Does the method of determining the construction estimates of a PPP project need to be appraised by agencies specialized in construction in Vietnam?
What do details of construction estimates include?
Pursuant to Article 11 of Decree 10/2021/ND-CP of Vietnam stipulating the details of construction estimates as follows:
“Article 11. Details of construction estimates in Vietnam
1. Construction estimates refer to all expected costs necessary and identified according to construction design implemented after fundamental design or technical drawing design in case projects only require construction investment economic-technical reports.
2. Construction estimates include: construction costs, equipment costs, project management costs, construction investment consultancy costs, other costs and backup costs. Costs above are elaborated under Points b, c, d, dd, e, and g Clause 2 Article 5 of this Decree, other than construction investment consultancy costs and other costs for the whole projects.
3. For projects with multiple constructions, investors shall determine total estimates to manage construction investment when necessary. Total estimates include construction estimates, consultancy costs, other costs, and backup costs for the whole project.”
Method of determining the construction estimates of a PPP project
Does the method of determining the construction estimates of a PPP project need to be appraised by agencies specialized in construction?
Pursuant to Article 13 of Decree 10/2021/ND-CP of Vietnam stipulating the examination and appraisal of construction estimates as follows:
“Article 13. Examination and appraisal of construction estimates
1. Appraisal of construction estimates shall be implemented together with appraisal of construction design implemented after fundamental design according to Decree on elaborating to regulations on management of construction investment projects.
2. Entitlement for appraisal of construction estimates is implemented according to Law on Construction and Decree on elaborating to management of construction investment projects.
3. Details for appraisal of construction estimates performed by agencies specialized in construction under Point d Clause 2 Article 83a of Law on Construction and amendments thereto under Clause 26 Article 1 of Law on amendments to Law on Construction are follows:
a) Adequacy and legitimacy of application for appraisal of construction estimates; legal basis for determining construction estimates;
b) Conformity of construction estimates with approved total construction investment; methods of determining construction estimates;
c) Conformity of construction estimate details under Article 11 of this Decree with project contents and requirements;
d) Compliance with regulations and law on application, reference of construction norms systems, construction prices, other necessary tools issued by regulatory authorities; application, reference of cost-related data of similar projects, constructions to determine construction estimates;
dd) List of new estimate indicators, revised estimate indicators (if any) and methods of determining; list of indicators to be surveyed during construction process.”
Thus, the method of determining the construction estimate of a PPP project is one of the contents that needs to be appraised by agencies specialized in construction.
What costs are included in the construction estimates?
Pursuant to Article 12 of Decree 10/2021/ND-CP of Vietnam, the construction estimates include the following costs:
- Construction costs include: direct costs, indirect costs, pre-assessed taxable income and value-added tax (VAT) and are determined as follows:
+ Direct costs (including: material costs, personnel costs, construction machinery and equipment costs) are determined according to specific construction quantity and unit price, and combined construction prices, type of construction operations, structural or component units of constructions.
In case direct costs are determined according to specific construction quantity and unit price: quantity determined according to construction affairs and operation; specific construction unit price is determined according to Clause 2 Article 24 of this Decree.
In case direct costs are determined according to construction quantity and combined prices of construction type, affairs, constructions components or structures: quantity is determined depending on construction type, structural or component units; prices of construction type, affairs, construction components or structures are determined under Clause 3 Article 24 of this Decree.
+ Indirect costs include general costs, costs for temporary structures for residence and construction coordination, and costs for affairs with unidentifiable work quantity. Indirect costs are determined by percentage as per the law;
+ Pre-assessed taxable income is determined by percentage;
+ VAT as per the law.
- Equipment costs are determined as follows:
+ Equipment purchase costs are determined according to quantity, type of equipment based on (technology, construction) design, approved list of equipment in projects and respective purchase prices;
+ Costs for processing and manufacturing equipment (if any) are determined by preparing estimates on the basis of quantity of equipment to be processed, manufactured and respective unit prices for processing, manufacturing; on the basis of processing, manufacturing contracts, price notice of manufacturers, processors or prices for processing, manufacturing similar equipment;
- Remaining costs for equipment according to Point c Clause 2 Article 5 of this Decree are determined by preparing estimates or on the basis of cost norms prescribed by regulatory authorities.
- Project management costs are determined under Article 30 of this Decree.
- Construction investment consultancy costs are determined under Article 31 of this Decree.
- Other costs are determined on the basis of price prescribed by regulatory authorities or estimate preparation.
- Backup costs include backup costs for work quantity, additional work and backup costs for inflation and are determined by percentage of total costs under Clauses 2, 3, 4, 5, and 6 of this Article. Percentage for backup costs for inflation is determined based on temporal length constructions under project execution plans and output price indices suitable for construction type taking into account domestic and international price fluctuation.
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