Summary of Doctoral thesis in Economics: Managment accounting of road and bridge engineering construction cost at civil engineering construction corporation under the ministry of transport

MINISTRY OF EDUCATION AND TRAINING
THUONGMAI UNIVERSITY
-------------------------

NGUYEN THI THAI AN

MANAGMENT ACCOUNTING OF ROAD AND
BRIDGE ENGINEERING CONSTRUCTION COST
AT CIVIL ENGINEERING CONSTRUCTION
CORPORATION UNDER
THE MINISTRY OF TRANSPORT

MAJOR: ACCOUNTING
CODE: 62.34.03.01

Summary of doctoral thesis in economics

Hanoi, 2018


Scientific instructors
1. Assoc. Prof. Dr. Do Minh Thanh
2. Dr. Nguyen Tuan Duy

Scientific instructors

Judge 1:
Judge 2:
Judge 3:

The thesis is to be presented at the Thesis Council at the

university level at ………………………………………………
At……….. hour …… day ………. month ………. year ……

The thesis is available at :
- the National Library of Vietnam
- the library of THUONGMAI UNIVERSITY


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PREFACE
1. Urgency of the thesis topic
Investment in transport infrastructure construction is considered a
strategic solution to ensure that the goals of economic development and
national defense and security are met.
During 2001-2015, there was breakthrough development in
Vietnam's transport infrastructure in terms of scale expansion and
quality improvement. Domestic road and waterway transport routes
were upgraded to meet the demand transport which enjoyed the anuual
growth rate of above 10%. In the Global Competitiveness Report of
Transport Infrastructure during 2015–2016” by the World Economic
Forum, Vietnam rank at No 67 out of 138 countries (compared to the
position of 103/139 in 2010). According to the World Bank, the rapid
development of transport infrastructure led to the continuously high
annual growth rate of Vietnamese logistic market (at 16%-20%).
The contribution of civil engineering construction corporations is
vital to the development of the national transport infrastructure under
the Ministry of Transport (MOT). These are leading companies in
Vietnam in terms of transport infrastructure construction. Thousands of
kilometers of transport toad, hundreds of bridges of large and small
scale connecting all regions of the countries have been built by

engineers and workers at civil engineering construction corporations,
which contribute to the national cause of industrialization and
international economic integration. There are unique and recordbreaking works such as Hanoi - Lao Cai express way, Nhat Tan bridge,
Hai Van tunnel...
In carrying out the resolutions No.59/2011/ND-CP and
189/2013/ND-CP of the government, civil engineering construction
corporations have been equitized since 2013.
In addition tos
opportunies, these corporations are also faced with many challenges. To
improve competitiveness, they need to find solutions to invest in
technological upgrade and renovate the management mindset to utilize
resources. How to utilize management tools is a matter of utmost
important and a regular task for company managers. Therefore, the
improvement of accounting activities in general and management
accounting of engineering construction cost in particular is essential in


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providing necessary economic information for company executives to
make appropriate and effective decisions.
The main tasks of management accounting of engineering
construction cost are to collect, handle information about construction
cost; supervise cost norms, create cost estimates and to provide and
analyze information of engineering construction cost for planning and
the decision-making process.
The main business field of civil engineering construction
corporation is about building roads and bridges of large scale,
complicated structure, long construction times and under the influence
of weather elements. Each of these transport works has to follow
procedures and technical standards issued by the government. The

selling price is determined prior to construction; therefore, to make
profit, construction companies need to apply advanced and appropriate
construction measures to control cost factors well and reduce unit price.
Through studying the reality of management accounting at civil
engineering construction corporations, the author chose the following topic
for the doctoral thesis: “Management accounting of road and bridge
engineering construction cost at civil engineering construction
corporations under the Ministry of Transport.” The thesis aims to evaluate
the reality and propose solutions to improve management accounting of
road and bridge engineering construction cost at civil engineering
construction corporations in the context of economic integration.
2. Overview of studies about management accounting of
engineering construction cost
2.1. Local and international studies
Firstly: studies about management accounting
Studies about management accounting started in the 19 centuries
regarding its fuctions, roles, and content. Here are a number of
representative works:
In Advanced management accounting ((2015, Prentice Hall),
authors Kaplan, Robert S., Alkinson, Anthony studied the establishment
and development of management accounting at companies in the
following basic contents: role, cost behaviour method, cost allocation
according to activity-based costing (ABC) method, construction of cost
centers at companies, cost items for the decision-making process;
balanced scorecard method. In “The use of management accounting


