Circular No. 167/BXD-VKT guiding the preparation of construction project budgets

CIRCULAR

DIRECTIVE NO. 167-BXD/VKT OF JULY 4, 1990 ISSUED BY THE MINISTRY OF CONSTRUCTION ON GUIDELINES FOR ESTIMATING THE COST OF BASIC CONSTRUCTION PROJECTS

IN RECENT YEARS, THE DETERMINATION OF THE ESTIMATED VALUE OF BASIC CONSTRUCTION PROJECTS HAS HAD MANY DRAWBACKS: THE COMPONENTS AND CONTENT OF EXPENSE ITEMS HAVE BEEN UNREASONABLE AND SOME CONTENTS ARE NO LONGER SUITABLE WITH CURRENT REGULATIONS: THE CALCULATION METHODS ARE COMPLEX, ESPECIALLY IN THE CONTEXT OF PRICES FLUCTUATING AND MANY POLICIES AND REGULATIONS BEING UPDATED AND MODIFIED... LIMITING THE AUTONOMY OF LOCAL UNITS, WHILE FAILING TO MEET FULLY AND PROMPTLY THE REQUIREMENTS OF STRICT MANAGEMENT AND ECONOMICAL USE OF STATE CAPITAL INVESTMENT.

TO USE STATE CAPITAL INVESTMENT IN BASIC CONSTRUCTION EFFICIENTLY AND ECONOMICALLY AND TO PROGRESSIVELY REVISE THE WORK OF PRICING AND MANAGING BASIC CONSTRUCTION, BASED ON THE CONCLUSIONS OF THE STANDING COMMITTEE OF THE STATE COUNCIL AT ITS MEETING ON MAY 23, 1990 REGARDING THE HANDLING OF CAPITAL INVESTMENT IN BASIC CONSTRUCTION FOR 1990; AFTER CONSULTATION WITH NATIONAL OVERALL MANAGEMENT AUTHORITIES, THE MINISTRY OF CONSTRUCTION GUIDES THE REVISED METHOD OF ESTIMATING THE COST OF BASIC CONSTRUCTION PROJECTS AS FOLLOWS:

I. REGARDING THE ESTIMATED PRICE OF INSTALLATION AND CONSTRUCTION

FROM NOW ON, THE ESTIMATED COST OF INSTALLATION AND CONSTRUCTION OF BASIC CONSTRUCTION PROJECTS WILL ONLY INCLUDE DIRECT COSTS, COMMON COSTS, AND STANDARD PROFIT OR TAX. THESE COSTS ARE DETERMINED ACCORDING TO MATERIAL CONSUMPTION QUOTAS (MATERIALS, LABOR, MACHINE USE) ISSUED BY AUTHORIZED AUTHORITIES AND CALCULATED WITH REASONABLE PRICES IN EACH REGION AND PERIOD. AMONG WHICH:

1. DIRECT COSTS: INCLUDE MATERIAL COSTS, LABOR COSTS, AND MACHINE RENTAL COSTS.

a) MATERIAL COSTS:

BASED ON MATERIAL USAGE QUOTAS AND MATERIAL PRICES IN EACH LOCATION TO DETERMINE MATERIAL COSTS IN THE BASIC CONSTRUCTION UNIT PRICE (UNIT PRICES OF PROVINCES AND CITIES OR PROJECT UNIT PRICES). MATERIAL COSTS IN THE ESTIMATED COST OF INSTALLATION AND CONSTRUCTION ARE DETERMINED BY MULTIPLYING THE APPROVED INSTALLATION AND CONSTRUCTION VOLUME WITH THE MATERIAL COSTS IN THE BASIC CONSTRUCTION UNIT PRICE OF EACH TYPE OF INSTALLATION AND CONSTRUCTION WORK. WHEN THERE ARE CHANGES IN PRICES AND TRANSPORTATION FEES, BASED ON THE AVERAGE REGIONAL PRICES IN EACH PERIOD TO DETERMINE THE DIFFERENCE AND DIRECTLY INCORPORATE IT INTO THE MATERIAL COSTS IN THE ESTIMATED COST.

b) LABOR COSTS:

