Construction Cost Estimation Professional Development Materials

Construction valuation professional training materials provide in-depth and updated knowledge about the field of valuation in construction. With advanced and practical methods, this document is a valuable resource for those who wish to improve their qualifications and develop their careers in the construction industry.

Topic 1: Management of construction investment projects according to current regulations

I. Basic contents of the legal system related to construction investment (construction law, investment law, bidding law, land law)

1. Basic contents of the Construction Law

The Construction Law was passed by the National Assembly of the Socialist Republic of Vietnam at its 4th session, XIth legislature (November 2003). The institutionalization of the Law aims to meet the requirements of uniformly managing construction activities throughout the country, strictly adhering to legal regulations towards the industry’s integration with countries in the region and internationally.

1.1. Scope of regulation, subjects of application, and structure of the Construction Law

1.1.1. Scope of regulation, subjects of application

Construction activities within the scope of regulation of the Construction Law: construction planning, formulation of construction investment projects, construction surveys, construction design, construction execution, construction supervision, management of construction investment projects, selection of contractors in construction activities, and other activities related to construction works). Subjects of application of the Construction Law: Domestic and foreign organizations and individuals participating in construction activities in the territory of Vietnam.

1.1.2. Structure of the Construction Law

The Construction Law, with 9 chapters and 123 articles, includes contents on: General provisions of the Law for construction activities; Requirements, contents, implementation conditions, rights, and obligations of organizations and individuals when participating in construction planning, formulating construction investment projects, surveying, designing construction works, constructing works, supervising construction, selecting contractors, and construction contracts; State management of construction activities; Sanctions for rewards, handling of violations in construction activities, and implementation provisions.

1.2. Construction activities

1.2.1. Basic principles in construction activities

• Compliance with planning, architecture, environmental protection, suitability for natural conditions, cultural, and social characteristics;
• Compliance with construction codes and standards;
• Ensuring quality, progress, and safety of works;
• Ensuring economy, economic efficiency, and synchronization in each work and the entire project.

1.2.2. Construction planning

• Requirements for the content of construction planning; Classification of construction planning includes: Regional construction planning, detailed urban construction planning, and rural residential point construction planning; Role of construction planning; Decentralization of responsibility for formulating and approving construction planning; Capacity conditions of organizations and individuals participating in construction planning according to construction law.
• General requirements for construction planning: Conformity and synchronization with other plans; Rational spatial organization and arrangement; Creation of a comfortable, safe, and sustainable living environment…

1.2.3. Formulation of construction investment projects

• Concept, structure, classification, management of construction investment projects:
  • Basis for formulating construction investment projects; definition of a construction investment project; Structure of a construction investment project, structure of the basic design; Small-scale, simple construction investment projects and religious works (Economic-Technical Report for construction works).
  • Classification of construction investment projects: By scale and nature, including national important projects; projects of groups A, B, C and Economic-Technical Reports for construction works; By investment capital source, including: Projects using state budget capital; projects using credit capital guaranteed by the State, development investment credit capital of the State; Projects using development investment capital of state-owned enterprises; projects using other capital including private capital or using a mixture of many capital sources.
  • State management of projects: General State management of all projects regarding planning, security, social safety and environmental safety, provisions of land law and other relevant laws.
  • Specific State management for projects using state budget capital; for projects using credit capital guaranteed by the State, development investment credit capital of the State, and development investment capital of State-owned enterprises; for projects using a mixture of different capital sources.
• Relationship between construction works and projects; Type, grade of construction works, equipment installed in works, construction execution of works.
  • Construction investment projects and their relationship with construction works; Classification of construction works; Basis for grading construction works; Content of technical infrastructure and social infrastructure systems; System of equipment installed in works:
  • Basic requirements for managing and implementing construction investment projects; Specific regulations for construction works; Items and parts of works.
• Rights and obligations of entities in formulating construction investment projects: Regarding project formulation organization, project formulation capacity; application of construction codes and standards; responsibility for supervising project formulation contracts; Acceptance, appraisal of projects; Requesting and providing information for project formulation, other provisions of law; Authority of the investment decider regarding project appraisal, approval, and adjustment.

1.2.4. Construction surveys

• Concept: Content of construction survey tasks serving construction activities; Requirements for survey tasks, construction survey documents
• Specific requirements for construction surveys: Survey tasks; Scope, content, technical requirements; Survey requirements for large-scale projects, important projects.
• Rights and obligations of entities in construction surveys: Regarding implementation, adjustment of survey tasks; Capacity conditions for conducting survey work; Organization of acceptance of survey results; Use of construction survey information and documents for design work; Sanctions and other relevant regulations.

1.2.5. Design of construction works

• Concept: Regulations on construction design steps for works, basis for determining design steps.
• Requirements for construction work design: Requirements on construction planning, landscape, natural conditions, architecture; Requirements for technology design; Requirements for the content of construction work design; Standards for fire and explosion prevention and fighting, environmental protection, and related standards;
• Basic contents of each design step: Design steps; Content requirements for each construction design step.
• Design appraisal and verification: Content of appraisal by state management agencies regarding basic design appraisal; Content of appraisal of technical design, construction drawing design by the investor.
• Rights and obligations in construction design: Regarding capacity conditions for construction work design activities; Use of information, documents, standards, construction codes; implementation of design tasks; Responsibility for design quality; author supervision during construction; Organization of appraisal, approval; Organization of acceptance of design documents; Archiving design documents and other obligations as prescribed by law.
• Prohibited acts in construction design: When renovating, expanding, making major repairs, restoring, embellishing works; Regarding design activity capacity; Regarding leasing or borrowing the name of a design organization…

1.2.6. Construction execution

• Conditions for commencing construction of works: Requirements for construction ground; construction permit; Construction drawing design of the item, work; Construction contract; capital source; Measures to ensure safety and environmental hygiene during construction;
• Site clearance for construction: Requirements for formulating site clearance plans; Scope of construction site clearance; Time limit for site clearance; Compensation for assets for site clearance
• Construction permit: Purpose of issuing construction permits; Regulations on cases not requiring a construction permit; Authority to issue construction permits.
• Requirements for the construction site.
• Rights and obligations of entities in construction execution: Regarding construction activity capacity; Negotiation, signing, supervision of construction contracts; Management of work quality, safety, and environmental hygiene; Organization of acceptance, payment, settlement of works; Archiving work documents; sanctions in construction execution and other provisions of law.
• Prohibited acts in construction execution: Regulations on prohibited construction areas; Work protection corridors; Construction execution capacity, construction practice capacity; Construction permits; Construction processes and regulations; Quality of construction materials or components, technological equipment; Quality management system; construction supervision; Acceptance, payment, settlement of works.

1.2.7. Construction supervision

• Role of construction supervision; Requirements for construction supervision capacity.
• Requirements for construction supervision: Regarding sequence, time, quality.
• Rights and obligations of entities: capacity conditions for construction supervision; Supervision of contract implementation; Handling proposals from the supervisor; archiving supervision results; Acceptance and provisions of law…
• In construction supervision: Capacity conditions; Incorrect acceptance of quantity, quality; Documents, information, data during supervision.

1.2.8. Management of construction investment projects

Content of construction investment project management; Forms of construction investment project management: Decision-making authority; Forms of construction investment project management; Prohibited acts.

1.3. Content of State management of construction

Directing the implementation of strategies and plans for developing construction activities; Promulgating and organizing the implementation of legal documents on construction; Construction codes, standards; Quality, archiving of construction work documents; Issuing, revoking licenses in construction activities; Inspection, resolution of complaints, denunciations, and handling of violations in construction activities; Scientific and technological research in construction activities; Training human resources for construction activities; International cooperation.

2. Basic contents of the Land Law related to construction activities

2.1. Scope of regulation and subjects of application of the Law

2.2. Regarding land use planning and plans

• Role and significance of land use planning and land use plans.
• Decentralization in organizing the formulation of land use planning and plans.

2.3. Regarding land allocation, land lease, and change of land use purpose to implement construction investment projects

2.3.1. Concepts

• Land allocation for construction investment; land lease; change of land use purpose.

2.3.2. Basis for land allocation, land lease, and permission for change of land use purpose

• Bases for deciding land allocation, land lease, and permission for change of land use purpose.
• Current outstanding issues regarding the implementation of land use in investment projects.

2.3.3. Authority for land allocation, land lease, and permission for change of land use purpose

• People’s Committees of provinces and centrally-run cities; People’s Committees of districts, towns, provincial cities; People’s Committees of communes, wards, townships.

2.4. Land finance and land prices

2.4.1. Land finance

• Land use levy: Definition; Land area subject to land use levy; Land price for calculating land use levy; Land use term; Exemption, reduction of land use levy.
• Land rent: Regulations on land rent; Exemption, reduction of land rent.
• Land use tax.
• Income tax from land use right transfer: Tax calculation basis; Authority of State management agencies; Tax rate for land use right transfer.

2.4.2. Land price: Price of land use rights; Formation of land prices; Management authority over land prices.

2.5. Land recovery; compensation, resettlement related to construction investment projects

2.5.1. Concepts:

• Land recovery; Compensation upon land recovery by the State; Value of land use rights; Support upon land recovery by the State.

2.5.2. Cases of land recovery:

• The State recovers land for use in national defense, security, national interests, public interests; The State recovers land for use in economic development.

2.5.3. Compensation, site clearance, resettlement:

• Role and organization of the Compensation and Site Clearance Council; Rights of the person whose land is recovered; Site clearance costs.

2.6. State management of land

3. Basic contents of the Investment Law related to construction activities

3.1. Scope of regulation and subjects of application of the Law

3.2. Forms of investment:

• Direct investment and indirect investment; investment in the form of BCC contracts, BOT contracts, BTO contracts, BT contracts; Investment in the form of establishing an economic organization with 100% capital from domestic investors or 100% capital from foreign investors; establishing a joint-venture economic organization; Other forms of direct investment.

3.3. Investment procedures when implementing investment projects

3.3.1. Investment registration:

• For domestic investment projects (scope of application, investment registration procedures); For foreign-invested projects (scope of application, investment registration procedures).

3.3.2. Appraisal of investment projects for Investment Certificate issuance:

• Time for carrying out appraisal procedures; Subjects and content of appraisal; Existing issues.

3.3.3. Authority to carry out investment registration and issue Investment Certificates:

• Prime Minister; Provincial-level People’s Committees; Management Boards of industrial parks, export processing zones, high-tech parks, economic zones.

3.4. State management of investment

4. Basic contents of the Bidding Law related to construction activities

4.1. Scope of regulation and subjects of application

• Scope of application: Type of project, scale of State capital use for the project.
• Subjects: Domestic and foreign organizations and individuals participating in bidding activities for the above-mentioned projects.

4.2. General provisions on bidding

4.2.1. Some concepts:

• Bidding package; Bidding package in construction activities; Bidding package price; Bidding plan; Bidding documents; Bid proposal; Procuring entity; Main contractor in construction activities; General contractor for construction; Costs on the same ground.

4.2.2. Principles for evaluating and selecting contractors:

• For construction consulting packages; For construction execution packages; For general construction contractor packages

4.2.3. Costs and fees in bidding:

• Content of costs; how to calculate these costs in the construction work estimate, total investment.

4.3. Entities participating in bidding

4.3.1. Competent person:

• Role and responsibility of the competent person.

4.3.2. Investor:

• Role and responsibility of the investor.

4.3.3. Procuring entity:

• Role and responsibility of the procuring entity.

4.3.4. Contractor:

• Role and responsibility of the contractor.

4.3.5. Appraisal agency, organization:

• Role and responsibility of the appraisal agency, organization.

4.4. Content of state management of bidding

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II. Sequence of formulation, appraisal, approval, and adjustment of construction investment projects

1. For National Important projects, projects of groups A, B, C

1.1. Identifying the construction investor:

• For projects using state budget capital; Projects using credit capital; Projects using other capital; For projects using mixed capital

1.2. Construction investment report (for National Important projects):

• Scope of application; Necessity; Content; Regulations related to the report submitted to the Government for the Construction Investment Report.

1.3. Obtaining planning approval: Group A projects; Group B projects.

1.4. Formulating the construction investment project: Conditions, necessity, other relevant regulations.

1.4.1. Content of the project’s explanatory report includes:

• Necessity and investment objectives; scale and construction area of the work; Implementation solutions; Environmental impact assessment, fire and explosion prevention and fighting solutions, and requirements for security and national defense; Total investment of the project; Economic and social efficiency of the project.

1.4.2. Content of the project’s basic design part: Content of the basic design explanatory report; Content and requirements of the basic design drawings.

1.5. Appraisal of the construction investment project

1.5.1. Authority and content of project appraisal

• Authority: National Important projects; Projects using State budget capital; Projects using other capital sources.
• Content of project appraisal: Appraisal of feasibility; Appraisal of project efficiency and appraisal of total investment.

1.5.2. Authority and content of basic design appraisal

• Authority for basic design appraisal: Authority for basic design appraisal for group A projects; Authority for basic design appraisal for group B, C projects.
• Content of basic design appraisal: Regarding architectural planning; regarding codes, standards; regarding the capacity conditions of the consulting organization.

