Determination of identifiable component values of the cost estimate of urban public services in Vietnam

According to Circular No. 14/2017/TT-BXD of the Ministry of Construction of Vietnam, direct costs (CPTT) include: material cost, labor cost and costs of vehicles, machinery and equipment.

General administration cost (C) includes expenses in general for managing or executive board of an enterprise, indirect managing costs, costs of worker services (including labor safety cost and costs of working tools and devices), payments of loan interests to banks and other credit institutions, social expenses payable by the employer (including compulsory contributions of social insurance, health insurance, unemployment and union dues), fees and charges, costs of leasing assets and houses/workshops (if any), costs of depreciation and repair of fixed assets in service of the enterprise’s executive or managing board, costs of hiring auditors, and other costs related to general operations of the enterprise providing urban public services. 

Concurrently, Circular No. 14/2017/TT-BXD stipulates that the general administration cost included in the cost estimate of urban public services shall be expressed as the percentage (%) of the direct labor cost. People’s Committees of provinces or central-affiliated cities shall consider deciding the general administration cost percentages so as to prepare the cost estimate of urban public services provided that such general administration costs shall not exceed the following values:

Unit:  %

If costs of vehicles, machinery and equipment of an urban public service are greater than 60% of the direct cost, the general administration cost must not exceed 5% of the costs of vehicles, machinery and equipment.

The general administration cost set up by the People’s Committee of a province or central-affiliated city must be conformable with the prescribed cost levels and the reality of providing public services as well as the ability to balance local budget.

Besides, according to Circular No. 14/2017/TT-BXD of the Ministry of Construction of Vietnam, profit target (LN) shall be expressed as the percentage which must not exceed 5% of the direct cost and the general administration cost specified in the cost estimate of urban public services.

VAT (T) (if any) shall be determined in accordance with regulations of the Ministry of Finance. In case certain urban public services are not subject to VAT payment, VAT shall be aggregated in input costs.

View more details at Circular No. 14/2017/TT-BXD of the Ministry of Construction of Vietnam, effective from February 15, 2018.

-Thao Uyen-

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