Circular No. 18/2019/TT-BXD guides the conversion of construction investment capital.

CIRCULAR

Guidelines for converting construction investment capital

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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;

Considering 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 conversion of construction investment capital.

Article 1. Scope of Regulation

This Circular guides the content and methods of converting construction investment capital for projects using state budget funds and non-budget state funds to determine the value of newly formed assets through investment as stipulated in Clause 1, Article 32 of Decree No. 68/2019/NĐ-CP dated August 14, 2019 of the Government on managing construction investment costs. For public-private partnership (PPP) projects, they shall be implemented in accordance with the laws on PPP investment.

Article 2. Applicability

1. Agencies, organizations, and individuals related to the conversion of construction investment capital for projects using state budget funds and non-budget state funds.

2. It is encouraged that agencies, organizations, and individuals related to the conversion of construction investment capital for projects using other funds apply the provisions of this Circular.

Article 3. Principles of converting construction investment capital

1. Converting construction investment capital involves converting the items of investment costs that have been settled to the price level at the time of handover for operation.

2. The investor shall organize the implementation of the conversion of construction investment capital for projects and works with a construction period exceeding two years (from the start of construction to the completion acceptance date) based on the guidelines set out in this Circular.

3. The conversion of construction investment capital must reflect all the investment costs already incurred by the project at the time of conversion. In cases where the converted value is lower than the settled investment cost, the settled investment cost shall be used as the converted value. For projects with interest expenses during the investment period, these expenses shall remain unchanged in the converted value of the work.

4. The report on the conversion of construction investment capital shall be prepared with the settlement dossier and submitted for approval by the investment decision-maker no later than nine months from the date of signing the completion acceptance certificate, handover for operation, and use.

5. Investors may hire consulting organizations with sufficient capacity as prescribed in the Government's Decree on project management to implement the conversion of construction investment capital. The selection of consulting organizations shall be carried out in accordance with regulations.

Article 4. Content of converting construction investment capital

1. Converting construction investment capital involves converting the items of costs including: compensation, support, and resettlement costs (if any); construction costs; equipment costs; project management costs; construction investment consulting costs, and other costs.

2. Compensation, support, and resettlement costs implemented annually shall be converted due to fluctuations in factors such as compensation costs, construction costs, cash flow, and other relevant factors at the price level at the time of handover for operation.

3. Converted construction costs are the total of annual construction costs of the work (work item) converted due to fluctuations in construction cost factors (including material costs, labor costs, machinery costs, and other construction cost items such as indirect costs, advance tax income) as guided by the Ministry of Construction on determining and managing construction investment costs at the time of handover for operation.

4. Converted equipment costs are the total of procurement costs for construction equipment and technology equipment; management costs for procurement of construction equipment by contractors; software purchase costs for construction equipment and technology equipment of the project; training and technology transfer costs; costs for manufacturing non-standard equipment (if any); installation, testing, calibration costs; trial operation costs for equipment according to technical requirements; transportation, insurance costs; taxes, and other related costs implemented annually converted due to fluctuations in cash flow (domestic currency, foreign currency), and other relevant factors at the price level at the time of handover for operation.

5. Converted project management costs are the values of annual project management costs converted due to fluctuations in construction cost factors and other relevant factors at the price level at the time of handover for operation.

6. Converted construction investment consulting costs are the total of annual construction investment consulting costs converted due to fluctuations in construction cost factors, cash flow, and other relevant factors at the price level at the time of handover for operation.

7. Converted other costs are the total of annual other costs converted due to fluctuations in construction cost factors, cash flow, and other relevant factors at the price level at the time of handover for operation.

Article 5. Methods for converting construction investment capital

1. Construction investment capital shall be converted using the following methods:

a. The method of using conversion coefficients.

b. The method of using construction price indices.

c. The method of preparing estimates based on completed volumes and construction project prices at the time of handover for operation.

d. The method combining the methods mentioned in points a, b, and c of this clause.

2. The investor shall select the methods mentioned in points a, b, c, and d of Clause 1 of this Article to convert construction investment capital appropriately based on the project implementation form and the contract price forms of construction tender packages. Detailed contents of the methods for converting construction investment capital are provided in Appendix 1 attached hereto.

3. The template for reporting the results of converting construction investment capital and the template for the construction investment capital conversion table are provided in Appendices 2 and 3 attached hereto.

Article 6. Transitional Provisions

Implementation in accordance with Article 36 of Decree No. 68/2019/NĐ-CP dated August 14, 2019 of the Government on construction investment cost management.

Article 7. Effective Date

This Circular takes effect from February 15, 2020.