LETTER

OF THE MINISTRY OF FINANCE NO. 8397 TC/ĐT DATE JULY 29, 2004
GUIDING THE PAYMENT OF COSTS FOR ADDITIONAL CONSTRUCTION DUE TO THE IMPACT OF STEEL PRICE INCREASE
ON PROJECTS AND CONSTRUCTIONS
FUNDED BY THE STATE BUDGET

Respectfully submitted to: - Ministries, ministerial-level agencies, agencies under the Government,

Central agencies of social organizations

- People's Committees of provinces and centrally governed cities

- State-owned Corporations (Corporation 91)

- National Treasury of Vietnam

- BASED on Circular No. 1814/VPCP-KTKH dated April 14, 2004 of the Government Office regarding the Prime Minister’s opinion on handling the impact of steel price increases in construction.

- BASED on Circular No. 02/2004/TT-BXD dated April 22, 2004 of the Ministry of Construction guiding the calculation of additional construction costs due to sudden increases in steel prices.

The Ministry of Finance guides the payment of additional construction costs due to sudden increases in steel prices as follows:

1. Objectives:

Projects, works, packages (hereinafter referred to collectively as works) using state budget funds currently being implemented and included in the national development investment plan for 2004, which use construction steel in actual construction volumes during the period of sudden increase in steel prices, shall be eligible for payment.

2. Regarding payment principles:

a. Additional construction costs due to sudden increases in steel prices shall be determined according to the principles and calculation methods specified in Circular No. 02/2004/TT-BXD dated April 22, 2004 of the Ministry of Construction.

b. The application period starts from January 1, 2004, for additional construction costs due to the use of construction steel with increased prices.

c. Payment of additional construction costs due to sudden increases in steel prices for construction volumes that must use construction steel or materials produced from steel products must have complete legal invoices and receipts consistent with the actual volume and type of steel used according to the design. The steel price in the invoices and receipts must be lower than or equal to the price announced periodically by the Joint Department of Finance - Construction.

3. Regarding sources of payment:

The source of payment for increased construction costs due to sudden increases in steel prices shall be included in the national development investment plan.

4. Inspection and payment:

a. The project owner or Project Management Board is responsible for the accuracy of the value of construction volumes using construction steel during the period of sudden increase in steel prices upon acceptance and the level of price difference adjustment for projects with designated or tendered contracts (with adjusted price or lump sum contracts) or self-executed projects.

For projects undergoing construction through tendering: If the steel price in the winning bid unit price is higher than the steel price in the announcement of the Joint Department of Finance - Construction effective at the end of December 2003, then the steel price in the winning bid unit price will be used to calculate the price difference. If the steel price in the winning bid unit price is lower than the steel price in the announcement of the Joint Department of Finance - Construction effective at the end of December 2003, then the steel price in the announcement of the Joint Department will be used to calculate the price difference.

b. The project owner must check the contract, legal invoices, and receipts for purchasing construction steel consistent with the actual volume and type of construction steel used according to the design presented by the contractor (for tendered or designated projects) or bear responsibility for the invoices and receipts for the actual volume of construction steel used (for self-executed projects). It must ensure that the prices of various types of steel in the invoices and receipts are lower than or equal to the prices in the periodic announcements of the Joint Department of Finance - Construction.

In the first quarter of 2004, if the Joint Department of Finance - Construction does not announce the steel price or announces it incorrectly or incompletely, the actual steel prices in legal contracts, invoices, and receipts will be used to calculate additional construction costs. The project owner or Project Management Board must verify and jointly with the contractor bear responsibility for the accuracy of the invoices and receipts for payment.

Strictly prohibit collusion, manipulation, or false declaration of construction volumes or steel usage during the period of sudden increase in steel prices, causing loss of investment capital.

c. The National Treasury Agency shall inspect the actual volume completed, price sheets, or itemized lists attached with calculations of the value of the actual volume proposed for payment when the project owner or Project Management Board submits complete payment documents as required. Specifically, for additional construction costs due to steel price increases, the project owner or Project Management Board must provide explanations and data for calculating the additional construction costs accepted for payment during the period of sudden increase in steel prices based on the actual volume and type of steel used according to the design, and the actual price difference of steel at the time of acceptance.

If additional construction costs due to steel price increases cause the total budget estimate or approved investment ceiling to exceed, the project owner or Project Management Board shall follow procedures to adjust the total budget estimate or approved investment ceiling according to current regulations. Payment shall be made as follows: + If the total amount paid (including additional construction costs due to steel price increases) has not exceeded the total budget estimate or approved investment ceiling at the time of requesting payment of additional construction costs, then the additional construction costs can be paid.

+ If the total amount paid (including additional construction costs due to steel price increases) exceeds the total budget estimate or approved investment ceiling at the time of requesting payment of additional construction costs, then payment can only be made after the total budget estimate or approved investment ceiling is re-approved according to current regulations.

d. Local Joint Departments of Finance - Construction shall not issue steel price announcements contrary to the first quarter of 2004 in their localities to legitimize cases of steel purchases without sufficient invoices and receipts as stipulated above.

d. The Financial-Construction Departments of the localities did not issue steel price notifications contrary to the period of the first quarter of 2004 in their respective localities to legitimize cases of steel purchases and sales lacking the required receipts and invoices as stipulated above.

5. On the basis of the reports from the project investors, relevant ministries, sectors, People's Committees of provinces and centrally governed cities, State-owned Corporations shall examine and approve adjustments to the total preliminary estimate and total investment cost due to additional construction costs caused by increased steel prices (in cases where the total preliminary estimate and total investment cost are exceeded); consolidate the additional construction costs and report to the Ministry of Finance and the Ministry of Planning and Investment for inclusion in the state budget estimate.

During the implementation process, if there are any difficulties, they are requested to be promptly reflected to the Ministry of Finance for study and amendment.