IN THE ESTIMATED COST OF INSTALLATION AND CONSTRUCTION, PRINCIPALLY LABOR COSTS INCLUDE BASIC WAGES AND ALL ALLOWANCES AND SUBSIDIES AND OTHER COSTS UNDER THE REGIME FOR CONSTRUCTION LABORERS THAT CAN BE DIRECTLY ALLOCATED TO WORKERS TO CALCULATE FOR A STANDARD DAY'S WORK. ACCORDING TO THIS PRINCIPLE, LABOR COSTS IN THE BASIC CONSTRUCTION UNIT PRICE ARE DETERMINED AS FOLLOWS:

FOR PROVINCE AND CITY UNIT PRICES, AS THEY APPLY TO MANY PROJECTS IN A REGION, ONLY BASIC WAGES, ALLOWANCES, AND SUBSIDIES APPLICABLE TO ALL PROJECTS IN THE REGION AND OTHER COSTS UNDER THE REGIME FOR CONSTRUCTION LABORERS THAT CAN BE DIRECTLY ALLOCATED TO WORKERS ARE CALCULATED. ACCORDING TO CURRENT REGULATIONS, THESE COSTS ARE TWICE THE LABOR COSTS IN THE CURRENT BASIC CONSTRUCTION UNIT PRICES OF LOCALITIES. SEPARATELY, CERTAIN PROJECTS THAT ENJOY HIGHER ALLOWANCES (MOBILE) OR OTHER ALLOWANCES NOT YET INCLUDED IN LABOR COSTS IN LOCAL UNIT PRICES (SUCH AS: AREA, ATTRACTIVE, HAZARDOUS, SENIORITY, RESPONSIBILITY, HIGH-ALTITUDE WORK, CONTINUOUS NIGHT SHIFT...) ARE SUPPLEMENTED WITH THESE ALLOWANCES INTO LABOR COSTS ACCORDING TO THE GUIDANCE IN ANNEX 2.

FOR PROJECT UNIT PRICES: DIRECTLY INCORPORATE BASIC WAGES, ALLOWANCES, SUBSIDIES, AND OTHER REGIME COSTS FOR CONSTRUCTION LABORERS THAT THE PROJECT ENJOYS INTO THE UNIT PRICE ACCORDING TO THE ABOVE CALCULATION METHOD.

c) MACHINE RENTAL COSTS:

UNTIL THE MACHINE RENTAL PRICES ARE ADJUSTED TO THE CURRENT PRICE LEVEL AND LABORER WAGES FOLLOWING THE ABOVE PRINCIPLES, TEMPORARILY CONTINUE USING THE CURRENT MACHINE RENTAL PRICES AND ADJUST WITH A FACTOR OF 1.05.

2. COMMON COSTS:

IN THE ESTIMATED COST OF INSTALLATION AND CONSTRUCTION, IN ADDITION TO DIRECT COSTS, ALL OTHER COSTS INCLUDING: OTHER DIRECT COSTS, MANAGEMENT SYSTEM COSTS, SOCIAL INSURANCE, UNION CONTRIBUTION FUNDS, LABORER SERVICE COSTS, AND OTHER CONSTRUCTION SITE PREPARATION COSTS ARE CALCULATED AS A COMMON COST AS A PERCENTAGE (%) OF THE DIRECT COSTS (INCLUDING MATERIALS, LABOR, AND MACHINE RENTAL). THE COMMON COST OF EACH TYPE OF PROJECT IS DETERMINED ACCORDING TO ANNEX 1.

3. STANDARD PROFIT: TEMPORARILY APPLY THE CURRENT REGIME FOR SPECIFIED OBJECTS AS PER THE MINISTRY OF FINANCE UNTIL THE NEW TAX POLICY IS IMPLEMENTED.

4. INTEREST COSTS ON BANK LOANS ARE NOT INCLUDED IN THE ESTIMATED COST OF INSTALLATION AND CONSTRUCTION. THE GUARANTEE OF INSTALLATION AND CONSTRUCTION CAPITAL IS AGREED UPON AND RECORDED IN THE ECONOMIC CONTRACT DEPENDING ON THE SPECIFIC CONDITIONS OF EACH PROJECT.

THE STRUCTURE OF THE ESTIMATED COST OF INSTALLATION AND CONSTRUCTION ACCORDING TO THE ABOVE PRINCIPLES IS FORMED ACCORDING TO THE TEMPLATE IN ANNEX 2.