1.6. Approval of the construction investment project

1.6.1. Dossier for approval

1.6.2. Investment decision-making authority

• The Prime Minister decides on investment for projects approved in principle and permitted for investment by the National Assembly; For other projects using state budget capital of groups A, B, C; authorization or decentralization of investment decisions for group B, C projects; projects under local budgets; projects using other capital, mixed capital.

2. Formulation, appraisal of the Economic-Technical Report for construction works

2.1. Scope of application for works requiring an Economic-Technical Report

2.2. Content of the Economic-Technical Report for construction works:

• Explanatory report of the Economic-Technical Report; Construction drawing design documents; Construction work execution estimate…

2.3. Appraisal, approval of the Economic-Technical Report for construction works: Authority of the Investment Decider; Investor; Content of appraisal of the Economic-Technical Report.

3. Adjustment of construction investment projects

3.1. Cases for adjustment

3.2. Authority for adjustment and organization of adjustment

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III. Organization of construction investment project management

1. Forms of project management

1.1. Case where the investor directly manages the project

1.1.1. Establishment of a Project Management Unit (PMU):

• Decision to establish the PMU; Scope of work of the PMU and requirements in project management; Tasks and powers of the PMU; Organizational structure of the PMU.
• Source of project management funds; Responsibilities of the investor and the PMU.

1.1.2. Not establishing a PMU: Scope of application; Organizational structure.

1.2. Case of hiring a project management consultant: Capacity conditions of the organization; Selection and signing of project management consultancy contracts; Responsibilities of the investor, project management consultant.

2. Requirements and contents of project management

2.1. Quantity management, cost management:

• Management principles; Management content; Relationship between entities in management; Responsibilities of entities in handling variations; State control and supervision.

2.2. Construction work quality management:

• Management principles; Management content; Relationship between entities in management; Responsibilities of entities in handling issues; State control and supervision.

2.3. Construction execution progress management:

• Management principles; Management content; Relationship between entities in management; Responsibilities of entities in handling variations.

2.4. Management of occupational safety on the construction site:

• Management principles; Management content; Relationship between entities in management; Responsibilities of entities in handling issues; State control and supervision

2.5. Management of the construction environment:

• Management principles; Management content; Relationship between entities in management; Responsibilities of entities in handling issues; State control and supervision.

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IV. Management of construction investment costs

1. Principles of construction investment cost management

Ensuring the objectives and efficiency of the construction investment project; the reasonableness of costs; Role of the State and the investor in cost management.

2. Management of total investment

Formulation of total investment; adjustment of total investment (cases for adjustment, authority); requirements for project management costs.

3. Management of work estimates

Requirements for estimate verification and approval; Adjustment of work estimates.

4. Management of construction norms

State management of norms; Responsibilities of the investor and contractor when applying norms.

5. Management of construction work prices

Basis for determining construction prices; Requirements in construction price management.

6. Management of construction price indices

Concept and significance of construction price indices; Management of price indices.

7. Management of construction contracts

Requirements and principles for construction contracts; Management of construction contracts.

8. Management of payment and settlement of investment capital

Responsibilities of the capital disbursement, lending agency, investor; Requirements for settlement of completed work items, works, projects.

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V. Capacity conditions of entities participating in the construction investment process

1. General regulations on capacity conditions for organizations and individuals participating in construction activities

General requirements for organizations and individuals participating in construction activities; Requirements for certificates for certain individual titles; Principles for determining the construction activity capacity of organizations; Requirements for foreign organizations and individuals operating in construction in Vietnam; Construction activity capacity of a consulting organization; Determining construction activity capacity when participating in bidding.

2. Construction practice capacity conditions for individuals participating in construction activities

2.1. Conditions for granting practice certificates

2.1.1. Conditions for granting architect practice certificates

2.1.2. Conditions for granting engineer practice certificates

2.1.3. Conditions for granting construction supervision practice certificates

2.1.4. Conditions for granting construction valuation engineer practice certificates

2.2. Capacity conditions and scope of activities for individuals in construction activities

• Project formulation manager: Capacity ranking criteria by Class I, Class II; scope of activity by each class; Application for small-scale projects.
• Project management consultant director: Capacity ranking criteria by Class 1, Class 2; Scope of activity by each class; Application for small-scale projects.
• Construction survey manager: Capacity ranking criteria by Class 1, Class 2; Scope of activity by each class.
• Construction work design manager: Capacity ranking criteria by Class 1, Class 2; Scope of activity by each class; Application for simple, small-scale works.
• Lead designer of construction works: Capacity ranking criteria by Class 1, Class 2; scope of activity by each class; Application for simple, small-scale works.
• Site manager: Capacity ranking criteria by Class 1, Class 2; Scope of activity by each class; Application for simple, small-scale works.
• Individuals practicing independently in design, survey, construction supervision: Project management consultancy; Practice conditions; Scope of activity.

3. Capacity conditions and scope of activities for organizations participating in construction activities

3.1. Capacity conditions for project formulation:

• Ranking; Criteria for ranking; Scope of activity for each rank; Cases not yet meeting ranking conditions.

3.2. Conditions for project management consulting organizations:

• Ranking; Criteria for ranking; Scope of activity for each rank; Cases not yet meeting ranking conditions.

3.3. Conditions for construction survey organizations:

• Ranking; Criteria for ranking; Scope of activity for each rank; Cases not yet meeting ranking conditions.

3.4. Conditions for construction design organizations:

• Ranking; Criteria for ranking; Scope of activity for each rank; Cases not yet meeting ranking conditions.

3.5. Conditions for construction execution organizations:

• Criteria for ranking; Scope of activity for each rank; Cases not yet meeting ranking conditions.

3.6. Conditions for construction supervision organizations:

• Criteria for ranking; Scope of activity for each rank; Cases not yet meeting ranking conditions.

3.7. Conditions for construction investment cost management consulting organizations:

• Ranking; Criteria for ranking; Scope of activity for each rank of construction investment cost management consulting organization; Cases not yet meeting ranking conditions.

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Topic 2: Overview of construction valuation

I. Some general theories on construction prices

1. Concept of construction work price

The construction work price of a construction investment project is the total necessary cost to newly build, renovate, expand, or re-equip the work. The construction work price is specifically expressed by different names and is gradually determined more accurately through each stage of the construction investment process.

2. Characteristics of the construction market, construction products, and construction technology affecting construction prices

2.1. Characteristics of the construction market

• One buyer, many sellers.
• The purchase and sale of products usually take place at the production site.
• The State is the largest customer.
• Subject to the influence of economic laws:
  • Law of value.
  • Law of currency circulation.
  • Law of supply and demand.
  • Law of competition.
• …

2.2. Characteristics of construction products

• Products are unique and individual.
• Composed of many types of raw materials and construction materials.
• Large consumption of human and material resources.
• Many entities participate in the process of forming the construction product.
• The product formation time is often long.
• The product is formed mainly on-site.
• The product has a large value.
• …

2.3. Characteristics of construction technology

• Use of many different technologies in the production process.
• Construction technology always tends to innovate continuously.
• The use of construction technology requires highly skilled labor.
• …

3. Role of the investor, consulting organization, and construction contractor in construction valuation

During the construction investment process, the participating entities have different roles regarding the construction price:

3.1. Role of the investor

3.2. Role of the consulting organization

3.3. Role of the construction contractor

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II. Basic content of Construction Price and key data forming the construction work price

1. Basic content of construction price

• At each stage of the project’s construction investment process, the construction price appears in different components and names depending on its function.
• In the investment preparation stage: The construction work price at this stage is expressed as the total investment. Total investment includes: construction cost; equipment cost; compensation, site clearance, and resettlement cost; project management cost; construction investment consulting cost; other costs and contingency costs.
• Total investment is determined based on the capital investment rate indicator, data on similar construction work prices, etc. The method for determining total investment is presented in detail in Topic 3 of this document.
• In the project implementation stage:
  • By design step: The construction price based on the design documents with design steps appropriate to the grade and type of work is the work estimate, work item estimate. The work estimate includes construction cost, equipment cost, project management cost, construction investment consulting cost, other costs, and contingency costs of the work.
  • The content and method for determining the construction work estimate are presented in Topic 6 of this document.
  • In the contractor selection step, types of prices include:
    • Bidding package price;
  • Bid price;
  • Proposed winning bid price;
  • Winning bid price;
  • Contract price.
• The content and method for determining the above construction prices are presented in Topic 7 of this document.
• In the project completion stage: When the project is completed, the work is handed over for operation and use, and construction is finished, the construction price is expressed as:
  • Payment price, contract settlement price
  • Payment, settlement of investment capital.
• The content and method for determining the above construction prices are presented in Topics 8, 9 of this document.

2. Key data forming the construction work price

Depending on the process of forming the construction price as mentioned above, necessary data is required to determine this construction price. The data for forming the construction price will be presented in detail in Topics 3, 4, 5, 6, 7, 8, 9 of this document.

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III. Content of construction valuation operations

Construction valuation includes the following main operations:

• Formulating, verifying the total investment of the construction investment project;
• Evaluating the efficiency of the construction investment project;
• Determining construction norms and unit prices for the work;
• Quantity takeoff of the work;
• Formulating, verifying the work estimate;
• Selecting contractors in construction activities;
• Determining bidding package prices, contract prices;
• Preparing contract payment and settlement documents;
• Payment, settlement of investment capital of the construction investment project;
• Other tasks related to construction valuation.

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Topic 3: Method for determining total investment and evaluating the investment efficiency of construction investment projects

I. Method for determining the project’s total investment

1. Some general issues about total investment

1.1. Concept and role of total investment

• The total investment of a construction investment project (TI) is an important comprehensive economic-technical indicator. The concept and role of Total Investment have been changed and gradually perfected in the State’s legal documents.
• Therefore, it is necessary to state the concepts and roles of this indicator through legal documents such as: Decree No. 52/1999/NĐ-CP; Decree No. 16/2005/NĐ-CP; and Decree No. 99/2007/NĐ-CP on TI of the Government on management of construction investment costs.
• According to Decree No. 99/2007/NĐ-CP, TI is understood as “the project’s estimated cost and includes construction cost, equipment cost, compensation, site clearance, and resettlement cost; project management cost, construction investment consulting cost; other costs and contingency costs.”

1.2. Content and structure of cost components of total investment: (Including project preparation costs).

1.3. Principles for determining total investment

1.4. Requirements of the calculation work

2. Some methods for determining total investment

In practice, there are many different methods for determining the TI of a construction investment project. The requirement of this lecture is to present 4 basic methods for determining the TI of a construction investment project as stipulated in Decree No. 99/2007 of the Government and Circular No. 05/2007 of the Ministry of Construction, which are:

2.1. Method for determining TI according to the basic design of the investment project

a) Scope and conditions of application; Data source basis; calculation bases; Calculation method and steps; and adjustments in calculation…

b) In the method of determining TI from the project’s basic design, the following main calculation steps should be mentioned:

• Step 1: Determine the project’s construction cost.
• Step 2: Determine the project’s equipment cost.
• Step 3: Determine the project’s compensation, site clearance, and resettlement costs. These costs are determined based on the volume to be compensated, resettled and the State’s current regulations on compensation and resettlement prices in the locality where the work is built, approved or issued by competent authorities.
• Step 4: Determine project management costs, construction investment consulting costs, and other project costs.
• Step 5: Determine the project’s contingency cost.

2.2. Method for determining TI according to the project’s capacity or operational output indicator

• Scope and conditions of application; Data source basis; Calculation method and steps and adjustments in calculation, …

2.3. Method for determining TI according to data from similar construction works already executed

• Scope and conditions of application; Data source basis; Calculation method and steps and adjustments in calculation, …

2.4. Mixed method for determining total investment

• Scope and conditions of application; Data source basis; Calculation method and steps and adjustments in calculation, …
• Depending on the specific conditions and requirements of the project and the available data source, the project formulator can flexibly apply the above methods to determine the TI indicator of the construction investment project.

3. Analysis of the applicability of the methods

The decision to apply which method to determine the TI of a construction investment project depends on many objective and subjective factors of the project formulator, for example, the experience of the calculator, the reliability and accuracy of the collected data? Is the data aggregated or detailed?, … Therefore, it is necessary to analyze the applicability of each method, the advantages and disadvantages when applying these methods, and illustrative examples of the accuracy of each method.

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II. Method for determining project investment efficiency

1. Concept of investment activity and project investment efficiency

1.1. Concept of investment activity

Investment activity is the act of committing capital with the aim of generating profit in the future. Regardless of the form of implementation, source of capital… all activities with the above characteristics are considered investment activities.

1.2. Basic characteristics of investment activity

• Activity of committing capital;
• Long-term activity;
• Activity that always requires consideration between immediate benefits and future benefits;
• Activity heavily fraught with risk,…

1.3. Efficiency of an investment project

Concept: The efficiency of an investment project (IP) is the entirety of the project’s set objectives, characterized by qualitative indicators (reflected in the types of efficiency achieved) and by quantitative indicators (reflecting the relationship between the project’s expended costs and the results achieved according to the project’s objectives).

