CIRCULAR

GUIDING THE METHOD OF FORMULATING AND MANAGING ESTIMATED COSTS OF URBAN PUBLIC-UTILITY SERVICES

Pursuant to the Government Decree No. 86/2002/ND-CP of November 5, 2002, defining the functions, tasks, powers and organizational structures of ministries and ministerial-level agencies;

Pursuant to the Government Decree No. 36/2003/ND-CP of April 4, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Construction;

Pursuant to the Government Decree No. 31/2005/ND-CP of March 11, 2005, on the production and provision of public-utility products and services;

In order to raise the efficiency of the use of state budget capital and the quality of urban public-utility services, and encourage organizations and individuals of all economic sectors to provide urban public-utility services, the Ministry of Construction hereby guides the method of formulating and managing estimated costs of urban public-utility services as follows:

I. GENERAL PROVISIONS

1. This Circular applies to the following urban public-utility services:

- Collection, transport and burial of garbage;

- Dredging and maintenance of water drainage systems;

- Maintenance of public lighting systems;

- Maintenance of green trees.

2. Estimated costs of urban public-utility services mean estimated social costs necessary for completion of part or the whole of a volume of service products according to technical processes approved by competent agencies. Costs of urban public-utility services estimated under the guidance of this Circular are the maximum costs serving as a basis for competent state agencies to determine the prices of urban public-utility services and negotiate, consider and decide on the prices of public-utility services provided through bidding or order placement or plan assignment to organizations or individuals providing urban public-utility services.

3. All organizations and individuals that use state budget capital for the provision of the above-said urban public-utility services must observe the provisions of this Circular.

II. METHOD OF FORMULATING ESTIMATED COSTS OF URBAN PUBLIC-UTILITY SERVICES

Estimated costs of urban public-utility services are determined as follows:

  Estimated                   Volume of             Unit cost                    
costs of urban              each urban              of each                 General                       
 public-utility      =    å     public-      x           urban       +     management     +    Norm profit
   services                         utility               public- utility            expense
                                       service                  service                                     

1. Volume of each urban public-utility service

The volume of each urban public-utility service shall be determined according to plans for assignment, order placement or extraordinary tasks assigned by competent state agencies for the provision of urban public-utility services.

2. Unit price of each urban public-utility service

The unit price of each urban public-utility service consists of the following constituent costs: material cost, labor cost, and cost for machine and equipment use (called direct cost). Specifically as follows:

2.1. Material cost means the cost of principal materials and subsidiary materials used in the provision of urban public-utility services.

                                                Waste limit of each                    Cost
                                                type of material for                  of each
      Material cost      =       å      performance of a        x         type of
                                               volume unit of urban                 relevant
                                                public-utility service                 material

The waste limit of each type of material for the performance of a volume unit of urban public-utility service shall comply with estimation norms promulgated by the Construction Ministry or provincial/municipal People’s Committees according to regulations; the cost of each type of relevant material shall be promulgated by local state agencies competent to manage prices in localities or local market prices (the material cost constituting the unit price is exclusive of value added tax).

2.2. Labor cost means all costs for laborers directly engaged in the provision of urban public-utility services.

                                                Norm of workdays
                                             of workers of a certain                              Workday wage
       Labor cost       =     å  grade, set for performance           x                 of workers of
                                           of a volume unit of urban                              relevant grade
                                                public-utility service

The norm of workdays based on a workers’ grade for the performance of a volume unit of urban public-utility service shall comply with estimation norms promulgated by the Construction Ministry or provincial/municipal People’s Committees according to regulations.

Workday wage of workers of relevant grade consists of:

+ Basic wage, determined according to wage table AI (workers of urban projects) issued together with Decree No. 205/2004/ND-CP of December 14, 2004;

+ Allowances, including night-shift allowance, allowance for toxic and hazardous jobs, allowance for mobile jobs, responsibility-based allowance, and other allowances (if any). Such allowances shall be determined under the guidance of the Ministry of Labor, War Invalids and Social Affairs.

2.3. Cost of machine and equipment use means the cost for the use of machine and equipment directly involved in the provision of urban public-utility services.