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practices in Malaysia SMES” (2012), Kamilah Ahmad studied the
application of management accounting tools such as: classifying costs,

making estimates, evaluating operating efficiency, strategic management
accounting in small and medium sized enterprises in Malaysia.
There are also studies of author Nguyen Viet (1995) (“Improving
accounting in Vietnam”) and Pham Van Duoc (1997) (“Direction for
building content and applying management accounting at Vietnamese
companies.” They pointed out differences between management and
financial accounting; analyzed roles, functions, contents of management
accounting and application at Vietnamese companies such as: classifying
cost, making estimates, analyzing the relation among cost, volume, and
profit and also cost fluctuation.
In “Direction for building the report system of management
accounting and applying it in Vietnamese companies”, author Pham
Quang clarified the theoretical framework of building the report system
of management accounting at Vietnamese companies including the list of
reports, purpose, function, structure and report methods. In “Building
management accounting at Vietnamese production companies”(2008),
author Huynh Loi contributed to systemizing basic issues of management
accounting such as: the role of management accounting at companies,
model and application mechanism of management accounting model in
all forms of production companies of different scales. In “Improving
management accounting at construction corporations under the Ministry
of Defence” (2016), author Do Thi Thu Hang systemized theoretical
issues about management accounting at construction companies and from
that provided solutions to improve cost management, including the
proposal of using modern costing methods.
There are also studies about specific industries such as: textile
(Duong Thi Mai Ha Tram - 2004), and post and telecommunications
(Nguy Thu Hien - 2012). They focused on specific issues of
management accounting that are applied to specialized companies. All
studies concluded that the role of information provision of management

accounting were not brought into full play. Also, information provided
by management accounting was not given enough consideration and
investment. All authors pointed out the role and function of
management accounting regarding information provision for managers.


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Secondly: studies about cost management accounting at
companies in general
Studies about management accounting can be divided into the
following phases:
Phase 1 - before the 20th century: this is the establishment period
of management accounting. Management accounting applied analysis
method of ratios and financial indicators to help managers manage
business and production activities.
Phase 2 - early 20th century to before 1970: break-even analysis
and cost analysis methods were created for management accounting to
control cost.
Phase 3 - during the 1970s: management accounting was based
on quantitative information to analyze cost information and behaviour;
from that desired profit was determined to help management control
cost and make decisions.
Phase 4 - from the 1980s until now: management accounting was
combined with strategic management to establish management methods
such as: target cost, activity-based management accounting, balance
scoreboard.
The establishment and development of management accounting
and cost management accounting are divided into four different period.
It can be seem that cost management accounting started to be created in
the second phase and begun to develop strongly in the 4th phase in line

with modern management methods. Cost management accounting is the
combination of financial accounting and management accounting.
There are many foreign authors who studied about cost
management accounting in enterprises, such as:
In “Activity Based costing in New Zealand” (2005), Sarah Moll
looked into information and superiority of ABC method. This study also
pointed out the difference between companies applying this method and
those not regarding the advantages of ABC.
In “Activity-Based costing in supply chain cost management
decision support systems” (2011), Amir H.Khataie studied and
developed the ABC method for business and production cost; according
to this, production cost is controlled and analyzed in the implementation
process of each order.


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In “Cost Accounting: Traditions and Innovations (1998),
Barfield, Raiborn & Kinney studied and pointed out the differences
between the two costing method: the ABC method applies criteria for
allocating operating cost into cost objects based on the activities of cost
objects; meanwhile in traditional costing method, cost allocation is done
based on output volume or labor cost without relation to loss cost of
cost objects
In “Cost management: Accounting and Control” (1997),
Hanson&Moowen pointed out the accounting content of responsibility
centers for executives in an organization. The system of responsibility
accounting is established to promote goals among executives.
An article titled “Japanese Cost Accounting Systems - analysis of
the cost accounting systems of the Japanese cost accounting standard”
(MPRA Paper No. 17117, posted T. September 2009 15:28 UTC) by

