CIRCULAR

GUIDING THE MANAGEMENT OF INVESTMENT EXPENDITURES ON THE CONSTRUCTION OF INFRASTRUCTURE PROJECTS UNDER PROGRAM 135

Pursuant to the Government’s Decree No.15/CP of March 4, 1994 stipulating the functions, tasks, powers and organizational structure of the Ministry of Construction;
Pursuant to the Prime Minister’s Decision No.135/1998/QD-TTg of July 31, 1998 ratifying the program for socio-economic development in mountainous, deep-lying and remote communes which meet with great difficulties (called Program 135 for short); and Decision No.197/1999/QD-TTg of September 30, 1999 on the management of the program for construction of mountainous and highland commune clusters centers;
Pursuant to Joint Circular No.416/1999/TTLT/BKH-UBDTMN-TC-XD of April 29, 1999 of the Ministry of Planning and Investment, the Committee for Ethnic Minorities and Mountainous Areas, the Ministry of Finance and the Ministry of Construction guiding the management of investment in and construction of infrastructure projects in mountainous, deep-lying and remote communes which meet with great difficulties;
After consulting the Ministry of Planning and Investment, the Committee for Ethnic Minorities and Mountainous Areas and the Ministry of Finance, the Ministry of Construction hereby guides the management of investment expenditures on the construction of infrastructure projects under Program 135 and the Program for construction of mountainous and highland commune clusters centers, as follows:

Part I.

OBJECTS AND SCOPE OF APPLICATION

1. This Circular guides the management of investment expenditures on the construction of small-scale infrastructure projects involving simple techniques, having an investment capital level of under VND 1 billion and falling within the scope of Program 135 and the Program for construction of mountainous and highland commune clusters centers (hereinafter collectively referred to as Program 135). The provisions of this Circular shall not apply to other construction projects.

2. For infrastructure projects with an investment capital level of VND 1 billion or more, the management of investment expenditures on their construction shall comply with the provisions of the Regulation on Investment and Construction Management promulgated together with the Government’s Decree No.52/1999/ND-CP of July 8, 1999 and Decree No.12/2000/ND-CP of May 5, 2000.

Part II.

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Construction cost of an infrastructure project under Program 135 shall be determined on the basis of construction and installation work volume of such project, the system of economic and technical norms and criteria and the State’s current regimes and policies suitable to the practical conditions of such project.

The total cost the total expense amount required for investment in the projects construction and concretely calculated in the technical designing-construction stage, including: Construction and installation cost, equipment cost (if any), other costs and reserve costs. Cost items in the total cost estimates are specified in the Ministry of Construction’s Circular No.09/2000/TT-BXD of July 17, 2000 guiding the elaboration of construction cost estimates and management of construction cost of works under investment projects.

The construction cost estimate of an infrastructure project shall be elaborated on the basis of construction and installation work volume calculated according to the technical design for construction, capital construction unit costs promulgated by the provincial-level People’s Committees and such costs and expenses as: General costs, pre-calculated taxable income and output value added tax (Appendix No.1 to this Circular). Concretely as follows:

1. Labor cost in the unit costs shall be applied under the guidance in the capital construction unit cost index of localities. In cases where is laborers are entitled to wage-based allowances, such allowances shall be additionally calculated into wage expenses in the cost estimates.

When it is necessary to separate the labor cost from the construction and installation cost estimates in order to employ local laborers under a package labor contract, the capital construction cost estimate norms and workday unit cost in the capital construction unit cost index of the localities shall serve as basis.

2. Materials cost: shall apply according to the capital construction unit cost index of localities. For projects executed by communes themselves or with appointed contractors that use assorted construction materials exploited on the spot such as bamboo, sand, stone, gravel, etc., the costs of such construction materials shall be calculated at their actual purchasing prices suitable to the construction materials price platform in such localities, and the construction materials price difference shall be accounted for clearing in the projects cost estimates.

3. Construction machine cost: shall be calculated according to the machine shift cost index promulgated together with the Construction Minister’s Decision No.1260/1998/QD-BXD of November 28, 1998

4. For general cost and pre-calculated taxable income, Appendix No.2 to this Circular shall apply.

Particularly for construction and installation volumes performed by communes themselves (under-taking to perform package volumes), the general cost shall be calculated equal to 40% of the prescribed general cost level. The use of such cost must be is Committees on the basis of actual implementation.

