What is project management cost norm? How to optimize project management cost effectively

Project management cost norms and project management costs are two particularly important concepts in operations, especially with construction investment projects, software development, or manufacturing. The following article by Bizzi will provide full information to clarify project management cost norms as well as how to manage these costs.

Definition of project management cost norms 

Project management costs are all the costs required to carry out management work throughout the life cycle of the project. In other words, project management costs are the maximum amount of money needed to manage the project within the specific time period and scope of work that has been reviewed and approved.

This cost is determined based on a percentage or estimate.

So what is a project management cost norm? A project management cost norm is the ratio or maximum allowable cost level for project management compared to the total cost of the project. In many industries (especially construction), this norm is regulated by state agencies, such as the Ministry of Construction (according to Circulars and Decrees).

For example: Project under 15 billion: standard 2.5%, Project over 500 billion: standard reduced to 0.5-1%. A construction investment project with a total cost of 100 billion VND, according to regulations, the maximum allowed project management cost is 1.5%.

Therefore, project management cost = 1.5% × 100 billion = 1.5 billion VND

• This level helps control budgets and ensures that management costs are not overstated.
• Note: The determination must be consistent with the form of management organization, implementation time, scale and characteristics of the project.

What are the project management costs?

Project management costs as prescribed in Clause 2, Article 30 of Decree 10/2021/ND-CP and Decree 32/2015/ND-CP include:

• Salaries for project managers and wages paid to employees under contract, along with allowances, bonuses, collective benefits and mandatory contributions (social insurance, health insurance, unemployment insurance, union fees, etc.).
• Costs of applying science and technology, managing construction information systems, and training to improve the capacity of project management staff.
• Cost of paying for public services.
• Office supplies costs.
• Information, propaganda and communication costs.
• Cost of organizing conferences related to the project.
• Business expenses.
• Cost of renting, repairing, purchasing assets for project management.
• Other costs and contingency costs.

The role of determining project management cost norms

Determining project management cost norms plays a very important role in the process of establishing, managing and implementing projects, especially investment projects in construction, technology, production, etc. 

• Reasonable budget and cost control: Accurately estimate the costs required for project management, avoiding overspending or uneven allocation between cost categories.
• Increase transparency and legal compliance: Reduce inspection and audit risks and avoid over-declaration or under-management of costs.
• Basis for establishing and appraising financial plans and investment plans for each stage; Helping parties (investors, contractors, management agencies) easily compare and appraise cost options.
• Allocate resources appropriately in the project: Organize appropriate management personnel; Allocate costs for activities: operation, supervision, reporting, administration, etc.
• Improve project implementation efficiency: Management tasks will be performed more systematically and effectively; Minimize errors, risks, and losses during implementation.
• Create a basis for comparison and evaluation of project effectiveness: Cost efficiency, Level of "savings" or "waste" in management.

How to calculate project management cost standards 

General method: Determined by percentage applied to total construction and equipment costs (excluding VAT).

Project management cost = Total investment × Project management rate (%)

This rate is stipulated in legal documents (for public investment or construction projects). It may vary depending on the type of project (civil, industrial, transport, irrigation, etc.) or the scale of the total investment.

Specific project management cost norms according to scale and type of project 

According to Circular No. 11/2021/TT-BXD of the Ministry of Construction (applicable to construction investment projects), project management cost norms are prescribed according to construction cost scale and type and level of construction, specifically as follows:

• Under 20 billion VND: Civil (2.784%), Industry (2.930%), Transport (2.491%), Agriculture & Rural Development (2.637%), Technical Infrastructure (2.344%).
• Under 50 billion VND: Civil (2.486%), Industry (2.616%), Agriculture & Rural Development (2.355%), Transport (2.225%), Technical infrastructure (2.093%).
• Under 100 billion VND: Civil (1,921%), Industry (2,021%), Transport (1,719%), Agriculture & Rural Development (1,819%), Technical Infrastructure (1,517%).
• Under 200 billion VND: (Note: the ratios listed in the source may differ from the summary table, clarification or use of the table is required).
• Under 500 billion VND: Civil (1,442%), Industry (1,518%), Transport (1,290%), Agriculture & Rural Development (1,366%), Technical Infrastructure (1,214%).
• Under 1000 billion VND: Civil (1,180%), Industry (1,242%), Transport (1,056%), Agriculture & Rural Development (1,118%), Technical Infrastructure (1,020%).
• Under 2000 billion VND: Civil (0.912%), Industry (1.071%), Transport (0.910%), Agriculture & Rural Development (0.964%), Technical Infrastructure (0.856%).
• Under 5000 billion VND: Civil (0.677%), Industry (0.713%), Transport (0.606%), Agriculture & Rural Development (0.642%), Technical Infrastructure (0.570%).
• Under 10,000 billion VND: Civil (0.486%), Industry (0.512%), Transport (0.435%), Agriculture & Rural Development (0.461%), Technical Infrastructure (0.409%).

Real life example:

A traffic construction project has a total investment of 200 billion VND.

•  According to the table above, the nominal rate = about 1.585% (taken as the middle level of the range 100–500 billion).
• Project management cost = 200 billion × 1.585% = 3.17 billion VND

Can project management cost norms be adjusted? 

The answer is yes. Project management cost norms can be adjusted, but must comply with certain principles and conditions depending on the type of project and the management agency.

When is the project management cost standard adjusted?

In practice, the issued norms are only guidelines and maximum frameworks, so they can be adjusted in the following cases:

Principles for adjusting project management cost norms

To adjust project management cost norms, businesses or investors need to comply with the following principles:

Automate project cost management 

As projects become increasingly complex, multi-phased, and involve multiple stakeholders, the use of technology and project management software has become essential for effective cost control. Modern management platforms not only help track progress but also integrate powerful financial features, streamline approval processes, monitor spending, and ensure budget compliance.

The benefits of project cost management software include:

• Establish and control project cost limits according to company policy
• Automate the process of creating – approving – recording expenses
• Track costs in real time, get visual reports on costs incurred by each stage, item, supplier...
• Ensure tax validity (input invoices)
• Connect to accounting system – ERP

Bizzi is a cost management and electronic invoice processing automation platform that is being used by many large enterprises in Vietnam. Bizzi's outstanding features include:

• Automatically collect and compare electronic invoices with approval data: Helps detect discrepancies and avoid errors before entering them into the accounting system.
• Set up cost limits by management level, project, department: Easily track whether spending is within approved limits.
• Flexible approval flow, integrating multiple approval levels: Depending on the organizational structure, different approval steps can be configured (leader → CFO → CEO).
• Integrating digital signature and storing electronic documents: Helps manage payment records closely, without losing documents.
• Intuitive Dashboard: Provide detailed reports on costs by time, unit of use, invoice status…

Conclude

Above is all the information about project management costs as well as effective management of project management cost norms. Project management cost norms can be adjusted if there is a reasonable reason, clearly explained and approved by the competent authority. Adjustments must be careful to ensure that the total investment is not exceeded unnecessarily and still comply with legal regulations.

Applying technology and software like Bizzi not only helps businesses automate project cost management, but also ensures transparency, tax compliance and control of spending according to internal policies. This is especially necessary when businesses implement multiple projects in parallel or have complex accounting systems.

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