Winter Peter provided an in-depth study into cost accounting in Japan
and from that systemized the Japanese system of standard cost
accounting as well as compared the Japanese standard cost accounting
system with the accounting systems in Germany and the U.S.
Locally, there have been many studies about cost management
accounting since 2000, specifically:
In the study named “Building the model of cost management
accounting at Vietnamese pharmaceutical production companies”
(2007), Pham Thi Thu Thuy provided a comprehensive overview about
cost management accounting and application possibility for Vietnamese
pharmaceutical companies; then proposed a model to improve cost
control via classifying cost, making cost estimates, analyzing cost
fluctuation, identifying each production lot’s appropriate scale, and
evaluating the detailed performance according to each product,
production unit and distribution branch
With the study titled “Organizing management accounting of
transport cost in Vietnamese road transportation companies”, Nguyen
Thi Ngoc Lan (2012) provided an in-depth analysis of cost management
accounting in a specific field: goods transportation. That author
proposed two methods of classifying cost (by the ABC method and cost
behavior) and recommended the ABC method to help transport
companies control cost better and have more accurate cost information.


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In “Improving management accounting of transport cost at
Vietnamese railway transportation companies in the context of
international economic integration” (2012), Vu Thi Kim Anh studied
and systemized basic theoretical issues and practical situation of cost
management accounting at Vietnamese railway transportation

companies in the context of international economic integration. That
author proposed recommendations to improve contents of cost
management accounting in these companies, including: building the
system of norms to control cost, classifying transport cost, building the
system of norms, and cost estimates; providing transport costing
methods; analyzing and evaluating cost implementation information to
assist cost control and assess the responsibilities of management levels
in railway transportation companies.
The contents of cost management accounting are also studied in
specific fields, such as: in plastic industry by Nguyen Thi Mai Anh
(2014), steel industry by Dao Thuy Ha (2015) [9], sugar cane industry
by Le Thi Minh Hue (2016), cement industry by Tran Thi Thu Huong
(2014), and medical industry by Vu Thi Thanh Thuy.
Thirdly: studies of management accounting of engineering
construction cost at engineering construction companies
In a study named “Cost accounting methods for construction
projects in North- West Russia” (2009), Jouni Keisala looked into the
superiority of ABC method, which includes all cost incurred in the
accounting period (production cost, cost of sales and management cost)
and allocated based on actual level for each activity and contribution to
each activity during the production and distribution process. Accordingly,
the application of ABC method brings about more accurate results.
In a study named “A costing system for the construction industry
in Southern Africa” (2015), Evans Mushonga analyzed the
shortcomings of the traditional costing method in calculating
construction unit price in South Africa. That author believed that the
application of ABC method would help companies identify accurately
component indirect costs of the construction unit price. The application
of ABC method in costing was believed to be the key for the decisionmaking process of enterprises and the analysis of profit from
construction contract. That author also proposed that companies should

apply both traditional and ABC methods at the same time. The


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traditional costing method has the principle role of providing
information for people outside the companies while the ABC costing
method focuses on providing information for executives in deciding
bidding prices and making estimates for engineering construction cost.
Nguyen La Soa (2016) presented a study named "Improving cost
management accounting at Civil Engineering Construction Corporation
8" which helped to systemize basic theories about cost management
accounting in engineering construction companies. From that, that author
proposed solutions to improve cost management accounting for
subsidiaries of CIENCO8 according to contents that are closely related to
the implementation of management functions such as: identifying cost,
building the system of cost norms, improving the costing method via
target cost and Kaizen costing methods, controlling cost via responsibility
centers to serve the control and decision-making functions.
In her study named “cost management accounting at engineering
construction companies in Hanoi”, Le Thi Huong (2017) systemized
theoretical basis of cost management accounting at engineering
construction companies and how the characteristics of their operation
affect cost management accounting. That author provided solutions to
improve the classification of cost, building cost norms and making cost
estimates and also propose using the method of identifying target cost
for engineering construction companies in Hanoi.
2.2. Research gap
The author believes that there exits a research gap in management
accounting, cost management accounting and management accounting
of engineering construction cost to meet the management requirements

in the context of market economy and international economic
integration. The author continues to inherit the results of local and
international research; then studies and further clarifies several
theoretical and practical issues related to management accounting of
road and bridge construction costs at civil engineering construction
corporations under the MOT. From that, the author proposes solutions
to improve management accounting of road and bridge construction
costs at civil engineering construction corporations under the MOT
during the period of international economic integration.