1.4. Analysis and evaluation of project efficiency

• Evaluate project efficiency in all aspects: financial, economic, social.
• The general sequence for performing project efficiency analysis and evaluation includes: Determining the necessary parameters for calculating efficiency evaluation indicators as required by the methodology; Calculating the indicators using appropriate methods; and Analyzing and evaluating efficiency based on the efficiency measurement indicators.
• The economic-financial and social indicators of an IP are divided into two groups: Economic-financial efficiency indicators and Economic-social efficiency indicators.
• Efficiency evaluation needs risk analysis to assess the feasible conditions and certainty of the project. The general content of this step is as follows:
• Identify important factors affecting the project’s feasibility;
• Calculate risk assessment indicators;
• Analyze risk.

2. Determining the factors serving as a basis for project economic-financial analysis and calculation

2.1. Total investment

2.2. Investment planning

• Concept: An investment plan is a list of necessary cost items for implementing the project from its start until the project is completed and operational. Or, an investment plan is a capital commitment plan over the project’s timeline.
• Bases, requirements, and principles for investment planning.
• Method for investment planning

2.3. Operational planning

• Concept: The project’s operational plan shows the projected annual mobilization of capacity/service capability of the project and the plan for production, exploitation, service provision, specifying the factors of output, quantity, type of products, and services at each operational time point.
• Requirements and principles for operational planning.
• Identify and analyze factors related to determining benefits and costs during project operation and the organizational structure for project operation management, clearly showing the functional parts of each department and individual in the project operation management process.

2.4. Depreciation plan and handling of recoveries

• Plan for depreciation appropriation and handling of recoveries, asset liquidation of the project. Regulations on depreciation calculation for projects using different capital sources. Methods for calculating depreciation for economic efficiency analysis options…

2.5. Working capital

• Concept, content, structure, and method for determining working capital (initial working capital in TI, annual working capital during project operation,..).

2.6. Debt repayment plan

• Content, role of formulating a Debt Repayment Plan,
• Bases and methods for formulating the project’s debt repayment plan,
• Analysis of how different debt repayment plans affect project efficiency.

3. Determining project economic-financial efficiency evaluation indicators

3.1. Financial statements in project efficiency analysis and evaluation

Some basic concepts: The Financial Statement, Revenues (cash inflows); expenditures (cash outflows); Balancing revenues and expenditures (net cash flow,..; provide examples of preparing the project’s Financial Statement.

3.2. Determining investment project economic-financial indicators

There are many economic-financial indicators used in analyzing and evaluating project investment efficiency. Some basic economic-financial indicators used in investment efficiency analysis and evaluation that need to be mentioned are:

• Net Present Value (NPV)
• Benefit-Cost Ratio (R)
• Internal Rate of Return (IRR)
• Payback Period (Tth)
• Debt Service Coverage Ratio (K)
• Breakeven Point

(requires stating the nature, content, calculation formula, and calculation bases of these economic-financial indicators, the advantages and disadvantages when using the indicators in analyzing and selecting multiple investment options for the project)

4. Analysis and evaluation of the investment project’s economic-social indicators

5. Comparison of results and selection of options

Principles for selecting, comparing the calculation results of economic-financial indicators when choosing a reasonable and optimal investment option with different requirements and selection solutions.

Illustrative examples for some cases of comparing and selecting different investment options.

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III. Method for analyzing and evaluating project risk and efficiency

Risk analysis when evaluating the economic-financial efficiency of construction investment projects at the project formulation stage to make investment decisions is an overall process conducted based on general theory and project characteristics, including the following contents:

• Content of project formulation and the project’s financial efficiency.
• Identification, classification of risks affecting the project’s financial efficiency.
• Measurement, assessment of the impact of risks on the project’s financial efficiency.
• Analysis of safety measures and prevention of the project’s financial risks.

1. Some general theories on risk analysis

1.1. Concept of risk

Risk is an objective phenomenon, existing in all economic, social, and natural activities. Risk occurs in the process of carrying out activities when there is a random impact from events in the social environment or from human behavior. Risk arises when a factor impacts a specific activity, changing or causing loss and deviation from the originally intended results of that activity.

1.2. Risk identification and classification

• Risk identification includes determining which types of risk affect the intended results of the action or event under consideration beyond an acceptable level, while also describing the nature of each risk.
• Risk classification:
  • Classifying project risks by scope of impact;
  • Classifying risks by project implementation process;
  • Classifying risks by interactive environment;

1.3. Risk measurement and risk mitigation measures

• Risk measurement (Qualitative methods and quantitative methods)
• Risk mitigation measures (Group of proactive measures and Group of measures to reduce negative consequences caused by risk).

2. Some methods for project risk analysis and evaluation

2.1. Sensitivity analysis method

2.2. Scenario analysis method

2.3. Simulation method

Each method needs to state the content and calculation formula, calculation method and data, data, calculation basis, applicability, advantages and disadvantages when applying these methods, and illustrative calculation examples,.. With the risk analysis and evaluation methods mentioned above, calculation and analysis methods can be applied according to some quantitative indicators (Method of determining mathematical expectation indicators (table form + tree form); Method of applying simulation analysis theory).

• Method of determining mathematical expectation indicators in table form
• Method of determining expectation indicators in tree form
• Method of applying simulation analysis theory: to implement this method, it is necessary to proceed as follows:
  • Establish the project’s financial efficiency calculation function according to input variables such as: Investment cost, product selling price, production output, annual fixed costs and variable costs, …
  • Select unsafe input variables to build a probability distribution graph of their values (through statistics and forecasting). This step uses probability and statistical mathematics theory.
  • Based on the objective function and the available input variables, determine the result of the function using combination and simulation analysis methods with the support of software programs.
  • Analyze and evaluate the results (determine the necessary values and probabilities from the result value distribution graph) including values: Max, min, expected average, variance, standard deviation, coefficient of variation…

3. Illustrative example of risk analysis and evaluation for the investment efficiency of a construction project

Provide an illustrative example and the application of the @RISK 4.0 software program by Palisade (USA) in analyzing and evaluating the investment efficiency risk of a construction investment project.

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IV. Method for determining capital investment rate

1. Some general issues about capital investment rate

1.1. Concept, significance, and role of capital investment rate

1.2. Economic content of the capital investment rate indicator

1.3. Classification of capital investment rate

• Classification by form of investment.
• Classification by type of work.
• Classification by cost component.

2. Method and steps for calculating the construction work capital investment rate

2.1. Some basic viewpoints: (Viewpoint of targeted investment; viewpoint of efficient investment and viewpoint of progress).

2.2. Bases for calculating capital investment rate

• Selection of work categories.
• Legal bases for determining capital investment rate.
• Documents and records.

2.3. Steps to determine capital investment rate

Phase 1: Phase of determining the list of construction works and collecting data on construction works, including the following tasks:

• Determine the scope and time frame for investigation, survey, and data collection of construction works.
• List the categories of completed and ongoing construction works belonging to the selected work type.
• Investigate, survey, and collect data and documents of the selected construction works according to the survey form.

Phase 2: Data processing and calculation of capital investment rate. The calculation and processing of data to determine the construction work capital investment rate depend on the data source and the type of documents and records collected from the previous phase.

Phase 3: Finalizing the calculation results of the selected work’s capital investment rate. After processing and calculating the capital investment rate indicators for the selected construction work, the finalization of the capital investment rate indicators includes the following steps:

• Step 1: Compile the capital investment rate.
• Step 2: Collect direct feedback from organizations/experts on the values and list of calculated capital investment rates. Gather feedback and revise, supplement the calculated capital investment rate if deemed necessary.
• Step 3: Compare the calculated capital investment rates with the capital investment rates of similar construction works that have been issued or announced; if possible, compare with the capital investment rates of similar works in other countries in the region.
• Step 4: Finalize the construction capital investment rate.

(Requires an illustrative example of calculating the capital investment rate for a type of work)

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V. Method for determining the construction price index

1. Concept, significance, and importance of the price index

The construction price index is a measure that reflects the fluctuation of prices for various materials, labor, and construction equipment over time. This index is very important because it helps managers, contractors, and functional agencies to forecast costs and plan finances for construction projects, ensuring accuracy and efficiency in resource use.

2. Classification of construction price index

The construction price index can be classified according to various criteria, such as by type of work (civil, industrial, infrastructure), by construction phase (basic construction, finishing), or by cost factor (materials, labor, equipment).

3. Principles and methods for developing the construction work price index

The development of the construction price index is based on several fundamental principles such as transparency, representativeness, and accuracy. The commonly used method includes collecting price data from reliable sources, analyzing and adjusting the data to accurately reflect market reality, and updating the index according to market fluctuations.

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VI. Method for determining construction duration

1. Role and significance of construction duration

Determining a reasonable construction duration has great economic significance in enhancing investment efficiency and is an important indicator in the process of analyzing and evaluating the economic-financial efficiency of an investment project.

A reasonably determined construction duration will contribute to ensuring feasibility in planning and implementation progress, and managing investment capital in work construction.

It is necessary to state the concept and content of the construction work duration indicator, the duration for implementing a construction investment project, etc.

2. Methods for determining construction work duration

Currently, there are many ways to determine the construction work duration. Some commonly applied methods include:

• Based on the construction experience of similar works in the region;
• Based on methods for scheduling work execution;
• Method of determining construction duration from the capital and cost indicators of the project/work,..

For each method, it is necessary to state the calculation bases, selection of calculation quantities, calculation formulas, and calculation methods,.. Provide illustrative examples of calculating and determining the construction work duration.

Example: Method of determining construction work duration based on the work execution scheduling method.

The construction work duration is determined by the work execution time plus a time contingency for unforeseen delays caused by various reasons, for example, fire, accidents, equipment failure, machinery breakdown, protests, strikes, delays in supplying construction materials, difficult construction conditions, floods, delays in legal documents, and so on.

T_CW = T_CONST + Δ T_CONT

Method for determining reasonable construction time (applying Murphy’s Law)

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Topic 4: Method for determining construction norms and unit prices

I. Method for establishing construction norms

1. Construction norm system

Construction norms stipulated in Decree 99/ND-CP dated June 13, 2007, of the Government on management of construction investment costs include: economic-technical norms and ratio norms.

1.1. Economic-technical norms

• Economic-technical norms include: Construction cost estimate norms and base norms of consultants, investors, and contractors.
• Construction cost estimate norms are the basis for establishing construction work unit prices.
• Base norms are data for consultants, investors, and contractors to reference or use when establishing construction work cost estimate norms.

1.1.1. Construction cost estimate norms:

• Content: Construction work cost estimate norms express the expenditure level of materials, labor, and construction machinery required to complete one unit of construction work volume, from the preparation stage to the completion of the construction work.
  • Material expenditure level: Is the quantity of main materials, auxiliary materials, components or discrete parts, and rotating materials needed to perform and complete one unit of construction work volume.
  • Labor expenditure level: Is the number of labor days of direct and serving workers by skill level required to perform and complete one unit of construction work volume.
  • Construction machinery expenditure level: Is the number of shifts of main and auxiliary construction machinery and equipment used to complete one unit of construction work volume.
• Construction cost estimate norm system:
  • Construction cost estimate norms announced by the Ministry of Construction: Are cost estimate norms for common, widespread construction, installation, etc., tasks found in various types of construction works.
  • Construction cost estimate norms announced by Ministries (with specialized construction) and Provincial People’s Committees: Are cost estimate norms for tasks not yet included in the norm system announced by the Ministry of Construction.
  • Construction work cost estimate norms: Are the cost estimate norms for all necessary construction, installation, etc., tasks that are consistent with the technical requirements, construction conditions, and execution methods of the work, serving as a basis for establishing construction work unit prices.

1.1.2. Base norms

• Material norms: Is the expenditure level of each type of material to constitute one unit of construction work volume (1m3 of brick masonry, 1m2 of tile laying,…) or 1 type of construction component or structure consistent with technical requirements, construction standards, and State design-execution codes.
• Labor norms: Is the direct labor expenditure (by skill levels or each required skill level) to perform each specific job of construction, installation,… with labor of corresponding professional qualifications working under normal conditions.
• Construction machine productivity norms: Is the quantity of products completed by a machine or construction equipment in a unit of time (machine hour, machine shift …).
• Some other indicators and norms for construction machinery and equipment: Original cost of machinery and equipment, number of shifts, machine hours of operation per year; norm ratios for depreciation, repair, fuel, energy consumption,… calculated for each type, group of machinery, and equipment consistent with technical requirements and construction conditions of the work.

1.2. Ratio norms

• Ratio norms are calculated as a percentage of the cost as prescribed, used to determine the cost of some types of work in construction investment that do not need to be determined by the cost estimation method.