II. REGARDING OTHER COSTS IN THE TOTAL ESTIMATE

FOR CONSTRUCTION PROJECTS

1. REGARDING PROJECT MANAGEMENT COSTS: TEMPORARILY APPLY CURRENT REGULATIONS TO ESTIMATE CAPITAL IN THE TOTAL PROJECT ESTIMATE. WHEN USED, THE INVESTMENT MANAGER MUST BASE THE ANNUAL ESTIMATE OF COSTS FOR EACH UNIT ON CURRENT NATIONAL REGULATIONS, WITHOUT USING THIS FUNDS FOR PERMANENT OFFICE BUILDING, HOUSING CONSTRUCTION, OR PURCHASING EXPENSIVE EQUIPMENT.

2. REGARDING CAMP COSTS AND PROGRESS BONUSES:

UNTIL THE OFFICIAL DECISION OF THE STATE COUNCIL CHAIRMAN IS ISSUED, AFTER CONSULTATION WITH THE NATIONAL PLANNING COMMITTEE AND THE MINISTRY OF FINANCE, TEMPORARILY DETERMINE THESE COSTS AS FOLLOWS:

CAMP COSTS (2.8%): DO NOT BASE THIS COST IN THE TOTAL ESTIMATE OF ALL TYPES OF CONSTRUCTION PROJECTS BUT APPLY IT ONLY TO PROJECTS WITH SPECIAL CONSTRUCTION CONDITIONS. THE INVESTMENT MANAGER MUST CONSULT WITH THE NATIONAL PLANNING COMMITTEE, THE MINISTRY OF FINANCE, AND THE MINISTRY OF CONSTRUCTION ON THE ACTUAL NECESSARY COSTS FOR TEMPORARY CONSTRUCTION AT THESE PROJECTS.

PROGRESS BONUSES: DO NOT APPLY CIRCULAR JOINT No. 72/TT-LB OF JUNE 8, 1983 OF THE JOINT MINISTRY OF NATIONAL BASIC CONSTRUCTION COMMITTEE AND THE MINISTRY OF FINANCE, THE SECTION ON GUIDELINES FOR BONUSES FOR COMPLETING DESIGN, INSTALLATION AND CONSTRUCTION, PUTTING PROJECTS INTO PRODUCTION AND USE. ONLY APPLY PROGRESS AND QUALITY BONUSES AT PROJECTS PERMITTED BY THE STATE COUNCIL CHAIRMAN.

3. REGARDING SURVEY AND DESIGN COSTS:

At present, the Ministry of Construction is coordinating with relevant local departments to review the norms, unit prices, and price lists for surveying, design of construction projects, and planning design, and will provide specific guidelines on these costs.

III. APPLICATION PROVISIONS

The method of preparing budgets for basic construction projects according to the above guidance shall be uniformly applied nationwide from July 1, 1990. Any provisions that conflict with those set forth in this Circular shall no longer be effective. Local sectoral and regional documents guiding the preparation of project budgets must not contradict the provisions of this Circular. In the course of implementation, if there are any issues or inconsistencies, it is requested that sectors and regions report them to the Ministry of Construction for study and resolution.

APPENDIX 1

COMMON COSTS AND FIXED PROFIT RATES FOR

VARIOUS TYPES OF CONSTRUCTION PROJECTS
(Attached to Circular No. 167/BXD/VKT dated July 4, 1990)

ANNEX NO. 2

COMPREHENSIVE ESTIMATE TABLE FOR

BASIC CONSTRUCTION PROJECT
(Attached to Circular No. 167/BXD/VKT dated July 4, 1990 issued by the Ministry of Construction)

for basic construction projects whose estimates are prepared based on

current local basic construction unit prices

Note:

Article 24_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}: is the volume of work type j;

D^{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}_KH; D^{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}_NC; D^{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}_{Briefly describe technical improvements, production processes, raw materials, designs; new technology applications such as automation, digitalization, clean technology; management, marketing, distribution solutions; products winning awards or certifications related to innovation…):…}: is the cost of materials, labor, and construction machinery in the current local basic construction unit price for work type j.

P is the total amount of additional allowances and subsidies not included in the current local basic construction unit price.

K is the ratio of common costs in the estimate.

M is the fixed profit rate.

In cases where localities base their new sets of basic construction unit prices on the principles stipulated in this Circular to replace the existing local basic construction unit prices, the labor cost in the estimate prepared based on the new unit prices shall be determined according to the formula:

"5. The pre-tax weighted average cost of capital i (%) is determined according to the formula below:

NC = ___

Article 24_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.} x D^{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}_NC (1 + 2,18)