Circular No. 16/2019/TT-BXD guiding the determination of project management costs and investment consulting construction costs

REGULATION LEGAL

Guidelines for determining management costs of project and

investment consulting construction

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Pursuant to Decree No. 81/2017/NĐ-CP dated July 17, 2017 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Construction;

Pursuant to Decree No. 68/2019/NĐ-CP dated August 14, 2019 of the Government on the management of construction investment costs;

At the proposal of the Director of the Institute of Construction Economics and the Director of the Department of Construction Economics;

The Minister of Construction issues this Circular to guide the determination of project management costs and investment consulting construction costs.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular guides the determination of project management costs and investment consulting construction costs for projects using state budget funds, state capital outside the budget, and public-private partnership (PPP) projects as stipulated in Clause 2, Article 32 of Decree No. 68/2019/NĐ-CP dated August 14, 2019 of the Government on managing construction investment costs (hereinafter referred to as Decree No. 68/2019/NĐ-CP).
2. For projects using official development assistance (ODA) funds implemented according to international treaties and domestic laws under the Law on International Treaties.

Article 2. Applicability

1. This Circular applies to agencies, organizations, and individuals related to the determination of project management costs and investment consulting construction costs for projects using state budget funds, state capital outside the budget, and public-private partnership (PPP) projects.

2. Organizations and individuals related may determine the project management costs and investment consulting construction costs for projects using other sources of funds based on the guidelines set out in this Circular as a basis for fulfilling financial obligations to the State.

Article 3. General Guidelines

1. The standard rates for project management costs for construction investment issued in this Circular serve as the basis for determining project management costs (hereinafter referred to as management costs) to organize the implementation of project management tasks from the project preparation stage, project execution, and completion of construction to put the project works into operation.
2. The standard rates for investment consulting construction costs issued in this Circular are used to determine consulting construction costs (hereinafter referred to as consulting costs) in accordance with the content, product requirements, and construction procedures.
3. In cases where the Project Management Board has sufficient capacity to provide project management consulting services for other projects or perform some consulting tasks, the costs of these consulting tasks shall be added to the operating costs of the Project Management Board. The management and use of costs for the aforementioned consulting tasks shall be carried out in accordance with current regulations.
4. For projects, works, or tender packages with cost scales within the range specified in the annexes attached to this Circular, the standard rates for project management costs and consulting costs shall be determined according to the following formula:

Where:

- N_t: Standard rate for project management costs and investment consulting construction costs based on the scale of construction costs or equipment costs or combined construction and equipment costs; unit of measurement: percentage;

: bid price after corrections and adjustments, minus any discount (if applicable) of the lowest bidder among those detailed financial evaluations;_t: Scale of construction costs or equipment costs or combined construction and equipment costs required to calculate the standard rate for project management costs and consulting costs; unit of measurement: value;

: bid price after corrections and adjustments, minus any discount (if applicable) of the lowest bidder among those detailed financial evaluations;_a: Upper limit of the scale of construction costs or equipment costs or combined construction and equipment costs required to calculate the standard rate; unit of measurement: value;

: bid price after corrections and adjustments, minus any discount (if applicable) of the lowest bidder among those detailed financial evaluations;_b: Lower limit of the scale of construction costs or equipment costs or combined construction and equipment costs required to calculate the standard rate; unit of measurement: value;

- N_a: Corresponding standard rate for project management costs and investment consulting construction costs for G_a; unit of measurement: percentage;

- N_b: Corresponding standard rate for project management costs and investment consulting construction costs for G_b; unit of measurement: percentage.

5. In cases where the project's cost scale (construction costs and equipment costs) exceeds the cost scale specified in Annex 1 attached to this Circular, or if due to specific characteristics of the project, the project management costs determined according to the standard rates issued in this Circular are insufficient, the project owner shall organize the preparation of a budget to determine the project management costs while ensuring the efficiency of the project.
6. In cases where the project's cost scale (construction costs and equipment costs) exceeds the cost scale specified in Annex 2 attached to this Circular, or if certain consulting tasks do not have established standard rates, the project owner shall organize the preparation of a budget to determine the consulting costs according to the guidelines provided in Annex 3 attached to this Circular.
7. Consulting costs for construction survey and specialized construction testing shall be determined as part of the construction costs in the construction budget.

