Circular No. 17/2008/TT-BXD guiding certain contents on the establishment and management of construction investment costs for hydropower projects under the 797-400 mechanism.

CIRCULAR

GUIDANCE ON CERTAIN CONTENTS OF ESTABLISHING AND MANAGING CONSTRUCTION INVESTMENT COSTS FOR HYDROPOWER PROJECTS UNDER MECHANISM 797-400

Pursuant to Decree No. 17/2008/NĐ-CP dated February 4, 2008 of the Government on the functions, tasks, powers, and organizational structure of the Ministry of Construction;
Pursuant toCircular No. 797/CP-CN dated June 17, 2003 and No. 400/CP-CN dated March 26, 2004 of the Prime Minister regarding the mechanism for hydropower projects initiated from 2003 to 2005 (hereinafter referred to as Mechanism 797-400).
The Ministry of Construction hereby provides guidance on certain contents of establishing and managing construction investment costs for hydropower projects under Mechanism 797-400 as follows:

I- GENERAL PROVISIONS

1. Objectives and Scope of Application

This Circular guides the establishment and management of direct costs other than those included in the project budget estimate; common costs and pre-tax income included in the price of extracted materials at hydropower projects; transportation costs of materials to the construction site; rates for processing, assembling, disassembling large formwork panels for hydraulic works; and construction costs of temporary housing for construction workers at hydropower projects implementing Mechanism 797-400 as stipulated by the Prime Minister.Other cost items not mentioned above within the total investment ceiling, total budget estimate, and project budget estimates for projects implementing Mechanism 797-400 shall be implemented according to relevant State regulations corresponding to each period.The establishment and management of construction investment costs for hydropower projects implementing Mechanism 797-400 must ensure investment objectives and effectiveness, while ensuring the feasibility of the construction project, accuracy, adequacy, rationality, and suitability with actual conditions and objective requirements of each project.

II- SPECIFIC PROVISIONS1. Direct Costs Other Than Those Included in the Project Budget Estimate1.1. Content of Direct Costs Other Than Those Included in the Project Budget Estimate

2. Principles for Establishing and Managing Costs

These are costs for necessary works directly serving construction activities such as moving labor forces within the construction site, labor safety, environmental protection for workers and surrounding environment, water pumping costs, silt removal, material testing, etc., which cannot be determined from design drawings. The level of direct costs other than those included in the project budget estimate is determined as follows:1.1.1. For construction work inside tunnels, direct costs other than those included in the project budget estimate (including operation costs, regular maintenance costs for water supply, drainage, ventilation, and power systems serving construction inside tunnels) are calculated at 6.5% of the total material costs, labor costs, and machinery costs in the construction project budget estimate.1.1.2. For construction work outside tunnels (open work), direct costs other than those included in the project budget estimate are calculated at 2% for main works and 1.5% for temporary works serving construction, based on the total material costs, labor costs, and machinery costs in the construction project budget estimate.

1.2. Costs Not Included in Direct Costs Other Than Those Included in the Project Budget Estimate (determined through budget estimation according to design, scale, test plan, and approved transportation plan)

- Initial investment costs for technical water systems for construction works;

- Initial investment costs for ventilation, lighting, electrical, drainage, and traffic systems serving construction inside tunnels for tunnel construction works;

- Initial investment costs for water pumping, silt removal, post-damming flood prevention drainage systems, and 0.4kV power systems serving construction;

- Post-damming flood prevention drainage costs;

- Costs for moving construction forces to the project site; dismantling, transporting, and installing tower cranes within the construction site; maintenance of traffic systems serving construction within the construction site; operation costs of the power system from the point of connection to the project's power system to the final low-voltage substation (metering point for electricity purchase);

- Waste disposal and wastewater treatment costs for temporary housing areas at the construction site;

- Additional testing costs for roller-compacted concrete (RCC) construction testing.

