Analysis of foreign aid project budget preparation?

At present, there are many types of complete sets of foreign aid projects, including railways, highways, civil buildings, public buildings including steel structures, etc. There are currently no unified regulations in China regarding foreign aid project budgets. At present, only a few national normative documents such as the "Management Regulations on the Preparation of Budget Estimates for Complete Foreign Aid Projects" Shang Yuanfa [2008] No. 533 (hereinafter referred to as "Document No. 533") are available for reference. Document No. 533 provides a programmatic explanation of the cost division of foreign aid project estimates and the cost components. The specific budget must be determined item by item according to the actual situation and in accordance with the preparation steps.

2 Steps in preparing budget for foreign aid projects

2.1 Selection of quotas

To budget for foreign aid projects, we must first select the country, industry, and region based on the actual situation of the foreign aid project. , enterprise quotas, among which highway and railway projects are generally referred to the domestic industry quotas by the Foreign Aid Department of the Ministry of Commerce, and construction projects are generally referred to relevant quotas in Beijing or enterprise quotas. Of course, specific to a certain project, it must be determined based on the actual situation of the project and the company's own situation. Aided by a large-scale comprehensive project in Tanzania, Africa, it designed multiple types of construction projects such as pavement concrete, professional buildings, and steel structures. Among them, the pavement part adopted domestic industry quotas, and professional buildings and steel structures adopted the 2012 Beijing Construction Project Pricing quotas (if the tenderer requires list pricing, the relevant quotas must be combined into a list item quotation in accordance with the 2013 list pricing specifications), and then the price will be determined based on market conditions. The selection of quotas does not necessarily require those from the latest year, because quotas from earlier years have a high proportion of labor and a relatively small proportion of mechanical construction, which sometimes coincides with the current situation in recipient countries where labor is more abundant and cheaper, and machinery and equipment are less.

2.2 Project Quantity Calculation

After the budget quota is selected, the next step is to calculate the project quantity item by item according to the sub-projects specified in the quota and group them item by item. If the domestic quota subheading cannot fully cover the construction content of foreign aid projects, additional subheadings need to be added. When calculating the quantities of foreign aid projects, two points need to be noted. Completely adopt domestic norms, standards, atlases and customary practices. The calculation of engineering physical quantities is no different from that in China. If local standards, specifications and practices are partially or fully adopted, it is necessary to carefully study the local design standards and detailed structures, completely and accurately determine the quota or list sub-item and calculate the engineering quantities. . Measure items that require calculation of engineering quantities. Due to the special construction environment in the recipient country which is different from the domestic construction environment, it is very difficult to determine the construction volume of the measure project. In a large-scale project aiding Africa in Tanzania, since there was no water source at the construction site, three additional measures were added: digging reservoirs, drilling wells, and dispatching water from elsewhere with water trucks. The engineering volume of the reservoir needs to be determined based on calculations and on-site conditions, while the engineering volume of well drilling is closely related to the water source depth and water output of the project location, and requires professional survey to determine. Therefore, for this kind of measure project that needs to determine the engineering quantity based on the actual construction site, it is necessary to master as much data, information, and on-site conditions as possible at the project location, so that the calculation of the engineering quantity is as realistic as possible, and provides a consistent basis for the package price. Based on actual project quantities.

2.3 Group price according to the engineering quantity

The group price mentioned in this article refers to the price after determining the engineering quantities of each quota or list sub-item based on the selected quotas and corresponding calculation rules. , the process of determining various project costs based on various cost information mastered by the construction company. Basic methods and procedures for budgeting and pricing of foreign aid projects. 1) Based on the relevant cost data and information from domestic, international and recipient countries, prepare the unit price of work materials and machines. 2) Combine the unit price of the work material machine and the fixed sub-project quantity to form direct engineering fees and measure fees (also other direct costs). If the quantity of work cannot be calculated in the measure fees, the entire project shall be priced. The total of direct engineering cost and measure cost is direct cost. 3) According to the selected fixed fee collection standard and refer to Document No. 533, determine the items and fee collection standards for foreign aid indirect costs, and determine the indirect costs. 4) Determine taxes and other project expenses based on various laws and regulations and cost regulations related to project cost, including domestic, international, and recipient countries’ tax laws. 5) Determine the profit rate based on the company's profit target, and summarize the aforementioned expenses to form a budget quotation.