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3. Research objectives and goals
Research objectives: studying and proposing solutions to
improve management accounting of cost of road construction cost at
civil engineering construction corporations under the MOT in the
context of market economy and international economic integration.
Research goals:
+ Systemizing and analyzing to clarify basic theoretical issues of
management accounting for engineering construction cost in
engineering construction companies.
+ Studying, analyzing experience of cost management accounting
of companies from developed countries, drawing lessons for
engineering construction companies in generals and corporations under
the MOT in particular.
+ Evaluating the practical situation of cost management
accounting at civil engineering construction corporations under the
MOT, obtained results, shortcomings and reasons for shortcomings.
+ Proposing solutions to improve management accounting of
road and bridge construction costs at civil engineering construction

corporations under the MOT.
4. Research questions
To achieve research objectives and goals, the author focuses on
studying, analyzing, and solving these questions:
- What is the theoretical basis of cost management accounting in
engineering construction companies?
- What are operating characteristics of engineering construction
companies that affect management accounting of engineering
construction cost?
- What is the practical situation of management accounting of
broad and bridge construction costs at civil engineering construction
corporations under the MOT and shortcomings to be addressed?
What are solutions and recommendations to improve
management accounting of road and bridge construction costs at
corporations under the MOT to ensure information provision for
management requirements during international economic integration?


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5. Research objects and scope
5.1. Research objects
Studying theoretical and practical issues of management
accounting of road and bridge engineering construction costs at
corporations under the MOT
5.2. Research scope
In terms of content: Studying management accounting of road
and bridge engineering construction costs at civil engineering
construction corporations under the MOT from the perspective that they
are are construction contractors of road and bridge works.
In terms of scope: Studying civil engineering construction

corporations (including head office, dependent accounting units and
subsidiaries of 6 corporations under the MOT).
In terms of time: Studying the practical situation of management
accounting of road and bridge engineering construction costs at civil
engineering construction corporations under the MOT from 2016 up to
now with proposals applied for coming years.
6. Research methodologies
6.1. Methodology basis and approach
Regarding methodology: The thesis is done using dialectical
materialism and historical materialism and in the dialectical relationship
between the activities of the business.
6.2. Research methodology
The thesis applies the qualitative research method and such
methods as systematic, interpretation, inductive, comparison, survey
methods to analyze, evaluate and draw reasonable conclusions.
7. New contributions of the thesis
In terms of theory: The thesis analyzes and evaluates operating
characteristics of engineering construction companies that affect
management accounting of engineering construction cost as well as
clarifies theoretical issues about management accounting of engineering
construction cost in engineering construction companies such as:
engineering construction cost; nature, role, and content of management
accounting of engineering construction cost.


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In terms of reality:
+ The thesis points out that operating characteristics of corporations
affect management accounting of road, bridge construction cost
The thesis conducts a survey and analyzes the practical situation

of management accounting of road and bridge construction. The thesis
applies qualitative measurement tools to evaluate and present the
practical situation of management accounting of engineering
construction cost at corporations; from that the thesis points out
shortcomings and results for shortcomings.
+ Based on the directions and development strategies of the
transport industry and of corporations under the MOT, the thesis presents
principle requirements and propose solutions to improve management
accounting of road and bridge construction cost at civil engineering
construction corporations under the MOT such as: identifying and
classifying engineering construction cost; building the system of cost
norms and estimates for cost and bridge construction cost; applying the
method of construction costing; collection of implementation information
of engineering construction cost for management of accounting
documents, accounts, books and report; analyzing information of road
and bridge construction cost for business management.
8. Structure of the thesis
Chapter1: General theory about cost management accounting at
engineering construction companies.
Chapter 2: Reality of management accounting of road and bridge
construction cost at corporations under the MOT.
Chapter 3: Improving management accounting of road and
bridge construction cost at corporations under the MOT.
Chapter 1
GENERAL THEORY OF COST MANAGEMENT
ACCOUNTING OF ENGINEERING CONSTRUCTION COST
AT ENGINEERING CONSTRUCTION COMPANIES
1.1. Production and business characteristics of engineering
construction companies affecting management accounting of
engineering construction cost

Engineering construction companies have distinctive operating
characteristics that affect management accounting of engineering


