CONTINGENCY COSTS IN BIDDING AND CONSTRUCTION ACTIVITIES AT PRIVATE CONSTRUCTION ENTERPRISES: PRACTICAL LESSONS LEARNED

Abstract

Contingency costs are a critical component in the cost estimation and financial accounting practices of construction enterprises, especially in the context of an evolving legal framework that grants greater autonomy to investors and consultants, while demanding higher transparency and adherence to financial accounting and tax management policies. This paper examines the differences in the nature, objectives, and methods of establishing contingency costs in construction cost estimation (as per the Ministry of Construction) and in financial accounting (according to VAS 18). Through legal analysis and practical case studies, the paper highlights the prevalent confusion in recognizing and accounting for contingency costs, leading to financial violations, tax arrears, and discrepancies in financial reporting. Additionally, the author identifies gaps in the inter-ministerial guidance between the Ministry of Finance and the Ministry of Construction, which pose challenges for enterprises, particularly in the private sector. Based on these findings, the paper proposes integrated solutions to enhance accounting capabilities, foster internal coordination, and recommends the issuance of inter-ministerial legal guidelines to standardize the recognition and control of contingency costs, thus contributing to the refinement of both theoretical and practical frameworks for contingency cost accounting in private sector construction enterprises