Circular No. 16/2005/TT-BXD guiding the adjustment of construction project cost estimates

CIRCULAR

Guidelines for Adjusting Construction Project Cost Estimates

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. 205/2004/NĐ-CP dated December 14, 2004 of the Government on the Wage Scale System and Allowance System in State-Owned Enterprises;

Pursuant to Decree No. 118/2005/NĐ-CP dated September 15, 2005 of the Government on Adjusting the Minimum Wage Level;

To implement the adjustment of construction project cost estimates according to the new minimum wage system and decisions of competent state authorities regarding adjusted electricity prices and fuel prices for construction projects funded by state budget, state-guaranteed credit, state development investment credit, and state-owned enterprise development investment. The Ministry of Construction hereby provides guidelines for adjusting construction project cost estimates from October 1, 2005 as follows:

I. ADJUSTMENT OF CONSTRUCTION PROJECT COST ESTIMATES:

Construction project cost estimates established based on current basic construction unit prices of provinces and centrally-administered cities calculated according to the wage scale of Group I of Wage Table A6 issued together with Decree No. 26/CP dated May 23, 1993 of the Government, with minimum wages set at different periods as prescribed by the Government shall be adjusted as follows:

1- Adjustment of Labor Costs:

Labor costs in construction project cost estimates established based on the aforementioned basic construction unit prices shall be multiplied by the corresponding adjustment factor ( signing and implementing Agreements^DC_NC ) specified in Table 1 of the attached annex.

For construction works belonging to other groups of Wage Table A6, after being adjusted according to the Group I adjustment factor stipulated in Decree No. 205/2004/NĐ-CP dated December 14, 2004 of the Government, they shall be further multiplied by the following adjustment factors:

- For Group II it is 1,066

- For Groups III and IV it is 1,183

For construction projects that enjoy additional allowances, wage supplements, and other policies not included in the unit price or receive higher mobility allowances than 20%, these items shall be added to labor costs according to current regulations.

2- Adjustment of Machinery Costs:

Machinery costs in construction project cost estimates established based on the aforementioned basic construction unit prices shall be multiplied by the corresponding adjustment factor (signing and implementing Agreements^DC _MTC ) specified in Table 1 of the attached annex.

The adjustment factor mentioned in the annex does not apply to the adjustment of machinery costs in construction project cost estimates where machinery costs in the estimate are determined based on machine rates issued separately by competent authorities and not included in the machine rate table issued together with Decision No. 1260/1998/QĐ-BXD dated November 18, 1998, Decision No. 10/2001/QĐ-BXD dated June 11, 2001, and Decision No. 38/2002/QĐ-BXD dated December 27, 2002 of the Minister of Construction.

3. Items of costs calculated as percentages in construction project cost estimates:

Direct other fees, general expenses, pre-tax income, value-added tax, and construction site temporary housing costs for living and construction management are calculated as percentages according to current regulations.

The contents of cost items in construction project cost estimates follow current regulations.

II. ADJUSTMENT OF OTHER COSTS IN THE TOTAL CONSTRUCTION PROJECT ESTIMATE

1. Adjustment of Construction Survey Cost Estimate:

Construction survey cost estimates established based on construction survey unit prices issued by the Chairman of the People's Committee of provinces and centrally-administered cities on the basis of construction survey cost estimate norms issued together with Decision No. 06/2000/QĐ-BXD dated May 22, 2000 of the Minister of Construction, Circular No. 07/2000/TT-BXD dated July 12, 2000 of the Ministry of Construction guiding the establishment of construction survey unit prices and the management of construction survey costs shall be multiplied by the corresponding adjustment factor (signing and implementing Agreements^DC _KS) specified in Table 2 of the attached annex..

2Adjustment of labor costs in construction survey cost estimates:

Labor costs in construction material and component testing work cost estimates established according to construction material and component testing norms and unit prices issued together with Decision No. 32/2001/QĐ-BXD dated December 20, 2001 of the Minister of Construction shall be multiplied by the corresponding adjustment factor. signing and implementing Agreements^DC _TN = 1,84

3. Some other costs calculated as percentages in the total construction project estimate:

They are calculated according to current national regulations.

Specifically, for pre-tax cost estimates for urban planning construction work established based on urban planning cost norms issued according to Decision No. 06/2005/QĐ-BXD dated February 3, 2005 of the Minister of Construction, they shall be multiplied by the corresponding adjustment factor ( signing and implementing Agreements^DC _QHXD = 1,09.

For cost estimates for implementing urban public services established according to Circular No. 05/2002/TT-BXD dated December 30, 2002 of the Ministry of Construction guiding the establishment and management of urban public service costs based on specific conditions of each locality as guided by the provincial People's Committee, adjustments shall be made accordingly.

III. IMPLEMENTATION:

1- For investment projects currently being prepared or have been prepared but not yet approved by competent authorities, the total investment amount of the project shall be adjusted in accordance with the new minimum wage system.

2- For construction projects of investment projects currently organizing design - total estimate, estimate preparation, the construction project cost estimate values and other cost items in the total estimate of the project shall be adjusted according to the guidelines provided in this circular.

3- For projects, project components whose total estimates, estimates have been approved by competent authorities but have not or are currently organizing bidding, designated bidding, completed bidding results but have not signed contracts, the investor shall adjust the total estimate, estimate and implement adjustments according to current regulations.

4- For ongoing construction projects, construction volumes implemented from October 1, 2005 shall apply the cost estimate adjustments as stipulated in this circular.

In the case where construction volume begins from October 1, 2005 but the contract stipulates that prices will not be adjusted throughout the implementation process, the Investor and the construction contractor shall negotiate to supplement the contract to ensure the rights of workers as prescribed.

5\. For construction projects permitted to establish individual unit prices (construction project unit prices), the Unit Price Board shall base on the system of wage scales, salary tables, and supplementary allowances allowed by the State for the project, and the principles for adjusting the construction project cost estimate as guided by this Circular, to determine the adjustment levels for labor costs, machinery operation costs, and other costs (if any) in the construction project cost estimate.

6\. For provinces and centrally-administered cities that have established construction unit price systems based on the wage scale, salary table, and supplementary allowance regulations set forth in Decree No. 205/2004/NĐ-CP dated December 14, 2004 of the Government, the adjustment of the construction project cost estimate shall be guided by the People's Committee of the province.

The Ministry of Construction requests the People's Committees of provinces and centrally-administered cities to promptly establish construction unit prices for their respective provinces and cities based on the construction project cost estimate norms issued with Decisions No. 24/2005/QĐ-BXD dated July 29, 2005, No. 28/2005/QĐ-BXD dated August 10, 2005, and No. 33/2005/QĐ-BXD dated October 4, 2005 of the Minister of Construction, and new wage and price policies in accordance with the guidance on establishing and managing construction unit prices in Circular No. 04/2005/TT-BXD dated April 1, 2005 and other guiding documents of the Ministry of Construction, serving as the basis for establishing and managing construction project costs from January 1, 2006.

This Circular takes effect fifteen days after its publication in the Official Gazette and replaces Circular No. 03/2005/TT-BXD dated March 4, 2005 of the Ministry of Construction guiding the adjustment of construction project cost estimates.

ANNEX

(Attached to Circular No. 16/2005/TT-BXD dated October 13, 2005 of the Ministry of Construction).

TABLE 1: ADJUSTMENT FACTORS FOR CONSTRUCTION COST ESTIMATES PROJECTS

TABLE 2: ADJUSTMENT FACTORS FOR CONSTRUCTION SURVEY COST ESTIMATES