2. Method for establishing construction work cost estimate norms

2.1. Sequence for establishing construction work cost estimate norms

• Prepare a list of construction work cost estimate norms for the work’s construction tasks consistent with the technical requirements, conditions, and execution methods of the work.
• Review and compare the above-mentioned requirements and conditions between the list of the work’s construction cost estimate norms and the existing construction cost estimate norm information system to:
  • Apply existing construction work cost estimate norms.
  • Apply with adjustments the existing construction work cost estimate norms.
  • Establish new cost estimate norms for construction tasks that do not have norms.

2.2. Establishing new cost estimate norms for construction tasks without norms

2.1.1. Steps to proceed:

• Step 1: Clearly establish the technical requirements, construction conditions, and execution methods for each type of task needing a cost estimate norm.
• Step 2: Determine the work components.
• Step 3: Calculate and determine the expenditure of materials, labor, and construction machinery.
• Step 4: Establish the norm items based on the synthesis of expenditures on materials, labor, and construction machinery. Each norm item consists of 2 parts:
  • Work components:
  • Table of expenditure item norms: Construction norm items are grouped by type of task or construction structure and are uniformly coded.

2.1.2. Calculation methods

Calculating the expenditure norms for new construction tasks is performed using one of the following three methods:

• Method 1: According to technical parameters in the technology chain
  • Material expenditure: Determined according to the design and construction conditions, execution methods of the work or based on referencing or using base norms.
  • Labor expenditure: Determined according to the labor organization in the technology chain consistent with the conditions, execution methods of the work or based on referencing or using base norms.
  • Construction machinery expenditure: Determined according to the technical parameters of each machine in the chain or based on referencing or using base norms, taking into account the efficiency due to the coordination of construction machines in the chain.
• Method 2: According to statistical-analytical data
  • Analyze, calculate, and determine the expenditure levels of materials, labor, and construction machinery from aggregated, statistical data as follows:
  • From the quantity of expenditures on materials, labor, and construction machinery to perform a volume of work over one cycle or multiple cycles of completed or ongoing works.
  • From material consumption, labor usage, machine productivity that have been calculated from similar works.
  • From data based on the experience of experts or professional organizations.
• Method 3: According to field surveys
  • Calculate and determine expenditure levels from design documents, field survey data of the work (by time, location, volume performed in one or more cycles…) and cross-reference with base norms.
  • Material expenditure: calculated based on field survey data and cross-checked with design, codes, and technical standards.
  • Labor expenditure: calculated based on the number of workers in each stage of the production chain and the total number of workers in the entire chain, referencing labor usage regulations.
  • Construction machinery expenditure: calculated based on survey data on the productivity of each type of machine and the coordination efficiency between construction machines in the same chain, referencing technical productivity regulations of the machines.

2.3. Applying with adjustments the existing construction work cost estimate norms

When applying existing cost estimate norms, but due to technical requirements, construction conditions, or execution methods of the work differing from the technical requirements, construction conditions, or execution methods stated in the existing cost estimate norms, adjust the relevant material, labor, or construction machinery expenditure components accordingly.

2.3.1. Adjusting material expenditure

For material expenditure that constitutes the product according to the design, base the calculation and adjustment on the work’s design regulations and standards.

For materials related to execution methods, adjust the component factors in the existing norm based on expenditure calculations from the execution method design or according to the experience of experts and professional organizations.

2.3.2. Adjusting labor expenditure

Increase or decrease the labor component in the published norm and calculate the expenditure according to the construction organization conditions or the experience of experts and professional organizations.

2.3.3. Adjusting construction machinery expenditure

• In case of change due to construction conditions, calculate and adjust the norm value up or down according to the construction organization conditions.
• In case of change in construction machine capacity, adjust based on the principle: if capacity increases, decrease the value, and vice versa.

2.4. Applying existing construction work cost estimate norms

For construction, installation,… tasks of the work that have technical requirements, construction conditions, and execution methods similar to the technical requirements, construction conditions, and execution methods of existing cost estimate norms, apply the existing norms.

3. Necessary documents for establishing construction work cost estimate norms When establishing construction work cost estimate norms, the valuer needs the following documents:

• Basic design documents, technical design, construction organization design, execution methods, technical standards of the work…
• Cost estimate norms that have been announced or existed in other works.
• Reference published execution norms (material norms, labor norms, machine productivity norms).

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II. Method for determining construction work unit prices

1. Concept, requirements, and classification of construction work unit prices

1.1. Concept of construction work unit price

1.2. Requirements for construction work unit price:

The construction work unit price must fully reflect the work’s characteristics, construction location, technical requirements, construction conditions, execution methods, policies, and market price levels at the time of construction.

1.3. Classification of construction work unit prices

• By the level of detail or aggregation of the unit price:
  • Detailed construction work unit price
  • Composite construction work unit price.
• By the cost content of the unit price:
  • Incomplete construction work unit price (only includes direct cost components: materials, labor, construction machinery)
  • Complete construction work unit price (includes both direct costs and cost components as in the estimate, such as overhead, pre-tax profit, taxes) .

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2. Method for establishing construction work unit prices

2.1. For detailed construction work unit prices

2.1.1. For incomplete detailed construction work unit prices

a) Content: The detailed construction work unit price includes three cost components:

• Material cost
• Labor cost
• Construction machinery cost

b) Database:

• Construction cost estimate norms for the work, determined as described above.
• Material price delivered to the construction site.
• Labor unit price for the work.
• Construction machine and equipment shift price for the work.

c) Establishment sequence:

• Step 1: Prepare a list of construction and installation tasks for the work with the accompanying technical requirements, conditions, and execution methods.
• Step 2: Gather the construction norms for the work for the construction and installation tasks according to the list above. (These norms have been previously established using the method described in Topic 4 of this document)
• Step 3: Prepare a list and calculate the price of materials delivered to the work site, the work’s labor price, the work’s machine shift price (using the method described in Topic 4 of this document).
• Step 4: Determine the material, labor, and construction machinery cost components of the unit price.
• Step 5: Synthesize the calculation results, finalize the document with application guidelines and accompanying notes.

d) Method for determining cost components:

• Determine material cost: Material cost is determined by the formula:

• • Where: Di : Quantity of the i-th material (i=1 to n) calculated for one unit of construction work volume specified in the construction work norm.
  • GVLi : Price of one unit of the i-th material (i=1 to n) delivered to the site, determined as follows:
    • Determined consistent with the standards, types, and quality of materials used for the construction work based on market prices provided by a capable organization, manufacturer’s quotations, supplier’s price information, or prices that have been applied to other works with similar standards and quality.
    • For materials not available on the market at the construction location, the price of this material equals the ex-works price plus transportation cost to the work and other related costs.
  • KVL : Coefficient for calculating other material costs compared to the total main material cost specified in the construction work norm for the construction task.Determine material price delivered to the site: The cost components forming the material price delivered to the work, include:
  • Ex-works price.
  • Transportation cost (loading, unloading, transport, loss, transshipment (if any)).
  • On-site cost (loading, unloading, storage loss, internal transport within the work site).

 

• Determine labor cost: Labor cost is determined by the formula

• Where:
  • B : Labor expenditure quantity calculated in direct labor days by average skill level for one unit of construction work volume specified in the construction work norm.
  • gNC : Average labor unit price for the work corresponding to the skill level specified in the construction work norm.
  • f : Total stable allowances and extra wages included in the unit price, calculated by the formula: f = f1 + f2 + f3 Where:
    • f1 : Total stable wage allowances.
    • f2 : Some extra wages calculated as 12% of the basic wage and some costs that can be directly paid to the worker calculated as 4% of the basic wage.
    • f3 : Adjustment factor to align with the regional labor market and the work’s specific characteristics.

 

• Determine construction machinery cost: Construction machinery cost is determined by the formula:

• Where:
  • Mi: Machine shift expenditure quantity of the i-th main machine/equipment (i=1 to n) calculated for one unit of construction work volume specified in the construction norm.
  • giMTC: Estimated machine shift price of the i-th main machine/equipment (i=1 to n) according to the work’s machine and construction equipment shift price list or machine rental price (According to Part III of this topic).
  • KiMTCp : Coefficient for calculating other machine costs (if any) compared to the total main machine/equipment cost specified in the construction work norm for the construction task.

2.1.2. Complete detailed construction work unit price

• The complete detailed construction work unit price is determined using the same steps as above for the material, labor, and construction machinery cost components; It also includes cost components such as overhead, pre-tax profit, and taxes as prescribed.

2.2. For composite construction work unit prices

2.2.1. For incomplete composite construction work unit prices

a) Content: The incomplete composite construction work unit price represents the necessary direct cost to complete one unit of a construction structure product, comprising three cost components:

• Material cost
• Labor cost
• Construction machinery cost.

b) Establishment sequence:

• Step 1: Determine the list of construction/installation task groups, structural parts requiring a composite construction unit price for the work, with an appropriate unit of measurement.
• Step 2: Calculate the construction/installation volume for each type of construction/installation task that constitutes the composite construction unit price.
• Step 3: Apply the available material, labor, and construction machinery costs for each construction/installation task from the detailed construction unit price.
• Step 4: Determine the material, labor, and construction machinery costs that constitute the composite construction unit price.
• Step 5: Synthesize the results by each cost item in the composite construction unit price.

c) Method for determining cost components:

2.2.2. For complete composite construction work unit prices

The complete composite construction work unit price is determined using the same steps as the incomplete composite unit price for the material, labor, and construction machinery cost components; in addition, it includes cost components such as overhead, pre-tax profit, and taxes by percentage.

2.2.3. Advantages of using composite construction work unit prices

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III. Method for determining machine shift cost, machine rental price, and construction equipment price for works

1. Some general theories on machine shift cost, machine rental price, and construction equipment price

1.1. Concept of construction machinery and equipment

Construction machinery and equipment are types of machines and equipment driven by engines, running on gasoline, diesel, electricity, or compressed air, used for construction and equipment installation tasks at construction sites. Some types of non-motorized equipment such as trailers, barges, etc., that participate in the aforementioned tasks are also considered construction machinery and equipment.

1.2. Concept and role of machine shift cost, machine rental price, and construction equipment price for works

• The machine and construction equipment shift cost for a work is the estimated necessary cost for the machine and equipment to work for one shift, consistent with the technical requirements and specific construction conditions of the work.
• The machine and construction equipment rental price for a work is the amount the lessee pays (or expects to pay) to the lessor according to a rental method consistent with the time required to rent to complete the work volume.
• The machine shift cost, machine rental price, and construction equipment price for a work are the basis for determining the construction machinery cost in the unit price and cost estimate for the construction work.
• The machine and construction equipment rental price for a work is agreed upon by both parties in the contract based on the principle that the lessor offers a price, and the lessee considers and decides.

2. Method for determining machine and construction equipment shift cost for works

2.1. Determination sequence:

• Prepare a list of machinery and equipment needed for the work.
• Review and compare the list of machinery and equipment needed for the work with the existing machine shift price list to:
  • Apply existing machine shift prices.
  • Develop new machine shift prices for machinery and equipment that do not have shift prices.

2.2. Method for determining new machine shift prices for machinery and equipment without shift prices:

2.2.1. Cost content in the machine and construction equipment shift price for works

The work’s machine shift price includes: depreciation cost; repair cost; fuel, energy cost; machine operator wage cost; and other machine costs.

2.2.2. Method for determining machine and construction equipment shift cost for works

• General formula for determining machine and construction equipment shift cost for works:

C_MS = C_DEP + C_REP + C_FE + C_WAGE + C_OTH (VND/shift)

• In there:
  • C_DEP : Depreciation cost (VND/shift). Depreciation cost included in the machine shift price is determined from the machine’s original cost, recovery value upon liquidation, the machine’s annual depreciation rate norm, and the number of machine shifts worked per year.
  • C_REP : Repair cost (VND/shift). Repair cost included in the machine shift price is determined from the machine’s original cost, recovery value upon liquidation, the machine’s annual repair norm, and the number of machine shifts worked per year.
  • C_FE : Fuel, energy cost (VND/shift). Fuel, energy cost is determined from the fuel, energy consumption norm to power the machine (including auxiliary fuels) and the fuel, energy price consistent with the calculation time and construction area.
  • C_WAGE : Machine operator wage cost (VND/shift). Machine operator wage cost included in the machine shift price is determined from the composition and skill level of the operator (or operator group) according to technical requirements and the wage, extra wages, and wage allowances (including wage support) as prescribed.
  • C_OTH : Other cost (VND/shift). Other cost is determined based on the machine’s original cost, the annual other cost norm, and the number of machine shifts worked per year.
• Determine other indicators and norms for machinery and equipment; original machine cost, number of shifts, machine hours worked, norm ratios for depreciation, repair, fuel, energy… are calculated for each type/group of machinery and equipment consistent with the technical requirements and construction conditions of the work.

3. Method for determining machine and construction equipment rental price for works

3.1. Determination sequence

• Determine the type of work, volume of work, and time required to rent machinery.
• Prepare a list of machine types to be rented according to the work’s specific conditions.
• Select the rental form, rental unit, and the number of units needed for each machine type consistent with the type, volume of work, and required machine rental time.
• Clarify the content of cost items in the rental price for the type of machine to be rented.
• Determine a machine rental price consistent with the machine rental form.