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construction cost such as: characteristics of product, mode of
production, operation, and management.
1.2. Engineering construction cost and requirement for cost
management at engineering construction companies
1.2.1. Concept, nature, and significance of engineering construction cost
The thesis studies many concepts of cost in general and
engineering construction cost in particular from different scopes and
perspectives. Regardless, there are three required characteristics of cost:
(1) cost is the loss of resources; (2) the lost of resources must be
associated with the performance; (3) loss of resources must be assessed
(measured by value).
1.2.2. Requirement for controlling construction cost
- Building cost norms and cost estimates based on appropriate
scientific basis and the practical situation
- Controlling engineering construction cost according to each
project and project category
- Classifying cost classified scientifically and in accordance with
standards
- Controlling engineering construction cost in each unit to
evaluate responsibility and performance of each unit
- Regularly analyzing, evaluating cost categories and factors to
have the basis for proposing solutions to cut down cost, reduce unit
price and assists the decision-making process.
1.3. Management accounting of engineering construction cost in
engineering construction companies

1.3.1. Nature, role of management accounting of engineering
construction cost in engineering construction companies
The author concludes that: “Management accounting of
engineering construction cost is a component of management
accounting that collects, processes, provides and analyzes information
about the past and the future to assist company executives in planning,
controlling, evaluating performance and making decisions."
The role of management accounting of engineering construction
cost is shown in each management function as follows: Planning
(identifying the goals to be achieved and outlines the steps to be taken


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to reach these goals); implementation; evaluation of performance;
decision-making (the combination of the above-mentioned functions) .
1.3.2. Content of management accounting of engineering
construction cost in engineering construction companies
The thesis presents contents of management accounting of
engineering construction cost, including: (1) Identifying and classifying
engineering construction cost; (2) Building the system of norms and
estimates of engineering construction cost; (3) Collecting
implementation information of engineering construction cost for
requirements of cost management accounting; (4) Analyzing
information of engineering construction cost for management
1.4. Cost management accounting at companies in several countries in
the world and experience lesson for Vietnamese companies
Through analyzing the content of management accounting of
production cost in the U.S, France, Japan, experience lessons are drawn
for Vietnamese engineering construction companies in improving
management accounting of engineering construction cost.

Firstly: Engineering construction companies need to identify and
classify engineering construction cost; from that they need to choose the
appropriate method of cost classification to help control cost effectively,
which serves as the basis for creating cost target and estimates.
Secondly: Building the cost norm system as the basis to control cost
effectively and compare the reality of implementation with estimates.
Thirdly: Applying modern costing methods to achieve the goals
of cutting down cost. With the operation characteristics of
construction companies nowadays, modern methods of cost
identification can be applied to provide useful information of
managers. For construction compaies that invest in modern machines
and equipment for implementation, they can study and choose the
method of identifying target cost.
Fourthly: Construction companies often apply the contracting
method so they learn from the experience of companies in the US and
France to establish resposibility centers, especially cost centers, to
control cost and evaluate management responsibilty at cost centers.


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Fifthly: Companies need to study the models of cost management
accounting in other countries. They can apply the combined model of
cost management accounting and financial accounting in the same
accounting apparatus like in US companies.
CONCLUSION OF CHAPTER 1
In chapter 1, the author clarifies general issues of
management accounting of engineering construction cost in
engineering construction companies: identifying how operating
characteristics of engineering construction companies affecting
management accounting of engineering construction cost and

systemizing contents of management accounting of engineering
construction cost in engineering construction companies including
(1) Identifying and categorizing engineering construction cost; (2)
Building the system of norms and estimates of engineering
construction cost; (3) Presenting methods of identifying engineering
construction cost, (4) Collecting implementation information of
engineering construction cost for requirements of cost management
accounting; (5) Analyzing information of engineering construction
cost for management. In addition, the author studies experience of
applying management accounting of engineering construction cost
at companies from developed countries to draw experience lessons
for Vietnamese engineering construction companies.
Chapter 2
REALITY OF MANAGEMENT ACCOUNTING OF ROAD AND
BRIDGE ENGINEERING CONSTRUCTION COST AT CIVIL
ENGINEERING CONSTRUCTION CORPORATIONS UNDER
THE MINISTRY OF TRANSPORT
2.1. Overview of civil engineering construction corporations
2.1.1. Establishment and development of civil engineering
construction corporations
Civil engineering construction corporations under the MOT were
established and developed during the Vietnamese war against the U.S.