Chapter II
DETERMINATION OF PROJECT MANAGEMENT COSTS

Article 4. Contents of Project Management Costs

Project management costs are determined according to the project management cost standards set forth in Table 1.1 and Table 1.2 of Appendix 1 attached hereto, which serve as the basis for determining project management costs including: salaries of project managers, wages paid to workers under contracts; allowances; bonuses, collective welfare; contributions (social insurance, health insurance, unemployment insurance, trade union fees, other deductions as prescribed by law for individuals receiving salaries from the project); application of science and technology, management of the application of construction information systems (BIM); training to enhance the capacity of project managers; payment for public services; office supplies; information, propaganda, communication; organization of meetings related to the project; travel expenses; rental, repair, purchase of assets serving project management, other costs, and contingency costs.

Article 5. Determination of Project Management Costs

1. Project management costs within the total investment ceiling are determined by multiplying the percentage standard (issued in Table 1.1 of Appendix 1 attached hereto) with the construction costs and equipment costs (excluding value-added tax) in the total investment ceiling of the project.

2. Project management costs in the construction project budget or the total project budget are determined by multiplying the percentage standard (the same percentage standard used to calculate project management costs in the approved total investment ceiling) with the construction costs and equipment costs (excluding value-added tax) in the construction project budget or the total project budget.

3. For projects located at sea; on islands; along the land border line; in communes with extremely difficult socio-economic conditions (coastal areas and islands; border communes, safe area communes; particularly difficult hamlets), as prescribed by the Government, project management costs are determined according to the standards set forth in Table 1.1 of Appendix 1 attached hereto and adjusted with a factor k = 1.35. For projects spanning across two or more provinces or consisting of separate works constructed in different provinces, project management costs are determined according to the standards issued in Table 1.1 of Appendix 1 attached hereto and adjusted with a factor k = 1.1.

4. In cases where the project is managed by the investor using its own legal entity status and specialized staff having sufficient capacity to directly manage the project, project management costs are determined according to the standards issued in Table 1.1 of Appendix 1 attached hereto and adjusted with a factor k = 0.8.

5. In cases where consulting services for project management are hired, the cost of hiring consulting services for project management is determined based on the budget prepared based on the content and volume of work agreed upon in the project management contract between the investor and the consulting service contractor. The cost of hiring consulting services for project management (including value-added tax) plus the investor's project management costs shall not exceed the project management costs determined according to the guidelines in this Circular.

6. In cases where the cost of equipment accounts for ≥ 50% of the total construction and equipment costs in the approved total investment ceiling, the project management cost standard is adjusted with a factor k = 0.8.

7. In cases where the project is managed through component projects, each of which may operate independently, be exploited and used, or be phased for implementation, project management costs are determined separately according to the scale of each component project.

8. In cases where the general contractor performs some project management tasks that are the responsibility of the investor, the general contractor is entitled to a portion of the project management costs depending on the tasks assigned by the investor. The costs incurred by the general contractor for performing project management tasks are agreed upon from the project management fund and included in the general contracting contract price. The investor's project management costs and the general contractor's project management costs shall not exceed the project management costs determined according to the guidelines in this Circular.

Article 6. Determination of project management costs for investment projects under the Public-Private Partnership (PPP) model

1. The project management costs of the State agency with competent authority shall be determined based on a budget estimate that is appropriate to the project management tasks and relevant policies and regulations.

2. The operating costs of the project management unit under the State agency with competent authority shall be determined based on a percentage rate standard (issued in Table 1.2 of Appendix 1 attached hereto) multiplied by the construction cost and equipment cost (excluding value-added tax) within the total investment limit of the project. For projects spanning across two or more provinces or consisting of separate works constructed in different provinces, the operating costs of the project management unit under the State agency with competent authority shall be determined according to the standards issued in Table 1.2 of Appendix 1 attached hereto, adjusted with a factor k = 1.1.

3. The project management costs of the investor shall be determined in accordance with the guidance provided in Article 5 of this Circular and adjusted with a factor k = 0.7.