3.2. Content and method for determining machine and construction equipment rental price for works

3.2.1. Cost content in the machine and construction equipment rental price for works

The cost content in the machine and construction equipment rental price for works is determined by agreement in the contract between the lessee and the lessor. In the general case, the work’s machine rental price includes the following cost items:

• Depreciation cost; repair cost; fuel, energy cost; machine operator wage; other machine costs.
• Overhead cost: is the cost to maintain the management and production operation activities of the machine lessor.
• Pre-tax profit: is the profit (before tax) of the machine lessor included in the rental price.
• Tax: is the value-added tax (VAT) included in the rental price.
• Machine transport cost: are the costs for transporting the machine to and from the site, installation, dismantling, test run (if any);

3.2.2. Method for determining machine and construction equipment rental price for works

• Depending on the machine rental form, the machine and construction equipment rental price for a work may include all or some of the cost items included in the rental price.
• Cost items such as depreciation cost; repair cost; fuel, energy cost; machine operator wage; other machine costs can be determined based on the method for determining the work’s machine shift cost mentioned in section 2 above. For cost items such as overhead, pre-tax profit, tax, and machine transport cost, they are determined by agreement between the lessee and the lessor.
• When using the machine rental price to calculate the unit price or cost estimate for construction, it only includes the cost items: depreciation cost; repair cost; fuel, energy cost; machine operator wage; other machine costs.

4. Illustrative examples of calculating machine shift cost and work machine rental price

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IV. Method for determining construction investment consulting costs

1. Some general issues related to construction investment consulting costs

1.1. Concept of construction investment consulting activities

1.2. Classification of consulting activities:

1.2.1. According to international practice: Project preparation phase; project implementation phase; project completion phase; other related consulting activities.

1.2.2. According to current regulations in Vietnam:

• According to the Bidding Law: Project preparation services; project implementation consulting services; other consulting services.
• According to the Construction Law: Project preparation phase; project implementation phase; project completion phase; other related consulting activities.

1.3. Content of construction investment consulting costs:

• Direct costs.
• Indirect costs (also called management costs).
• Other costs.
• Professional liability insurance.
• Pre-tax profit.
• Value-added tax.

1.4. Current regulations related to consulting cost management:

• According to the provisions of Decree No. 99/2007/NĐ-CP dated June 13, 2007, of the Government on management of construction investment costs, Circular No. 05/2007/TT-BXD dated July 25, 2007, of the Ministry of Construction guiding the formulation and management of construction investment costs.
• According to the provisions of Decision No. 131/2007/QĐ-TTg dated August 9, 2007, of the Prime Minister on the promulgation of the Regulation on hiring foreign consultants in construction activities in Vietnam, Circular No. 09/2007/TT-BXD dated November 2, 2007, of the Ministry of Construction guiding the determination and management of costs for hiring foreign consultants in construction activities in Vietnam; Decision No. 61/2006/QĐ-BTC dated November 2, 2006, of the Minister of Finance promulgating some expenditure norms applicable to projects/programs using Official Development Assistance (ODA) capital.
• According to the guidance in Document No. 1751/BXD-VP dated August 14, 2007, of the Ministry of Construction announcing the Norms for project management costs and construction investment consulting.
• According to the provisions of some other relevant documents.

2. Method for determining consulting costs

2.1. Determination based on published consulting cost norms (percentage %):

2.1.1. Determination principles:

• Use the consulting cost norms announced by the Ministry of Construction to determine the costs for these types of consulting work.
• Use the interpolation method to determine the consulting cost norm or the extrapolation method if the scale to be calculated falls outside the scale range in the published consulting cost norm table.

2.1.2. Determination method:

• General formula for determining consulting costs.
• Specific determination method:
  • Cost of project formulation, economic-technical report formulation.
  • Design cost.
  • Cost of design verification, estimate verification.
  • Cost of preparing bidding documents and evaluating bid proposals for construction execution.
  • Cost of preparing bidding documents and evaluating bid proposals for material and equipment supply.
  • Cost of construction supervision.
  • Cost of equipment installation supervision.

2.1.3. Method of interpolation and extrapolation from published consulting cost norms:

• Interpolation of consulting cost norms.
• Extrapolation of consulting cost norms:
  • Method 1: Extrapolation by formula.
  • Method 2: Graphing combined with expert experience.

2.2. Determination by cost estimate:

2.2.1. Determination principles:

• Cost for consulting work that does not have published cost norms.
• Cases where applying published cost norms is not suitable for the project’s consulting work requirements.
• The determined cost estimate must be consistent with the scope, content of work, implementation time, and completed consulting product.

2.2.2. Method for determining consulting cost estimate:

• Consulting cost estimate formula.
• Method for determining cost components in the formula.

3. Using the above methods to determine consulting costs in total investment and work estimates

3.1. Determining consulting costs in the project’s total investment:

3.1.1. Content of consulting costs in the total investment.

3.1.2. Determination method:

• Method 1: Determine based on published cost norms (for consulting work with published cost norms) combined with cost estimation (for consulting work without published cost norms).
• Method 2: Estimate based on the consulting costs of similar projects that have been implemented.

3.1.3. Determining the cost of hiring foreign consultants in the total investment.

3.2. Determining consulting costs in the work estimate:

3.2.1. Content of consulting costs in the work estimate.

3.3.2 Determination method:

• For consulting work with published cost norms: determine as a percentage (%) of the construction cost or equipment cost in the work estimate.
• For consulting work without published cost norms: estimate based on cost data from consulting work of similar projects that have been implemented.

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Topic 5: Method for quantity takeoff and cost control

I. Method for quantity takeoff

1. Concept of construction quantity takeoff and the role of quantity takeoff in construction valuation.

1.1. Concept:

According to the training materials on the Topic of Quantity Takeoff for Construction Works compiled by Davis Langdon & Seah (Singapore), the concept of Quantity Takeoff is defined as follows: “Quantity takeoff is the process of taking off dimensions from drawings and entering them onto dimension sheets according to a list of works.

These figures are then processed to produce a Bill of Quantities according to regulations.” To provide the most complete expression of construction quantity takeoff consistent with current Vietnamese regulations on design and cost management, the following concept can be considered: Construction work quantity takeoff is the determination of the quantity of the work or work item according to the specific construction work volume, performed by measuring, counting, calculating, and checking based on the dimensions and quantities specified in the design drawings (basic design, technical design, construction drawing design) and other quantities based on the project’s requirements, technical specifications of the design, and Vietnamese construction standards and codes.

1.2. Role of quantity takeoff in construction valuation:

Quantity takeoff is used as follows:

• Construction quantity takeoff according to basic design drawings to determine the total construction investment.
• Construction quantity takeoff according to technical design drawings, construction drawing design to: determine the estimate; prepare the Bill of Quantities in the bidding documents; determine the package price (investor), bid price (contractor); determine the contract price in the case of direct appointment of contractor; determine the payment price in the case of direct appointment of contractor and application of a lump-sum contract method.

2. Method for construction work quantity takeoff.

2.1. Principles of construction work quantity takeoff

• Construction work quantities must be measured, counted, and calculated in a sequence consistent with the technological process and construction execution sequence. The takeoff quantity needs to reflect the nature, structure of the work, main materials used, and appropriate execution method to ensure sufficient conditions for determining construction costs.
• Depending on the characteristics and nature of each type of construction work, the takeoff construction quantity can be divided by work parts (such as underground parts (level 00 and below), above-ground parts (level 00 and above), finishing parts, and other construction parts) or by work items. The takeoff construction quantity of the work part or work item is divided into construction work and installation work.
• Explanations, notes, or instructions related to the takeoff process must be stated clearly, concisely, understandably, and in accordance with codes, consistent with the construction work design documents. When calculating tasks that require descriptions, there must be specific descriptions such as arch curvature, nature of materials (wood, concrete, metal…), construction conditions (inside, outside, on land, underwater…).
• Takeoff dimensions are recorded in the order of length, width, height (or depth); if not in this order, it must be specifically explained.
• Symbols used in the calculation sheets and quantity takeoff for works and work items must be consistent with the symbols shown in the design drawings. Quantities taken from design statistics must clearly state that they are taken from design statistics and specify the drawing number of that statistic.
• Unit of measurement: Depending on management requirements and as shown in the design, each construction quantity will be determined according to an appropriate unit of measurement. The unit of measurement for volume is m3; for area is m2; for length is m; for quantity is piece, set, unit…; for weight is ton, kg…
• In case of using units of measurement different from common units (Inch, Foot, Square foot…), additional explanation must be provided.

2.2. Sequence for implementing construction work quantity takeoff.

• Study, check, and firmly grasp the information in the design drawings and accompanying instructional documents. If necessary, request the designer to clarify issues related to the construction work quantity takeoff.
• Prepare a Calculation and Quantity Takeoff Sheet for the work or work item. This calculation sheet must be consistent with the design drawings, the construction execution sequence, fully reflect the construction work quantity, and clearly indicate the location of the work parts and construction tasks belonging to the work. The Calculation and Quantity Takeoff Sheet for the work or work item should be prepared in the order from outside to inside, from bottom to top according to the construction sequence (underground foundations, frame, upper floors, finishing, installation).
• Perform the construction work quantity takeoff according to the Calculation and Quantity Takeoff Sheet for the work or work item.
• Summarize the construction quantities that have been taken off into the Construction Work Quantity Sheet after the takeoff quantities have been processed according to the principle of rounding values.

2.3. Some specific regulations for construction work quantity takeoff.

Depending on the requirements and instructions from the design, the work, work part, or work item may include some of the construction and installation task groups listed below. When taking off these construction and installation tasks, attention should be paid to the following specific regulations:

• Excavation and backfill work.
• Masonry work.
• Concrete work.
• Formwork.
• Reinforcement work.
• Piling work.
• Drilling work.
• Roadwork.
• Roadwork. (Duplicate in original)
• Finishing work.
• Installation of building technical systems.
• Installation of work equipment.

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II. Cost control according to construction investment phases

1. Concept and role of construction investment cost control

1.1. Concept:

The general concept of construction investment cost control (hereinafter referred to as cost control) is: people, through cost control methods, supervise the formation of costs, expenditure of costs throughout the construction investment process, and propose necessary solutions to ensure the construction investment cost stays within the approved budget (by ensuring this budget, the work achieves the intended efficiency objectives).

Cost control is a continuous process by the investor to perform management actions to ensure the specific objective that the project’s investment cost stays within the approved total investment limit.

1.2. Role:

• Poor management and control of construction investment costs.
• Pressures from the globalization process of the world economy and the trend of integration.

2. Purpose and requirements of cost control

• Ensure true value for the investor’s money spent, consistent with the purpose of the construction investment, balancing between quality and the investment budget.
• Ensure that costs are allocated to the appropriate parts in line with the requirements of the investor and the designer. Keep costs within the investor’s budget.

3. Necessary conditions for implementing the cost control process

• Have a cost control method (approach) suitable for the characteristics and content of costs for each phase and task of the construction investment process.
• Have appropriate support tools for implementing construction investment cost control.
• Have individuals and consulting organizations with sufficient capacity conditions to perform cost control.

4. Content of construction investment cost control

4.1. Cost control in the pre-construction phase.

4.1.1. In determining the project’s total investment.

4.1.2. In determining the estimate, total estimate for the construction work.

4.1.3. In bidding and contractor selection.

4.2. Cost control during the construction implementation phase.

4.2.1. In construction contract payment.

4.2.2. Cost control in the settlement of construction investment capital.

5. Organization of construction investment cost control management

5.1. Forms of cost control organization

Depending on the scale and nature of the work, the investor decides on the organization of cost control in one of the following forms:

• Appoint an individual as the cost controller. This individual may belong to the investor’s organization or be hired from cost management consulting organizations but must have a Construction Valuation Engineer certificate.
• Appoint a cost management consulting organization to perform the cost control task. This cost management consulting organization must have sufficient capacity conditions as prescribed by law.

5.2. Investor’s responsibility for cost control

To ensure that cost control achieves its purpose and to create a corridor for determining responsibility, the rights and obligations of the investor need to be specifically defined.

5.3. Responsibility of individuals, cost control consulting organizations

To ensure the independence and objectivity, as well as to clearly define the responsibility of the individual or cost control consulting organization, the rights and obligations of this individual or consulting organization during the performance of cost control tasks also need to be clearly defined.

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Topic 6: Method for determining construction work estimates

I. Concept, content, and role of construction work estimates

1. Concept

A construction work estimate is an indicator representing the construction price of a work based on the technical design or construction drawing design, determined during the implementation phase of the construction investment project.

2. Content

The content of a construction work estimate includes: construction cost, equipment cost, project management cost, construction investment consulting cost, other costs, and contingency cost.

3. Role

The construction work estimate serves as a basis for determining the package price, construction cost, and as a basis for negotiation, contract signing, and payment in the case of direct appointment of a contractor.