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They are reputable contractors in the field of infrastructure construction
for the transport industry. After being transformed into corporations,
they have made progress, firmly established their reputation and got
recognized by reputable domestic and international organizations for the
achievement and quality of transport infrastructure products.

2.1.2. Production and business characteristics of corporations that
affect management accounting of engineering construction cost
2.1.2.1. Production, business characteristics of corporations
a. Business fields of corporations
Building transport works; Building industrial and civil works;
Providing construction investment consultancy; Providing design survey;
Supervising transport works; Manufacturing construction materials…
b. Characteristics of products and working procedures
Transport construction products are often made according to
single orders.The same type of products is made at different places with
different conditions and cost.
c. Characterisics of the lump-sum mechanism
Survey results show that these corporation are applying the
following contracting mechanism: 51,11% applies the lump-sump
mechanism by cost categories; 26,67% applies the work package
mechanism, and 22,22% applies both mechanisms.
2.1.2.2. Characteristics of management organization and financial
management mechanism at corporations
100% of corporations organize their magement apparatus
according to the online functional model. They all operate according to
the model of parent company - subsidiaries.
2.1.2.3. Characteristics of accounting organization at corporations
Survey results from 45 companies of 6 corporations show that: 12
companies (29%) organize the accounting apparatus according to the
centralized model and 33 companies (71%) apply the combined model
(both centralized and decentralized)
2.2. Reality of management accounting of road and bridge engineering
construction cost at civil engineering construction corporations
2.2.1. Reality of identifying and classifying road and bridge engineering
construction cost at civil engineering construction corporations

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100% of corporations identify and classify cost according to
function, economic content and inductive ability.
2.2.2. Reality of building the system of norms and estimates for
engineering construction cost at corporations
Survey results of the lump-sump mechanism basis and control of
engineering construction cost in projects/project categories show that:
60% companies under these corporation contract execution teams and
units according to the negotiated ratio among them; 40% have built the
internal cost norms to contract and control engineering construction cost
of projects/project categories. The system of engineering construction
cost norms in these companies includes: cost norms for material, labor,
construction machine.
2.2.3. Reality of collecting implementation information of
engineering construction cost for management requirements
Survey results show that engineering construction costs are
collected and calculated according to the actual cost method; the cost
objects are projects/project categories. To collect implementation
information of engineering construction cost for management
requirements, corporations are based on the systems of accounting
documents, books, reports of management accounting of engineering
construction cost.
2.2.4. Reality of analyzing engineering construction cost
information for management
Survey results of which methods corporations use to analyze
engineering construction cost for management show that:
* Analyzing differential cost for cost management: 100% of
corporations compare and analyze difference in actual cost with cost the

precious period or with estimates based on the total number amount and
each incurred cost category.
* Analyzing appropriate information to assist the decisionmaking process: Civil engineering construction corporations often have
to make such business decision as: bidding price, price of lump-sump
contract, selection of execution method, decision to continue or end the
operation od a unit; investment,...
* Analyzing, evaluating the operation of cost centers: 100% of
civil engineering construction corporations have not decentralized
management and identified responsibility centers for cost control. The


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system of responsibility accounting has not been applied so the analysis
and evaluation of performance of responsibility centers have not been
carried out.
2.3. Evaluating the practical situation of management accounting of
road and bridge engineering construction cost at corporations
Besides obtained results of management accounting of
engineering construction cost at corporations, there are still
shortcomings:
* Because of the current identification and classification of
cost, management accounting of engineering construction cost has yet
provided information for the decision-making process of executives.
* About the system of norms and estimates of engineering
construction cost: Civil engineering construction corporations have
built the cost norms for material, labor and construction machine but
not for general cost category. They still rely on the norms promulgated
by the government to build their internal cost norms. In reality, no
enterprise builds the complete system of cost estimates like mentioned
in the content of Chapter 1.

* About the method of identifying cost: To recognize cost,
corporations apply the method of identifying engineering construction
cost according to works and the method of calculating and allocating
cost according actual cost. These methods have simple information
collection procedure; however, they only provide production and unit
cost information for executives at the end of the accounting period.
Information about engineering construction cost is received after the
implementation process is completed so it is difficult to reduce cost and
unit price of projects/project categories.
*About the method of collecting accounting information of
road and bridge engineering construction cost at civil engineering
construction corporations: The systems of accounting accounts,
documents are not adequate to collect useful information for
management accounting. The system of accounting books have yet
satisfied the requirement of providing information for management
accounting of engineering construction cost in creating cost estimates,
controlling and analyzing cost.