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Part III.

OTHER COST ITEMS

I. STAGE OF INVESTMENT PREPARATIONS

1. For an infrastructure project with a total investment capital level of under VND 1 billion, only the investment report is required. Content of investment reports shall comply with the Ministry of Planning and Investment’s guidance in Circular No.06/1999/TT-BKH of November 24, 1999 and Circular No.07/2000/TT-BKH of July 3, 2000. Projects eligible for investment reports shall not have to be evaluated. Investors shall have to submit investment reports to the authorities competent to decide the investment for examination, consideration and decision.

2. The expense level for making investment reports applicable to all infrastructure projects shall be equal to 0.37% of the total capital invested in the construction of projects already approved by the competent authorities.

II. STAGE OF CONSTRUCTION INVESTMENT EXECUTION

Some other costs and expenses arising in the stage of construction investment execution mentioned below shall be calculated in the projects cost estimates:

1. Expenses for damage compensations and construction site clearance:

The determination of expenses for payment of compensations for damage in land, assets, crops and project construction site clearance (if any) shall comply with the provisions of the Government’s Decree No.22/1998/ND-CP of April 24, 1998 on compensations for damage when the State recovers land for use for purposes of national defense, security, national interest and public interest. The applicable compensation unit prices shall be those promulgated by the presidents of the provincial People’s Committees.

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2. Construction survey costs:

Construction survey costs for geological and hydrological probing drills, earth and rock sampling, and measurement and drawing of maps of construction sites shall be determined according to the cost estimates norms of construction survey promulgated together with the Construction Ministry’s Decision No. 06/2000/QD-BXD of May 22, 2000 and Circular No.07/2000/TT-BXD of July 12, 2000 guiding the elaboration of construction survey unit costs and management of construction survey costs and construction survey cost index promulgated by the provincial-level People’s Committees.

3. Construction project designing cost:

a/ For infrastructure projects under Program 135, due to their small scale and simple techniques, the construction designing shall be made according to the one-step designing process (technical designing -construction).

c/ In cases where a project uses the typical design or reused design, the designing cost shall be calculated according to the level applicable to new designs multiplied by the readjusting coefficient of 0.5.

4. Expense (fee) for evaluation of designs, total cost estimates and cost estimates:

a/ For cases where a provincial agency with the construction management function conducts the evaluation of designs, total cost estimates, cost estimates of projects, the evaluation fee shall be determined according to the fee level prescribed by the Finance Ministry in Decision No.141/1999/QD-BTC of November 16, 1999.

b/ In cases where it is necessary to hire a consultancy organization to conduct the evaluation of designs, total cost estimates and cost estimates of projects, the evaluation expense shall be determined according to the expense level prescribed by the Construction Ministry in Decision No.14/2000/QD-BXD of July 20, 2000, more concretely as follows:

- Design evaluation expense shall be equal to 0.18% of the estimated construction and installation value (without VAT) of projects approved by the competent authorities.

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5. Bidding organization expenses:

For infrastructure projects subject to construction and installation bidding according to the provisions of the Bidding Regulation promulgated together with the Government’s Decree No.88/1999/ND-CP of September 1st, 1999 and Decree No.14/2000/ND-CP of May 5, 2000, the expenses for compiling bid-soliciting dossiers and evaluating construction and installation bids shall be calculated. Such expenses shall be determined equal to 0.35% of the estimated construction and installation value (without VAT) of the projects approved by the competent authorities.

6. Construction supervision expenses:

Expenses for supervision of construction of infrastructure projects are prescribed as follows:

a/ For cases where consultants are hired to supervise the construction of projects, the supervision expenses shall be determined equal to 1.5% of the estimated construction and installation value (without VAT) of the projects approved by the competent authorities.

b/ In cases where district or commune-level project management boards (if any) supervise the construction by themselves, the supervision expense level shall, depending on the specific conditions of projects, be estimated and approved by the investment-deciding authorities, but must not exceed the expense level prescribed at Point a, Clause 6 of this Article.

7. Expenses for project management boards:

- For district-level project management boards, the expense level shall be equal to 2.2% of the estimated construction, installation and equipment value of projects already approved by the competent authorities.