Among the above procedures, the most core and complex ones are the determination of the unit price of the work material machine and the determination of indirect cost items and rates.

Analysis of the key points of the 3 group pricing work

The determination of the unit price of the work material machine and the items and rates of indirect expenses can be determined with reference to Article 19 of Document No. 533. It is worth noting that in the determination process, each enterprise has its own procedures and methods according to the actual situation. This chapter will do some discussion on the determination of labor and machinery unit prices and indirect costs.

3.1 Modification of the formula for determining the labor unit price

The labor unit price is the weighted average price of the unit price per day of Chinese workers and the unit price of foreign workers [2]. Document No. 533 also stipulates that the comprehensive labor unit price = (unit price per day for Chinese workers + unit price per day for local workers × Chinese and foreign labor ratio × Chinese and foreign labor efficiency ratio) / (1 Chinese and foreign labor ratio). Judging from the structure of the formula, the numerator is the total comprehensive labor price, the denominator is the Chinese and foreign mixed labor efficiency equivalent to the total number of Chinese workers' man-days, and the ratio of the numerator to the denominator is equal to the comprehensive man-day unit price. After reviewing various foreign aid project literature and related papers, and conducting research based on the investigated foreign aid project budget examples, the author believes that the above formula should be modified in two aspects. The numerator should be revised to (unit price per day for Chinese workers, unit price per day for local workers × foreign-to-Chinese labor ratio). In actual calculations, the ratio of Chinese and foreign workers in the numerator and denominator of the original formula is both the ratio of foreign and Chinese workers. This has been verified by many documents and budget examples. The denominator should be revised to (1 labor ratio between foreign and Chinese × labor efficiency ratio between Chinese and foreign). Since the denominator is the total value of the mixed work efficiency of Chinese and foreign workers relative to the working days of Chinese workers, the ratio of Chinese and foreign work efficiency should be moved to the denominator. The revised formula is comprehensive unit price per working day = (unit price per working day for Chinese workers x unit price per working day for local workers × foreign-to-Chinese labor ratio)/(1 foreign-to-Chinese labor ratio × Chinese-foreign labor efficiency ratio). The original formula and the revised formula are now calculated as examples. In order to make the comparison clearer, this article uses typical examples selected from many foreign aid literature [3] for discussion. The “original calculation formula calculation” in Table 1 is a typical algorithm found in many foreign aid documents. In order to verify the correctness of the two results, first assume that the Chinese and foreign work efficiency ratio is equal to 1, then the results of the two formulas are both 117.13 yuan/comprehensive man-day, and in this example, the Chinese and foreign work efficiency ratio is 1:1.5<1, In other words, one working day abroad with very low price can be equivalent to 1.5 domestic working days, and the comprehensive unit price of working days will obviously be reduced. According to the calculation results shown in the table above, the comprehensive unit price calculated by the revised formula is reduced and is more in line with the actual situation.

3.2 Calculation of depreciation expenses for machinery

For machinery provided by foreign aid project construction enterprises, only the usage fee is calculated, and the purchase fee is not included. Usage fees are divided into first-category expenses and second-category expenses: first-category expenses include depreciation fees, maintenance and repair fees, and transportation premiums; second-category expenses include on-board labor costs and power and fuel costs. The unit price per shift is prepared based on the quota of construction machinery shift labor and material consumption. For machinery rented locally by construction enterprises, the unit price per shift is calculated based on the local rental fee and the actual second-category expenses [4]. Among them, the calculation of depreciation expenses is generally based on the construction period of the foreign aid project as the depreciation life and adopts the accelerated depreciation method. For large machinery that cannot be disposed of after use, the residual value rate will not be calculated. In a large-scale comprehensive project aided by Tanzania, the construction period is three years. After the construction is completed, all machinery will be donated to Tanzania as foreign aid materials, so the residual value rate will not be calculated. The mechanical depreciation fee is flattened into the mechanical shift price using 3 years as the depreciation period. Other expenses included in the shift price are calculated based on the actual occurrence.

3.3 Determination of indirect costs

The indirect cost items of foreign aid projects have the names and contents of the indirect cost items in the fixed fee standards of countries, industries, regions and enterprises. There is a certain difference. For example, profits in foreign aid projects are indirect expenses. In addition to the indirect expenses of foreign aid projects, there are also expenses for foreign affairs activities, etc. Therefore, it is necessary to carefully compare the fee items and contents between the two to avoid double counting and misreporting of omitted items.

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