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II. Method for determining construction work estimates

1. Determination principles

• The construction work estimate is determined by determining each cost item structured within the construction work estimate as per the content in section 2, item I above.
• To determine each cost item within the construction work estimate, depending on the characteristics, nature, and content of each cost item, a suitable determination method is chosen, such as: By quantity and construction work unit price or capital investment rate, by ratio norm, similar implemented works, by provisional sum…
• Among them, the construction cost item is determined consistent with technical requirements, technical specifications, specific construction conditions, and reasonable execution methods based on the quantity of construction task types or task groups, structural parts from the design documents at the construction investment project implementation phase.

2. Method for determining cost items in the construction work estimate

2.1. Determining construction cost

Construction cost includes: Direct cost, overhead cost, pre-tax profit, and output value-added tax, and is determined by preparing an estimate in the following ways:

2.1.1. First method:

By quantity and unit price of the construction work. The construction cost estimate is determined based on the quantity of each construction task or task group, structural part, and the corresponding unit price for each quantity type, appropriate unit of measurement, and cost items calculated by percentage (%).

• Regarding quantity: Determined according to the technical design documents or construction drawing design documents. Quantity determination is carried out according to the guidance in Topic 5 of this Document.
• Regarding construction work unit price: Includes detailed construction unit price, composite construction unit price according to Section II, Topic 4 of this document.
• Determining cost items in the construction cost estimate:
  • Direct cost includes: Material cost (including investor-supplied materials), labor cost, construction machine usage cost, and other direct costs.
    • Material cost, labor cost, and machine cost in the direct cost are determined by the quantity and composite construction unit price of a group of construction/installation tasks forming a structural unit, work part, or by the quantity and detailed construction unit price of the construction/installation task type, or a combination of these unit price types.
    • Other direct costs within direct cost are costs for necessary tasks serving the direct execution of construction work but whose quantity cannot be determined from the design. To determine other direct costs, the ratio method is usually used.
  • Overhead cost includes: Enterprise management cost, production operation cost at the site, worker service cost, construction service cost at the site, and some other costs. Overhead cost is calculated as a percentage (%) of the direct cost or as a percentage (%) of the labor cost in the estimate for each type of work.
  • Pre-tax profit: Is calculated as a percentage (%) of the direct cost and overhead cost for each type of work.
  • Value-added tax for construction work is applied according to State regulations.
  • Cost of temporary site facilities for accommodation and construction management: The cost of temporary site facilities for accommodation and construction management is determined by a ratio norm or, in special cases, can also be estimated based on quantity and construction work unit price.

2.1.2. Second method:

By the total expenditure quantity of each type of material, labor, machine, and equipment, and the corresponding price lists:

• Material, labor, and machine costs are determined based on the expenditure quantity of each type of material, labor, machine, and equipment, aggregated from the construction tasks according to the design documents, technical specifications, construction standards, or the work’s construction cost estimate norms, or base indicators and norms, or based on the expenditure of similar construction tasks in other implemented works.
• Other direct cost items, overhead cost, pre-tax profit, value-added tax, cost of temporary site facilities for accommodation and construction management in the construction cost estimate are as per the content in section 2.1.1 above.

2.1.3. Third method:

By the construction cost rate within the capital investment rate or of a similar implemented work with comparable economic-technical indicators.

• The construction work cost estimate can be determined by the area or operational capacity of common, simple works, the construction cost rate within the construction work capital investment rate, etc.
• The construction cost estimate can also be determined based on the construction cost estimates of similar implemented works with comparable economic-technical indicators, converting the cost items to the time of estimate formulation.

2.2. Determining equipment cost

Equipment cost includes: Cost of procuring technological equipment (including non-standard technological equipment needing production, fabrication); Cost of training and technology transfer; Cost of equipment installation and testing, adjustment.

• Cost of procuring technological equipment: Includes purchase price (including design and fabrication supervision costs); Cost of transport from the place of purchase or from the Vietnamese port to the work, cost of storage, yard, container storage at the Vietnamese port for imported equipment; Cost of preservation, maintenance at the site, taxes, and insurance fees for equipment.
• For equipment with a determined price: Based on the quantity, type of equipment, or the entire technology line and the corresponding unit price.
• For equipment with an undetermined price: Provisionally calculated based on quotations or the price of similar equipment on the market or from a similar implemented work.
• For types of non-standard technological equipment needing production, fabrication, it can be determined based on the quantity of equipment to be produced, fabricated and the production, fabrication price per unit according to the contract or the manufacturer’s price list, or the price from a similar implemented work.
• Cost of training and technology transfer: Determined by preparing an estimate depending on the specific requirements of the work.
• Cost of equipment installation, testing, adjustment: Prepare an estimate as in section 1 above.

2.3. Determining project management cost:

Project management cost is determined by applying the ratio norm announced by the Ministry of Construction or determined by estimate.

2.4. Determining construction investment consulting cost:

Construction investment consulting cost is determined according to the guidance in Section IV, Topic 4 of this Document.

2.5. Determining other costs:

Other cost items can also be determined based on similar works or provisionally calculated to ensure progress and plan for capital forecasting.

2.6. Determining contingency cost:

2.6.1. Content of contingency cost

2.6.2. Method for determining contingency cost

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III. Management of construction work estimates

1. Verification and approval of construction work estimates

1.1. Content of work estimate verification and approval includes:

• Checking the consistency between the main estimate quantities and the design quantities;
• Checking the correctness and reasonableness of applying and using construction work unit prices, construction norms…
• Determining the value of the work estimate.

1.2. Authority for work estimate verification and approval

• The investor organizes the verification of the work estimate.
• The investor may also hire organizations or individuals with sufficient capacity and experience to verify the work estimate.
• The work estimate is approved by the investor.

2. Adjustment of construction work estimates

The work estimate may be adjusted in the following cases:

• Occurrence of force majeure events.
• Adjustment of the approved planning that directly affects the work.
• The investment decider decides to change or adjust the work’s scale for higher economic-social efficiency.
• Changes or additions to the design are permitted that do not contradict the basic design, or changes in the cost structure within the estimate (including the use of contingency costs) but do not exceed the approved work estimate.
• The investor self-organizes the verification and approval of the adjusted work estimate.

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Topic 7: Contractor selection in construction activities

I. Key regulations related to contractor selection in construction activities

1. Related legal documents

System of legal documents related to bidding: Construction Law; Bidding Law; Decree 111/2006/NĐ-CP; Decree 16/2005/NĐ-CP; Decree 112/2006/NĐ-CP; Decree 99/2007/NĐ-CP and some other related documents.

2. Requirements for contractor selection in construction activities

• Requirements for construction activity capacity;
• Requirements for competition, fairness, transparency in bidding;
• Requirements for technical solutions, progress, price, and project efficiency;
• Other legal requirements.

3. Bidding implementation sequence

• Bidding preparation.
• Bidding organization.
• Bid proposal evaluation.
• Appraisal and approval of bidding results.
• Notification of bidding results.
• Negotiation, finalization of contract, contract signing.
• In each step, the requirements, basic content, achievable objectives, and implementation authority must be stated.

4. Forms of contractor selection in construction activities

• Open bidding: Scope of application; Organization process.
• Limited bidding: Scope of application; Organization process.
• Direct appointment: Scope of application; Organization process.
• Design competition for construction work architecture: Scope of application; Organization process.
• Self-execution: Cases where self-execution is applied.

5. Prequalification of contractors

5.1. Scope of application: Type of package, scale, and other cases.

5.2. Prequalification organization process

Preparation, approval of prequalification documents; Invitation for prequalification; Free provision of prequalification documents to contractors; Receipt and management of prequalification applications; Evaluation of prequalification applications; approval and notification of prequalification results.

5.3. Content of prequalification documents

• Information and instructions for contractors.
• Prerequisite conditions for rejecting prequalification applications.
• Sample prequalification questions.
• Evaluation criteria for prequalification applications.

5.4. Prequalification application

Requirements, content of prequalification application.

5.5. Evaluation of prequalification applications

• Checking prequalification applications and rejecting those that do not meet prerequisite conditions.
• Checking the capacity conditions and eligibility of the contractor as prescribed.
• Evaluation of prequalification applications: evaluation criteria, evaluation method.

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II. Bidding planning and determination of package price in the bidding plan

1. Formulation and approval of bidding plan

• Bidding plan formulation: Timing, basis for formulation, entity’s authority.
• Bidding plan approval: Procedures, approval authority.

2. Content of the bidding plan

2.1. Content

• Bidding plan for the project preparation phase: Type of package, work of the project preparation phase; content and determination method; Notes for each package (Package name; Package price; Capital source; Form of contractor selection and bidding method; Domestic or international bidding; Time for contractor selection; form of contract; Contract implementation time).
• Bidding plan after project approval: The bidding plan must be formulated for the entire project (including the total value of work parts already performed); Clearly state the type of package, work of the project preparation phase; Content and determination method; Notes for each package (Package name; Package price; Capital source; Prequalification if any, form of contractor selection and bidding method; Domestic or international bidding; Time for contractor selection; Form of contract, type of construction contract price expected to apply; Contract implementation time).

2.2. Basis for formulating the bidding plan

• Basis for formulating the bidding plan for the project preparation phase.
• Basis for formulating the bidding plan after project approval.
• State specific bases: Investment report, project, total investment, total estimate, approved estimate, cost norms, economic-technical norms announced by the state, regulations on time in bidding, regulations on applying each form of contractor selection, state policies on wages, prices, money… and other related documents.

2.3. Dividing the project into packages

• Principles of division
• Bases, requirements for dividing the project into packages.
• Determine the technical nature of the package (construction consulting package, construction execution package, selection of general contractor for construction with high technical requirements).

2.4. Determining the form of contract (construction contract price)

• Lump-sum price contract: Cases of application; Related regulations.
• Fixed unit price contract: Cases of application; Related regulations.
• Adjustable price contract: Cases of application; Related regulations.
• Combined price contract: Cases of application; Related regulations.

3. Determination of package price

3.1. Principles for determining package price

• For construction consulting packages:
  • For consulting packages in the project preparation phase: refer to published consulting cost norms, consulting costs of similar implemented packages, other reference bases suitable for the project’s characteristics, construction work.
  • For consulting packages implemented after project approval: approved project, refer to published consulting cost norms, consulting costs of similar implemented packages, other reference bases suitable for the project’s characteristics, construction work.
• For construction execution packages: Approved design, estimate, scope of work, technical requirements, expected execution methods, and other bases.
• For general construction contractor packages: Requirements, scope of work for each type of general contractor; project, total investment; work design estimate; Technical requirements, expected execution methods, and other bases (specify clearly for each type of general contractor)

3.2. Adjustment of bidding plan, package price

• Necessity of adjusting the bidding plan, package price.
• Cases requiring adjustment.
• Adjustment authority.

3.3 Package estimate when organizing bidding

• Basis for determining the package estimate.
• Factors leading to discrepancies between the package price and the package estimate.
• Authority for approval, handling situations.

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III. Determining requirements related to contractor proposals

1. For consulting packages

1.1. Requirements for technical proposals

• Implementation personnel;
• Solution for package implementation;
• Competitive proposals that bring efficiency to the investor, project;
• Other requirements.

1.2. Requirements for financial proposals

• Bid price;
• Financial, commercial conditions: advance payment, payment…
• Competitive proposals that bring efficiency to the investor, project, quantified into money.

2. For construction and installation packages

2.1. Requirements for the content of proposals on technical solutions and progress

2.1.1. Proposals on technical solutions (including subcontractors if any):

• Technical solution for package implementation.
• Solution for arranging workshops for construction execution.
• Plan for using technical infrastructure (electricity, water) for construction execution. The technical solution declared by the contractor must demonstrate the ability to implement and be consistent with the proposals on progress, proposals on bid price, meeting requirements for each specific part of the work, for each specific phase throughout the package implementation.

2.1.2. Proposals on construction execution progress:

• Time for package implementation and overall progress schedule with key construction milestones;
• Chart of mobilizing materials, construction supplies, construction equipment, and manpower according to progress;
• Measures for managing overall progress, including the work progress of subcontractors (if any);
• The contractor’s proposed progress must be consistent with the contents declared in the technical solution, consistent with the proposals on bid price, meeting requirements for each specific part of the work, for each specific phase throughout the package implementation.

2.2. Requirements for financial proposals

• Bid price: necessary costs to implement the package; taxes. Depending on the nature and requirements of the package, the contractor may be required to propose a bid price in the form of a total package price, unit price for work, or a combination of price for work parts with unit prices; items requiring unit price bidding, lump-sum bidding, taxes, profit.
• Price reduction proposals and explanations
• Other competitive proposals that bring efficiency to the investor, project, such as shortening the package implementation time, payment conditions, ability for capital advance, and other financial conditions; work warranty….

3. For design-build general contractor packages

3.1. Requirements for technical proposals

• For the design work part
• For the construction execution work part
• Other requirements

3.2. Requirements for financial proposals

Includes requirements for proposals on:

• Bid price;
• Financial, commercial conditions;
• Contractor’s preferential proposals related to finance, commerce (if any); competitive proposals that bring efficiency to the investor and project, quantified into money.