                                        Norm of shift-based wear
       Cost of                          of each machine and                   Cost of a shift of
   machine and     =    å   equipment for performance       x     relevant machine
  equipment use                      of a volume unit of                      and equipment
                                        urban public-utility service       

The norm of shift-based wear of each machine and equipment for the performance of a volume unit of urban public-utility service shall comply with estimation norms promulgated by the Construction Ministry or provincial/municipal People’s Committees according to regulations; the cost of a shift of relevant machine and equipment shall comply with the Construction Ministry’s Circular No. 06/2005/TT-BXD of April 15, 2005, guiding the method of formulating cost of shifts of construction machine and equipment.

3. General management expense means expense for the managerial apparatus and assisting body; expense for general production management; expense in service of workers (not yet included in direct labor cost); expense for payment of interests on loans from banks or other credit institutions; mid-shift meal allowance; charges, fees and other expenses. The general management expense is exclusive of the expense for rent of ground area or workshops (if any).

The general management expense in the estimated costs of urban public-utility services is a percentage of the direct labor cost for the performance of a volume unit of urban public-utility service and specified in the table below:

Table 1

Unit of calculation: %

* Where the cost of machine and equipment use represents more than 60% of the direct cost incurred for a volume of urban public-utility service, the general management expense shall be equal to 2.5% of the cost of machine and equipment use.

4. Norm profit shall be equal to 4-5% of the direct cost and general management expense in the estimated cost for the provision of public-utility services.

III. MANAGEMENT OF ESTIMATED COSTS OF URBAN PUBLIC-UTILITY SERVICES

1. The norms of estimated costs of several types of service specified in this Circular are promulgated by the Construction Ministry and apply nationwide; where the urban public-utility services mentioned in this Circular and other public-utility services have not yet been included in current lists of estimation norms, provincial/municipal Traffic and Public Works Services shall, in coordination with provincial/municipal Construction Services (for centrally run cities), or provincial/municipal Construction Services (for provinces), study and formulate norms for such services and submit them to provincial/municipal People’s Committees for promulgation and application and, at the same time, report thereon to the Construction Ministry for monitoring and inspection;

2. Provincial/municipal People’s Committees shall formulate and promulgate the unit price of each urban public-utility service applicable to provinces or cities;

3. Based on the method of formulating and managing estimated costs of urban public-utility services guided in this Circular and current State regimes and policies, provincial/municipal Traffic and Public Works Services (for centrally run cities) or provincial/municipal Construction Services (for provinces) shall formulate and submit estimated costs of urban public-utility services to presidents of provincial/municipal People’s Committees for approval;

4. Estimated costs of urban public-utility services shall serve as a basis for urban administrations to negotiate, consider and decide on the price of urban public-utility services and select organizations or individuals to enter into economic contracts on the provision of urban public-utility services through bidding, order placement or plan assignment;

Where the prices of urban public-utility services have been established and are relatively stable in localities, urban administrations may apply such prices as estimated costs of urban public-utility services;

5. Estimated costs of urban public-utility services or prices of urban public-utility services may be adjusted in case of changes in supplies or material prices, wages, or other relevant regimes or policies promulgated by competent state agencies.

V. ORGANIZATION OF IMPLEMENTATION

1. The Ministry of Construction shall regularly or irregularly inspect the formulation of estimation norms and unit prices and the management of estimated costs of urban public-utility services in localities nationwide;

2. Provincial/municipal People’s Committees shall have to:

- Regularly or irregularly inspect the provision of urban public-utility services by organizations and individuals under the signed service contracts;

- Reorganize public-utility task-performing state companies under their management, according to the provisions of Chapter III of the Government Decree No. 31/2005/ND-CP of March 11, 2005, on the production and provision of public-utility products and services;

- Formulate preferential mechanisms and policies to encourage organizations and individuals to provide urban public-utility services with a view to realizing the Party and State guidelines on socialization of urban public-utility services in their localities;

3. To encourage investors of new urban quarters, which have been put to use in whole or in part but not yet transferred to urban administrations for management, to implement the provisions of this Circular.

4. This Circular takes effect 15 days after its publication in “CONG BAO” and replaces the Construction Ministry’s Circular No. 05/2002/TT-BXD of December 30, 2002, guiding the formulation and management of costs for the provision of urban public-utility services. The transitional handling shall abide by the principle that signed contracts or cost estimates (costs of urban public-utility services) approved by competent authorities shall not need to be re-approved. The adjustment of cost estimates (costs of public-utility services) in case of changes in regimes or policies promulgated by competent authorities shall comply with current regulations.

Localities should report any problems arising in the course of implementation to the Construction Ministry for guidance and settlement.