Chapter III
DETERMINATION OF INVESTMENT CONSULTANCY COSTS FOR CONSTRUCTION

Article 7. Contents of Investment Construction Consultancy Costs

Investment construction consultancy costs shall be determined based on the consultancy cost standards, serving as the basis for determining the costs of consultancy works including: consultancy labor costs (wages, allowances, bonuses, collective welfare, social insurance contributions, health insurance contributions, unemployment insurance contributions, trade union fees, other deductions as prescribed by law for individuals performing consultancy work at the project); costs for applying science and technology; costs for public service payments, office supplies, communication expenses; costs for renting, repairing, purchasing assets for consultancy services for the project (if any); management costs of consultancy organizations; other costs; pre-tax profit but excluding costs for applying Building Information Modeling (BIM) systems, value-added tax, and contingency costs.

Article 8. Determination of Investment Construction Consultancy Costs

1. Consultancy costs shall be determined based on percentage rates corresponding to the scale of construction costs, the scale of equipment costs, or the combined scale of construction and equipment costs.

2. Consultancy costs shall be determined according to the type of construction; the level of construction as stipulated currently. Specifically, consultancy costs for defense and security works shall be determined based on the consultancy cost standards for civil, industrial, technical infrastructure, transportation, agricultural, and rural development works.

3. Consultancy costs shall be determined based on the standards issued in Appendix 2 attached hereto, excluding costs for preparing foreign language documents. Costs for preparing foreign language documents shall be added to consultancy costs and determined through budget estimates but not exceeding 15% of the consultancy costs determined based on the standards issued in Appendix 2 attached hereto.

4. In cases where additional consultancy documents must be prepared according to international practices, or separate reports are required by sponsors for foreign-funded projects, the costs for these tasks shall be determined based on appropriate budget estimates matching the specific requirements of each task.

5. Where multiple adjustment factors for consultancy cost standards are applied simultaneously, these factors shall be multiplied by the consultancy cost standards.

6. In cases where individual or organizational consultants are hired by state management agencies to perform certain consultancy tasks during the acceptance inspection process of construction works, the costs for hiring such consultants shall be determined based on appropriate budget estimates matching the scope and content of the consultancy tasks to be performed.

7. In cases where domestic consultancy organizations collaborate with foreign consultants to perform consultancy tasks, the costs for hiring consultancy services shall be determined based on budget estimates but not exceeding twice the amount calculated according to the standards in Appendix 2 attached hereto. Costs for hiring foreign consultants shall be determined based on the number of consultants, their working hours, their wages, and other necessary costs to complete the hired consultancy work, following international practices, complying with sponsor funding regulations (if applicable), and suitable for the conditions of providing consultancy services in Vietnam.

Chapter IV
IMPLEMENTATION

Article 9. Transitional Provisions

The determination of project management costs and consulting fees during the transitional period as stipulated in Article 36 of Decree No. 68/2019/NĐ-CP shall be specified as follows:

1. For investment construction projects that have been approved before the effective date of Decree No. 68/2019/NĐ-CP and are currently being implemented, continue to apply the project management cost standards and consulting cost standards prescribed in Decree No. 32/2015/NĐ-CP dated March 25, 2015 on the management of construction investment costs to determine project management costs and consulting costs. In cases where project management tender packages and consulting tender packages have not yet signed contracts after the effective date of this Circular, the investor decision-maker shall decide to apply the project management cost standards and consulting cost standards issued in this Circular to adjust the prices of project management tender packages and consulting tender packages but must meet the project's schedule and effectiveness requirements.

2. For investment construction projects that have been approved after the effective date of Decree No. 68/2019/NĐ-CP:

a) In cases where project management tender packages and consulting tender packages have already applied the cost standards prescribed in Decree No. 32/2015/NĐ-CP dated March 25, 2015 to determine the prices of project management tender packages and consulting tender packages, selected contractors, and signed contracts before the effective date of this Circular, they shall implement according to the contents of the signed contracts.

b) In cases where project management tender packages and consulting tender packages have not yet commenced contractor selection or are in the process of selecting contractors before the effective date of this Circular, the cost standards for project management and consulting issued in this Circular shall be applied to update the prices of project management tender packages and consulting tender packages.

3. For project management and consulting contracts signed before the effective date of this Circular, they shall be implemented according to the contents of the contracts and in compliance with applicable laws governing the contracts.

Article 10. Effective Date

This Circular takes effect from February 15, 2020.