4. For EPC general contractor packages

4.1. Regarding technical proposal content

Requirements for technical proposals include content requirements:

• For the design work part
• For the construction execution work part
• Other requirements

4.2. Requirements for financial proposals

Includes requirements for proposals on:

• Bid price;
• Financial, commercial conditions;
• Contractor’s preferential proposals related to finance, commerce (if any); Competitive
• proposals that bring efficiency to the investor and project, quantified into money.

5. For turnkey general contractor packages

5.1. Requirements for technical proposals

• Similar requirements as for EPC packages
• Require the contractor to propose content, implementation solutions related to the project formulation, appraisal, and approval process.

5.2. Requirements for financial proposals

Includes requirements for proposals on:

• Bid price;
• Financial, commercial conditions;
• Contractor’s preferential proposals related to finance, commerce (if any); competitive proposals that bring efficiency to the investor and project, quantified into money.

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IV. Preparation of financial proposals and calculation of bid price

1. Bases for preparing financial proposals and bid prices:

• Requirements of the bidding documents, request for proposals, terms of reference, technical specifications, design documents, bill of quantities.
• Contractor’s proposed technical solutions, contractor’s proposed implementation schedule.
• State policies on consulting costs, wages, taxes, and related costs.
• Contractor’s own advantages and conditions.

2. Content of financial proposals and bid prices for consulting packages

2.1. Content of cost items in the bid price

Content of cost items for each type:

• Expert cost;
• Management cost;
• Other costs;
• Profit;
• Taxes;
• Professional liability insurance cost (if any);
• Contingency.

2.2. Basis for determining the content of cost items in the bid price

• For consulting work with cost norms.
• For consulting work determined by cost estimate.

3. Content of financial proposals and bid prices for construction and installation packages

3.1. Content of financial proposals and bid prices for construction and installation bid proposals

• Propose all necessary costs to implement the package, consistent with the design documents in the bidding documents;
• Recalculate the bill of quantities provided by the procuring entity;
• Calculate a separate price for the difference (if any) between the bill of quantities provided by the procuring entity and the bill of quantities calculated by the contractor.

3.2. Method for determining bid price

• Method for determining material, labor, machine costs, other direct costs, overhead costs, site facilities…. and the contractor’s competitive factors.
• Determine bid price based on direct construction costs and fee rates;
• Determine bid price based on composite unit prices.

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V. Bid proposal evaluation

1. Evaluation of bid proposals for construction consulting packages

1.1. Preliminary evaluation of technical proposals (applies to all construction consulting packages)

• Check the validity of the bid proposals.
• Check compliance with prerequisite conditions.
• The investor compares the regulations on the validity of the bidding documents with the contractor’s declaration. The contractor is responsible for explaining and providing additional information. Bid proposals that do not violate prerequisite conditions will be evaluated in detail.

1.2. Detailed evaluation of bid proposals for packages not requiring high technical standards

• Technical evaluation.
• Financial evaluation.
• Composite evaluation

1.3. Detailed evaluation of bid proposals for packages with high technical requirements:

• Technical evaluation.
• Rank contractors by total technical score.
• Review financial proposals, negotiate contract.

2. Evaluation of bid proposals for construction and installation packages

2.1. Preliminary evaluation

• Check the validity, compliance with prerequisite conditions of the bid proposal against the requirements of the bidding documents. Bid proposals that do not violate prerequisite conditions are evaluated in detail.
• Evaluate the contractor’s experience, technical capacity, and financial capacity according to the requirements specified in the bidding documents using scoring methods or pass/fail methods. Contractors who meet the requirements of the bidding documents will be evaluated in detail. This is the contractor prequalification step.

2.2. Detailed evaluation

• Method of simultaneous evaluation of technical solution, price, progress.
• Method of sequential evaluation of technical, bid price, evaluated price.
• Method according to the recommendations of international banking organizations.

3. Evaluation of bid proposals for design-build general contractor packages

3.1. Preliminary evaluation

The preliminary evaluation aims to check the validity and compliance with the prerequisite conditions of the bid proposal against the requirements of the bidding documents. The content of the preliminary evaluation includes:

• Check the validity of the bid proposal.
• Check compliance with prerequisite conditions and reject bid proposals that violate even one of the prerequisite conditions.

3.2. Detailed evaluation

• Technical evaluation of the design work part.
• Review the consistency between the content of the proposed technical solution for the construction part and the proposed progress, proposed bid price to implement the construction work part.
• Evaluate the contractor’s competitive proposals that bring efficiency to the investor, project, and determine the evaluated price.
• Consider the recommendation for contract award.

4. Evaluation of bid proposals for EPC general contractor packages

The evaluation of bid proposals includes preliminary evaluation, detailed evaluation, ranking of bid proposals, and recommendation for contract award.

4.1. Preliminary evaluation

• Check the validity of the bid proposal.
• Check compliance with prerequisite conditions and reject bid proposals that violate prerequisite conditions.

4.2. Detailed evaluation

• Technical evaluation for each work part: design and supply of materials, equipment according to evaluation standards;
• Review the consistency of the technical solution for package implementation (including construction, installation, supply of materials and equipment for the work, project) with the proposed progress (including progress of providing design documents, progress of supplying materials and equipment) and the proposed bid price for the construction work part.
• Determine the recommended contract award price for the entire EPC package;
• Evaluate the contractor’s competitive proposals that bring efficiency to the investor, project (including proposals related to design, construction, and supply of materials and equipment);
• Consider the evaluated price;
• Rank contractors;
• Recommend the contractor for contract award

5. Evaluation of bid proposals for turnkey general contractor packages

• The evaluation of bid proposals is carried out similarly to that for EPC general contractor bid proposals but with additional consideration of the content regarding project formulation consulting work.

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Topic 8: Contract Management in Construction Activities

I. General Issues Regarding Contracts in Construction Activities

1. Concept:

A contract in construction activities (hereinafter referred to as a construction contract) is a civil contract; it is a written agreement between the procuring entity and the contractor regarding the establishment, modification, or termination of the rights and obligations of the parties to perform one, several, or all tasks in construction activities.

2. Characteristics of construction contracts:

• It is a type of civil contract containing many economic elements.
• It involves large scale and long implementation time.
• The contract content and implementation are closely linked to the contractor selection process.
• The contractual rights and obligations of the contracting parties are related to third parties.

3. Legal framework for construction contracts:

• Civil Code.
• Construction Law.
• Commercial Law.
• Bidding Law.
• Government Decree No. 99/2007/NĐ-CP dated June 13, 2007, on Management of Construction Investment Costs and Decree No. 03/2008/NĐ-CP dated January 7, 2008, supplementing and amending some articles of Decree No. 99/2007/NĐ-CP.
• Circular No. 06/2007/TT-BXD dated July 25, 2007, of the Ministry of Construction guiding Contracts in construction activities.

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II. Types of Contracts in Construction Activities

Depending on the scale and nature of the work, the type of work, and the relationship between the participating parties, construction contracts come in many types with different forms and contents. There are several ways to classify contracts as follows:

1. According to the nature, type of work in construction activities to be performed

1.1. Construction consulting contract:

• Concept.
• Application.

1.2. Contract for supply of construction materials and equipment:

• Concept.
• Application.

1.3. Construction execution contract:

• Concept.
• Application.
  • A construction contract to perform all design work for the project’s construction is a general design contract.
  • A construction contract to perform all construction execution work for the project is a general construction execution contract.
  • A construction contract to perform all design and construction execution work for the project is a general design and construction execution contract.

1.4. Engineering – Procurement – Construction contract (abbreviated in English as EPC)

• Concept.
• Application.

1.5. Turnkey contract

• Concept.
• Application.

2. According to management relationship

2.1. Main contract

• Concept.
• Application.

2.2. Subcontract

• Concept.
• Application.

2.3. General contract

• Concept.
• Application.

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III. Principles for Signing Construction Contracts

a) It is a legal document agreed upon between the procuring entity and the contractor based on the principles of: voluntariness, equality, goodwill, honesty, not contrary to law, and all agreements must be recorded in the contract.

b) The contract is signed after the completion of contractor selection and the conclusion of contract negotiations with the winning bidder (in both bidding and direct appointment cases).

c) The contract price (signed contract price) does not exceed the winning bid price (for bidding cases), does not exceed the approved package estimate (for direct appointment cases). Quantities arising outside the package are permitted by the competent authority.

d) The investor (or the investor’s representative) may sign contracts with one or more main contractors to perform the work. In a project, the content of the main contracts must be consistent and synchronized to ensure the project’s objectives, progress, and quality.

e) The main contractor may sign one or several subcontracts, but these subcontractors must be approved by the Investor.

f) Joint venture contractor: Members must have a joint venture agreement.

g) Representatives for negotiation, signing, and implementation of the contract.

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IV. Main Contents of a Construction Contract

The construction contract dossier includes the construction contract document and documents attached to the contract. The main contents include:

1. Construction contract document:

Expresses the commitment of the parties participating in the contract regarding the rights and obligations of each party, sanctions for enforcing contract commitments, and is expressed through the following contents:

• Information about the contract and the related parties participating in the contract signing;
• Definitions, interpretations (of the contract);
• Governing law, language, currency of payment;
• Quantity, scope of work;
• Construction contract price;
• Contract price adjustment;
• Advance payment for contract implementation;
• Payment of construction contract;
• Time and schedule of implementation;
• Performance security;
• General rights and obligations of the contractor;
• General rights and obligations of the procuring entity;
• Construction quality management;
• Acceptance of completed works;
• Regulations on subcontractors appointed by the investor;
• Insurance, warranty of the work;
• Environmental protection, safety, fire prevention and fighting;
• Ensuring electricity, water, and security at the construction site;
• Responsibility for errors;
• Suspension and termination of contract;
• Risks and responsibilities of the parties;
• Force majeure;
• Contract bonuses and penalties;
  • Contract bonus: Specify cases for bonus; Method for determining the bonus amount.
  • Penalty for contract violation: Specify cases for penalty for contract violation; Method for determining the penalty amount; Remedial measures upon contract violation.
• Contract dispute resolution; Regulations on principles of contract dispute resolution; Steps for handling contract disputes.
• Contract settlement;
  • Settlement dossier.
  • Regulations on sequence and procedures.
• Contract liquidation.
• Contract validity.

2. Documents attached to the contract

Documents attached to the contract are an integral part of the construction contract and include:

• Notice of award or Document of direct appointment;
• Contract conditions: particular conditions, general conditions;
• Contractor’s proposal;
• Technical specifications;
• Drawings;
• Written amendments and supplements;
• Tables, charts;
• Guarantee letters (if necessary), insurance;
• Other related documents.

Depending on the specific characteristics of the work, scale, and nature of the construction project, the content of the documents attached to the contract may add or omit some of the items mentioned above. Attention should be paid to the order of the contents stated in the contract documents.

3. Relationship between parts in the construction contract dossier

• Contract conditions (general conditions): are the official documents for interpreting other documents in the Contract Documents.
• Supplementary conditions of the contract (particular conditions): are changes and additions incorporated into the general conditions. Technical specifications: Define the quality requirements for products, materials, and labor in the construction contract.
• Drawings. Contract appendices: are prepared to supplement or classify the objectives of the Contract Documents.

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V. Determining the Construction Contract Price

1. Basis for determining the construction contract price

The construction contract price is based on the following documents:

• Guidelines on management of construction investment costs.
• Results of contractor selection.
• Contractor’s proposals.
• Results of negotiation with the winning bidder.
• Type of construction contract and form of contract price.

2. Forms of construction contract prices

2.1. Contract price based on lump sum price:

• Concept – Cases where applied – Work part for determining lump sum price – Related conditions – Conditions for contract adjustment if any – Method for adjusting additional parts outside the contract.

2.2. Contract price based on fixed unit price:

• Concept – Cases where applied – Work part for determining application – Method for adjusting unit price when quantity changes – Agreement on additional, adjusted parts outside the contract – Method for adjusting additional parts outside the contract.

2.3. Contract price based on adjustable price:

• Concept – Cases where applied – Work part for determining application – Method for adjusting unit price, quantity – Agreement on additional parts outside the contract – Method for adjusting additional parts outside the contract.

2.4. Combined price:

• Concept – Cases where applied – Work part for determining application – Method for adjusting unit price, quantity – Agreement on additional parts outside the contract – Method for adjusting additional parts outside the contract.

3. Methods for determining prices for various types of construction contracts

3.1. Determining the price of construction consulting contracts:

• Based on the time spent on consulting work;
• Based on the percentage (%) of the value of the work being consulted;
• Lump sum for implementation cost.