- For commune-level project management boards (if any), the expense level shall be equal to 2% of the estimated construction, installation and equipment value of projects already approved by the competent authorities.

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For infrastructure projects, which are permitted by the cost estimates-approving authorities to erect makeshift tents or camps in service of construction activities, the expenses therefor must be separately estimated and approved by the investment-deciding authorities at the level not exceeding 1% of the estimated construction and installation value (without VAT) of the projects.

9. In the course of executing projects, the projects funding amounts shall not be set aside for use for other purposes.

III. STAGE OF COMPLETION OF PROJECT CONSTRUCTION

1. The settlement of infrastructure projects construction investment capital according to various kinds of mobilized capital sources shall comply with the guidance in the Finance Ministry’s Circular No. 70/2000/TT-BTC of July 17, 2000. Particularly, the expense for evaluation and approval of projects investment capital settlement shall be calculated equal to 0.10% of the estimated construction and installation value (without VAT) of the settled projects.

2. The expenses for pre-acceptance test and hand-over of projects for operation (if any) shall be put in separate cost estimates and accounted into the total cost estimates and/or cost estimates of projects.

Part IV.

ORGANIZATION OF IMPLEMENTATION

This Circular shall apply only to infrastructure projects under Program 135 and the Program for building of commune clusters centers, which have been implemented under the Prime Minister’s decisions.

The elaboration of cost estimates of infrastructure projects under this Circular’s guidance shall apply as from October 1st, 2000.

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In the course of implementation, if the localities covered by Program 135 detect any matter that needs to be supplemented and/or amended, they should promptly report it to the Construction Ministry for study and solution.

MINISTER OF CONSTRUCTION




Nguyen Manh Kiem

APPENDIX 1

THE GENERAL INDEX OF CONSTRUCTION AND INSTALLATION COST ESTIMATES OF CONSTRUCTION PROJECT COMPONENTS

Ordinal
number

Cost items

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...

Result

I

Direct costs

1

Materials cost

m

Σ Qj x Djvl + CLvl

...

...

...

VL

2

Labor cost

m

Σ Qj x Djnc + Fnc

j = 1

NC

3

Construction machine cost

...

...

...

Σ Qj x Djm

j = 1

M

Total direct costs

VL + NC + M

T

II

General costs

...

...

...

C

III

Pre-calculated taxable incomes

(T + C) x Prescribed percentage

TL

Pre-tax construction and installation cost estimates value

(T + C + TL)

gxl

...

...

...

Output value added tax

Gxl x TXL GTGT

VAT

After-tax construction and installation cost estimates value

(T + C + TL) + VAT

Gxl

In which:

Qj: Construction and installation work volume number j;

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P: General cost norms (%);

TL: Pre-calculated taxable incomes;

Gxl: After-tax construction and installation cost estimates value;

CLvl: Difference in materials prices (if any);

TXL Value added tax rate prescribed for construction and installation activities;

VAT: Total output value added tax amount (including input value added tax paid when materials, supplies, fuels, energy... are purchased, and value added tax amount that must be paid by the construction enterprise);

Fnc: Allowances not yet accounted into the unit costs specified in the capital construction unit cost index of localities (if any).

APPENDIX 2

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Calculation unit: %

Ordinal
number

Types of project

General
costs

Pre-calculated
taxable income

1

Construction and installation of civil projects

58.0

5.5

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Construction and installation of industrial projects and small hydroelectric power plants

67.0

5.5

3

Construction and installation of hydroelectric power plants, electricity transmission lines, transformer stations

71.0

6.0

4

Construction of tunnels and pits, installation of machines in tunnels and pits

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6.5

5

Construction of road beds and surfaces

66.0

6.0

6

Construction and installation of traffic bridges and culverts, wharves and ports, and marine projects

64.0

6.0

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...

Construction and installation of irrigation works

64.0

5.5

- Particularly for manual excavation and embankment of irrigation works (except for obligatory local laborers)

51.0

5.0

8

Construction and installation of postal communications projects, railway signaling systems, radio and television broadcasting projects

...

...

...

5.5

9

Construction and installation of petrol and oil tanks, oil and gas pipelines

66.0

6.0

10

Construction of stations and farms of all kinds for forestation, industrial crops cultivation, land reclamation and field building

55.0

5.5

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