2. Common Costs and Pre-Tax Income Included in the Price of Extracted Materials at Hydropower Projects

For materials such as sand, gravel, cohesive soil, and filter materials produced by construction units for use in construction works, reasonable common costs and pre-tax income can be applied to calculate the product selling price. Specific ratios of common costs and pre-tax income are determined as follows:

- Common costs are calculated at 2.5% of machinery costs;

- Pre-tax income is calculated at 3% of direct costs and common costs.

A consolidated budget estimate table for production costs of materials is attached as an appendix to this Circular.

For projects and works where the Investor and Contractor have agreed on prices before extraction begins, the guidance provided in Clause 2 shall not apply.

3. Determination of Transportation Costs of Materials to the Construction Site

To determine transportation costs that reflect fluctuations in fuel prices in a market-based mechanism, transportation costs must be based on the type of material, transportation plan, supply location, road category, freight rates for goods issued locally, and reasonable transportation costs agreed upon by the Investor and Contractor.

4. Regarding Rates for Processing, Assembling, and Disassembling Large Formwork Panels for Hydraulic Works for Use

Large formwork panels for hydraulic works are formwork panels with dimensions of 1.5 x 2 meters or larger.

5. Costs of Temporary Housing at the Construction Site for Workers' Accommodation and Construction Management Including Transportation Costs for Construction Workers to the Construction Site Shall Be Calculated Based on the Necessary Requirements of the Project According to the Approved General Layout Plan and Overall Progress Schedule of the Project by the Competent Authority, But Shall Not Exceed 2% of the Construction Project Budget Estimate Value.

For projects and works where the Project Owner and Contractor have agreed on the price before commencing exploitation, this Clause 2 shall not apply.

3. Determine the transportation costs for materials to the construction site.

To determine transportation costs that are consistent with fluctuations in fuel prices under market mechanisms, such costs must be based on the type of material, transportation plan, supply location, level of transport road, freight rates for goods issued locally, and the Project Owner and Contractor must negotiate and agree on reasonable transportation costs to apply.

4. Regarding the norms for processing, assembling, dismantling large panel formworks for hydraulic structures for reuse.

Large panel formworks for hydraulic structures are formworks with a size of one panel from 1.5 x 2 meters or larger.

The cost of temporary housing at the construction site for living and managing construction operations, including the cost of transporting construction workers to the construction site, shall be calculated based on the necessary requirements of the project, according to the overall layout and total schedule of the project approved by the competent authority, but shall not exceed 2% of the estimated construction cost of the project.

III. IMPLEMENTATION

The transfer implementation of this Circular shall be reviewed and decided by the Investment Decision Maker in accordance with each stage of the project's implementation to ensure that it does not disrupt the ongoing works of the construction investment project; for projects decided on investment by the Prime Minister, the Chairman of the Economic Group and the Chairman of the State-Owned Enterprise Management Council shall review and decide.

This Circular shall take effect fifteen days from the date of publication in the Official Gazette and shall apply to projects 1.1.1. For construction work inside tunnels, direct costs other than those included in the project budget estimate (including operation costs, regular maintenance costs for water supply, drainage, ventilation, and power systems serving construction inside tunnels) are calculated at 6.5% of the total material costs, labor costs, and machinery costs in the construction project budget estimate.that have been implemented up until now. Any difficulties encountered during the implementation process should be reported to the Ministry of Construction for study and resolution./.

ANNEX

(Issued together with Circular No. 17/2008/TT-BXD dated October 2, 2008 of the Ministry of Construction)

COMPREHENSIVE ESTIMATE TABLE OF PRODUCTION COSTS FOR MATERIALS IN HYDROPOWER PROJECTS

Where:

- Q_{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.} where Q is the quantity of material j (j=1¸n) used for extraction and production of construction materials for the project.

- 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.}^vl, 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.}^{t s} is the cost of materials, labor, and construction machinery in the detailed unit price of material j (j=1¸n) used for extraction and production of construction materials for the project.

+ K_nc, K_mtc : Adjustment factor for labor and construction machinery (if applicable).