adjustment factor (KMTC) shall be determined by the weighted average method for machinery groups.

According to this principle, the adjustment factor for construction machinery costs in the construction cost budget estimate (KDCMTC) for provinces and centrally-administered cities is 1.05. Provinces and centrally-administered cities with special construction structures shall determine this factor but not exceed 1.05.^ĐCFor projects constructed along routes through multiple provinces and centrally-administered cities with their own machinery rate tables, the investor shall calculate the adjustment factor and report it to the relevant ministry for approval; other cases shall be decided by the investment decision-maker.

1.1.3 Other cost items calculated as percentages in the construction cost budget estimate.^ĐCCost items calculated as percentages in the construction cost budget estimate include: direct costs other than labor, common costs, pre-tax income, value-added tax, temporary housing at the construction site for living and managing construction work, as prescribed.

1.2 Other cost items.^ĐCCost items such as project management for investment construction projects (Decision No. 10/2005/QĐ-BXD dated April 15, 2005, of the Ministry of Construction) and project establishment and design (Decision No. 11/2005/QĐ-BXD dated April 15, 2005, of the Ministry of Construction) shall be calculated as percentages according to current regulations.

For construction survey budget estimates, cost factors shall be adjusted according to the principles and methods mentioned above.

Article 1. Provinces and centrally-administered cities that have established construction unit price lists and machinery rate tables according to the salary scale and allowance system stipulated in Decree No. 205/2004/NĐ-CP dated December 14, 2004, of the Government, shall adjust construction project budget estimates and guide transitional implementation measures, decided by the provincial People's Committee to apply to adjusting budget estimates for construction projects funded by state capital in the locality.

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

Article 2. Relevant ministries and sectors shall guide the adjustment of construction cost budget estimates for investment construction projects under their jurisdiction according to the guidelines set out in these guidelines.

Article 3. Investors shall organize the implementation and approve the results of budget adjustments and total construction project budget estimates according to current regulations.

The items of expenditure such as Project Management for Construction Investment Projects (Decision No. 10/2005/QĐ-BXD dated April 15, 2005 of the Ministry of Construction) and Preparation of Projects and Design of Construction Works (Decision No. 11/2005/QĐ-BXD dated April 15, 2005 of the Ministry of Construction) shall be calculated at the current prescribed percentage rate (%).

As for the construction survey budget, the cost factors shall be adjusted according to the principles and methods mentioned above.

III. IMPLEMENTATION

1. Provinces and centrally governed cities that have established unit prices for construction works, Machinery and Equipment Construction Cost Tables in accordance with the wage scale system and salary allowances stipulated in Decree No. 205/2004/NĐ-CP dated December 14, 2004 of the Government on the wage scale, salary tables, and salary allowance systems shall decide on the adjustment of construction project budgets and transitional implementation guidelines to apply the adjustment of construction project budgets using state funds in their locality.

The Department of Construction shall take the lead in coordinating with relevant agencies in the locality to determine the adjustment factor to be submitted to the People's Committee of the province for promulgation and application.

2. Relevant ministries and sectors shall guide the adjustment of construction cost budgets for investment construction projects under their jurisdiction in accordance with the guidelines set out in this Circular.

3. The project sponsor shall organize the implementation and approval of the results of the budget adjustment and the total construction project budget in accordance with the current regulations.

4. The transfer and implementation of construction project budget adjustments shall be decided by the Competent Authority but must ensure effectiveness and not disrupt the project implementation process, specifically as follows:

4.1- For investment construction projects that are being prepared or have been prepared but have not yet been approved by the Competent Authority for investment approval, the total investment cost of the project shall be adjusted to align with the new minimum wage regime.

4.2- For construction works of investment construction projects that are organizing the preparation of design documentation - general estimate, estimate, the construction work estimate and other cost items in the total project estimate shall be adjusted according to the guidelines set out in this Circular.

4.3- For construction works, construction work components that have been approved by the Competent Authority for the general estimate, estimate but have not yet or are currently organizing bidding, direct award, or have completed the bidding results but have not signed the contract, the Project Owner shall adjust the general estimate, estimate, tender price according to the provisions of this Circular.

4.4- For construction works, construction work components that are under ongoing construction, the construction volume implemented from October 1, 2006 shall apply the construction work budget adjustment as stipulated in this Circular.

In cases where the construction volume implemented from October 1, 2006 but the contract parties have agreed not to adjust prices throughout the implementation period, the Project Owner and the construction contractor may negotiate supplementary contracts to ensure workers' rights in accordance with the provisions.

4.5- For construction works permitted to establish separate unit prices (construction work unit prices), the Unit Price Board shall base on the system and policies allowed by the State at the project and the principles for adjusting construction costs as guided by this Circular, determine the level of adjustment for labor costs, machinery operation costs, and other costs (if any) in the construction work estimate.

This Circular takes effect fifteen days after its publication in the Official Gazette.