3.2. Determining the price of construction execution and installation contracts

• Necessary cost elements;
• Costs for site preparation, construction of temporary facilities for execution (if necessary) by the contractor;
• Contingency for unforeseen work quantities and price escalation during the implementation of the work, construction project.
• Contractor’s estimated profit, taxes payable on construction products according to regulations

3.3. Determining the price of general contracts

• For general contracts, the general contract price must include the necessary costs to perform all contract works and related costs for organizing, managing the work implementation, performing technology transfer, techniques, and experience from the general contractor.
• The determination of the general contract price also depends on the contractor selection method and the level of contracting for the construction work design.

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VI. Adjusting the Construction Contract Price

1. Cases for contract price adjustment:

• Addition of work.
• Use of provisional unit prices.
• Quantity variation > 20% of the corresponding work quantity.
• Unit prices agreed by both parties to be adjusted after a certain period from contract implementation.
• Changes in input prices (fuel, materials, equipment,…) affecting the cost elements of the construction unit price.
• Force majeure specified in the contract (for existing works/ for non-existing works).
• Price escalation agreed upon in the contract.

2. Contract price adjustment

2.1. Basis

• Perform work steps according to the agreement in the signed contract.
• Quantity: Conditions agreed in the contract; accepted quantity.
• Unit price: Conditions regarding the agreed unit price; Price escalation formula; Bases for determining the price escalation factor.

2.2. Adjusting unit prices in the construction contract

• Adjustment principles
• Cases where contract unit prices can be adjusted
• Unit price adjustment

2.3. Method for adjusting construction contract price

• Using construction price indices announced by the Ministry of Construction, consulting organizations, General Statistics Office.
• Direct compensation calculation method.
• Formula for determining the adjustment factor.

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VII. Advance Payment, Payment, and Settlement of Construction Contracts

1. Contract advance payment

1.1. Principle: agree in the contract on contents related to advance payment.

1.2. Advance payment level: Specified by contract type.

1.3. Recovery of advance payment: Immediately upon the first payment and gradually recovered through subsequent payments, ending advance payment recovery when payment reaches 80% of the contract value.

2. Construction contract payment

2.1. Principles:

• Contract payment consistent with the contract type, contract price, number of payments, payment stages, and conditions agreed upon by the parties.

2.2. Payment for lump-sum contract price:

• Payment method based on percentage (%) of the contract price or price of the work, work item, completed work quantity for each payment installment after the payment dossier is confirmed and checked by the procuring entity.
• Payment dossier: Acceptance minutes; As-built documents of completed works (if any); Table determining the value of completed work quantity according to the contract; Table determining the value of quantity variations outside the contract; Table calculating the proposed payment value.

2.3. Payment for contract price based on fixed unit price:

• Basis for payment: completed work quantity (including quantity variations) accepted and the corresponding unit price stated in the contract (this unit price was determined upon contract signing).
• Payment dossier: Acceptance minutes; As-built documents of completed works (if any); Table determining the value of completed work quantity according to the contract; Table determining the adjusted unit price as specified in the contract; Table calculating the proposed payment value.

2.4. Payment for contract price based on adjustable price

• Basis for payment: Completed work quantity and unit price adjusted according to the provisions in the contract or the provisional unit price upon contract signing if conditions for unit price adjustment according to the contract provisions are not yet met.
• Payment dossier: Acceptance minutes; As-built documents of completed works (if any); Table determining the value of completed work quantity according to the contract; Table determining the adjusted unit price as specified in the contract; Table calculating the proposed payment value.

2.5. Payment for combined contract price: Corresponding to the price type for each specific work, payment follows the respective regulations above.

2.6. Payment deadline

3. Contract settlement

3.1. Settlement dossier:

• As-built documents; Acceptance minutes of completed quantities according to the contract, variations; Results of survey, design acceptance; Minutes of handover of the work for use; Table determining the confirmed contract settlement value; Other related documents.

3.2. Regulations on settlement sequence and procedures

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VIII. Construction Contract Management

The procuring entity and the contractor, within the scope of their rights and obligations, are responsible for planning and organizing implementation measures consistent with the content of the signed contract to achieve the agreements in the contract. The content of contract implementation management includes:

1. Quality management

• Construction contract quality management is based on current regulations on construction quality management.
• Content of quality management.
• Responsibility for quality management.
• Measures to ensure quality.
• Handling quality issues.
• Regulations on acceptance of completed works.

2. Contract implementation progress management

• Based on bidding results, progress management measures, from the contractor’s proposals on progress that won the bid.
• Specify time milestones.
• Management content
• Evaluate impacting factors.
• Responsibility of parties in progress management.

3. Contract price management and contract changes, adjustments

• Based on the contract type, contract price, regulations on cost management to manage the contract price, adjust the contract price.
• Management content.
• Responsibility of parties in managing price, adjusting contract price.
• Evaluate factors impacting the contract price and contract price adjustment.
• Advance payment, payment, and contract settlement.

4. Management of safety, environmental hygiene, and fire prevention

• Management basis implemented according to the provisions of the Construction Law, Decree 16/2005/NĐ-CP, other related laws.
• Rights and responsibilities of the parties participating in the contract.

5. Management of changes and contract adjustments

• Cases for adjustment.
• Principles for adjusting construction contracts.

6. Management of other contract contents

• Performance security.
• Subcontractors appointed by the investor: Procuring entity’s responsibility regarding subcontractors.
• Main contractor’s authority over subcontractors.
• Insurance, warranty of the work.
• Responsibility for errors.
• Suspension and termination of contract.
• Risks and responsibilities of the parties.
• Force majeure.
• Contract bonuses and penalties.
• Contract dispute resolution.
• Contract validity.

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Topic 9: Payment, Settlement of Construction Investment Capital

I. Investment Capital Payment

1. Basic requirements

Scope of application for capital sources; Investor’s responsibility; Determination of legitimate costs for payment; Requirements on content and results.

2. Dossier, procedures, authority in investment capital payment

2.1. Dossier, process, responsibility in investment capital payment

2.1.1. Payment principles

• Completed quantity; Content, payment method in the signed contract.

2.1.2. Payment plan and conditions for implementing investment capital payment for projects

a) Investment capital payment plan:

• Decentralization in formulating, appraising, approving capital payment plans; basic documents serving the notification of investment capital payment plans

b) Payment conditions

• Requirements for opening accounts;
• Conditions, dossier, procedures for payment during the investment preparation phase;
• Conditions, dossier, procedures for payment during the project implementation phase.

2.1.3. Procedures and process for project investment capital payment

• Payment for lump-sum contract price.
• Payment for contract price based on fixed unit price.
• Payment for contract price based on adjustable price.
• Payment for combined contract price.

2.1.4. Authority of entities

a) For the investor.

b) For the disbursing, lending agency.

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II. Investment Capital Settlement

1. Basic requirements

2. Content, dossier, authority for verifying the Settlement Report

2.1. Content of the Settlement Report

Determine capital sources; Investment costs proposed for settlement; Damaged investment costs; Determine the value of assets formed through investment.

2.2. Settlement Report forms

For completed projects; For completed works, work items; For planning projects, cancelled investment preparation costs.

2.3. Dossier submitted for settlement approval

• Applicable to completed projects, works, work items.
• Applicable to planning projects, cancelled project investment preparation costs.

2.4. Authority for settlement verification

National Important projects; Projects decided by Ministers, Chairpersons of Provincial People’s Committees, Heads of Ministry-level agencies; Projects decided by Chairpersons of District People’s Committees; Other projects.

3. Audit, settlement of investment capital

• General principles of audit
• Investor’s responsibility
• Auditor’s responsibility

4. Verification of completed project settlement

4.1. Verification content

• Content performed for projects that have undergone settlement audit.
• Content performed for projects that have not undergone settlement audit.

4.2. Verification sequence and content of the Verification Report on completed project settlement

a) Verification of legal dossier: Regarding sequence and procedures; legal validity of dossiers; Validity in using capital…

b) Verification of investment costs:

• Verification of work performed by the investor (project management unit) themselves: Content of performed cost items; Principles, procedures, verification method.
• Verification of work performed by contractors under contract
  • Verification for contract parts applying the “Lump-sum Contract Price” form (regardless of contractor selection form).
  • Necessary dossier for verification; Principles, procedures, verification method
  • Verification for contract parts applying the “Fixed Unit Price Contract” form (regardless of contractor selection form): Necessary dossier for verification; Principles, procedures, verification method.
  • Verification for contract parts applying the “Adjustable Price Contract” form (regardless of contractor selection form): Necessary dossier for verification; Principles, procedures, verification method.
  • Verification for contracts applying the “Combined Contract Price” form (regardless of contractor selection form): Necessary dossier for verification; Principles, procedures, verification method.
• Verification of cases with quantity variations: Cases where quantity variations are calculated; Necessary dossier for verification; Principles, procedures, verification method.
• Verification of damaged investment costs not included in asset value:
  • Verification of damage costs due to natural disasters, enemy sabotage, and other force majeure.
  • Verification of costs for cancelled work quantities.
• Verification of asset value formed through investment:
  • Verification for fixed assets formed.
  • Verification for current assets formed.
• Verification of liabilities, inventory of materials and equipment: Bases for verification; Principles, verification method.
• Review the compliance of the investor and related units with the conclusions of Inspection agencies, Examination agencies, State Audit Office (if any). Remarks, evaluation, conclusions.
• Regarding mechanisms, policies in construction investment management; Regarding management of assets through investment; Recommendations on settlement value and handling related issues.

5. Settlement approval

5.1. Settlement approval authority

• Minister of Finance; Ministers, Chairpersons of Provincial People’s Committees; For remaining projects.

5.2. Management of settlement approval decisions

6. Costs for verification, settlement approval, audit

6.1. Determination of costs for verification, settlement approval, audit costs.

6.2. Management, use of verification and settlement approval costs: For projects group B and above; For group C projects.

6.3. Content of verification and settlement approval costs.

7. Settlement deadline

8. Responsibility in completed project settlement

8.1. Investor’s responsibility:

The investor is responsible for ensuring the accuracy and truthfulness of the completed project settlement report. They must check, review, and confirm the actual cost figures, ensuring compliance with legal regulations and signed contracts. Additionally, the investor needs to prepare and submit the settlement report by the specified deadline.

8.2. Contractors’ responsibility:

Contractors must provide complete vouchers, invoices, and documents related to construction costs as required by the investor. They are also responsible for cooperating with and assisting the investor during the checking, verification, and preparation of the settlement report. Besides, contractors need to ensure that the declared costs are accurate and reasonable.

8.3. Responsibility of the payment control, investment capital lending agency:

This agency is responsible for supervising and checking the use of investment capital, ensuring the capital is used effectively and for the intended purpose. They must review and approve project payments and settlements, ensuring compliance with current financial and accounting regulations.

8.4. Auditor’s responsibility:

The auditor is tasked with checking and confirming the accuracy of financial reports and costs related to the project. They must ensure the audit is conducted according to procedures, objectively, and transparently. The audit report must accurately reflect the project’s financial status.

8.5. Responsibility of the settlement verification and approval agency:

This agency is responsible for verifying, reviewing, and approving the project settlement report. They must ensure the settlement report accurately and fully reflects the incurred costs, complying with legal regulations. The approval decision must be based on clear legal and factual grounds.

8.6. Responsibility of ministries, sectors, localities:

These agencies are responsible for issuing policies, regulations, and guidelines related to project settlement. They need to coordinate with relevant parties to ensure the settlement process is carried out correctly according to regulations and effectively. At the same time, ministries, sectors, and localities must supervise and support projects within their scope of management.

8.7. Responsibility of finance agencies at all levels

Finance agencies are responsible for guiding and inspecting the implementation of financial regulations during the project settlement process. They must ensure project financial reports and costs are prepared and approved according to regulations. In addition, finance agencies need to supervise the use of investment capital and ensure the transparency and efficiency of the capital source.

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III. Guidance on the method for converting construction investment project costs at the time of handover for use

1. Requirements, principles

Objectives; Content of items to be calculated; Calculation for cases of different project scales.

2. Conversion method

2.1. Basis for conversion

Implementation costs; Price levels; Related regimes, policies.

2.2. Conversion sequence

• Calculate, aggregate costs;
• Determine conversion factors;
• Calculate the aggregated construction investment cost after conversion.

2.3. Conversion method

2.3.1. Calculate conversion of construction work costs

2.3.2. Calculate conversion of equipment costs

a) Convert equipment purchase cost, technology transfer training cost (if any).

b) Convert other equipment costs; Equipment installation cost and testing, adjustment cost (if any).

2.4. Convert compensation, site clearance, resettlement costs

2.5. Convert project management costs, construction investment consulting costs, and other costs

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IV. Determining the Value of Assets Handed Over for Use

1. General requirements

2. Specific regulations on determining the value of assets handed over for use

2.1. Fixed assets Determine list; Principles for calculation in the project.

2.2. Current assets:

Determine list; Principles for calculation in the project.

2.3. Report determining the value of assets handed over for use Construction valuation professional training textbook 67

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Topic 10: Further Reference

1. Construction valuation professional training test

• Take the construction valuation professional training test

2. Price list for the construction valuation professional training course

• View details

3. Download document

• Download construction valuation professional training document