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* About cost management accounting reports: They are not
adequately created to provide information of engineering construction
cost to help executives make decisions. Reports about management
accounting of engineering construction cost, if any, are still spontaneous
and inconsistent.
* About analyzing engineering construction cost to assist the
decision-making process: Most corporations have yet analyzed cost
fluctuations to help executives control cost. Cost centers have yet been
established so the analysis of cost to clarify cost fluctuations and the
reasons for fluctuation has not been done. Corporations have not

assigned responsibility of management level for each cost fluctuation at
units related to production cost.
CONCLUSION OF CHAPTER 2
In Chapter 2, the author studies and analyzes the reality of
management accounting of road and bridge engineering construction
cost at corporations under the MOT. The author analyzes the
characteristics of operation, management organization, accounting
organization that affect management accounting of road and bridge
engineering construction cost.
Also, the author synthesizes research results about the reality of
management accounting of engineering construction cost according to
the following contents: identifying and classifying engineering
construction cost; building the system of norms and estimates of
engineering construction cost; presenting the method of identifying
engineering construction cost; establishing the report system of
engineering construction cost in management accounting and
analyzing information of engineering construction cost to assist the
decision-making process. The author evaluates strong points and
shortcomings as well as analyzes reasons of such shortcomings.
Studied results in chapter 2 serve as the important basis for the
author to propose solutions to improve management accounting of
road and bridge engineering construction cost at corporations under
the MOT.


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Chapter 3
IMPROVING MANAGEMENT ACCOUNTING OF ROAD AND
BRIDGE ENGINEERING CONSTRUCTION COST AT CIVIL
ENGINEERING CONSTRUCTION CORPORATIONS UNDER

THE MINISTRY OF TRANSPORT
3.1. Development orientation and strategy of corporations under
the Ministry of Transport
The development of corporations in the coming years can be
generalized as follows: general orientation; strategic shareholder and
partner association orientation ,orientation for industry and products;
technology; intensive reform of company management.
3.2. Requirements to improve management accounting of road and
bridge engineering construction cost at corporations in the context
of international economic integration
- Provide information that meets management requirements in
the context of international integration
- Conform with characteristics of production, business and
company management organization
- Satisfy the goals of controlling cost of corporations
- Ensure feasibility and effectiveness
3.3. Solutions to improve management accounting of road and
bridge engineering construction cost at civil engineering
construction corporations.
3.3.1. Improving the identification and classification of engineering
construction cost
The author proposes the classification of road and bridge
engineering construction cost in relation with activity level and scope of
cost control.
+ Road and bridge engineering construction costs are classified
according to the relation with activity level into fixed cost, variable cost
and combined cost.
+ In classifying road and bridge engineering construction cost
according to the scope of cost control, cost incurred at teams, units,
departments are classified into controllable and uncontrollable costs so

assign the responsibility of controlling cost for each cost center.


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3.3.2. Improving the establishment of norms and estimates system
of road and bridge engineering construction cost
3.3.2.1. Improving the establishment of norms and estimates system of
road and bridge engineering construction cost
To accurately identify road and bridge engineering construction
cost, corporations should combine the methods of analysis-research,
statistics-experience with economic-technical analysis to build norms
for each cost type.
+ Improve the establishment of quantitative norms
+ Improve the pricing system
The pricing system includes cost of materials, labor, and
construction machine calculated for one unit of work volume or
construction structure.
The costing system specifies cost for each construction work; it is
built based on the system of economic-technical norms and pricing
system. The author proposes using norms for each cost and divide into
fixed cost and variable cost.
3.3.2.2. Improving estimates for road and bridge engineering
construction cost
* Grounds for creating estimates of road and bridge
engineering construction cost: Based on circulars, decrees and
guidelines of the Government, provinces and cities; contracts between the
investors and companies (projected winning price); internal norms: labor
norms (labor waste norms) unit price of working shift, internal labor unit
price; construction organization measure; market price: The actual market
price surveyed at the area of construction works.

* Method of creating estimates of road and bridge engineering
construction cost: To help corporations control and save cost as well as
to calculate profit in the production process, it is possible to create
estimates of road and bridge engineering according to the relation
between cost with activity level and be flexible according implemented
volume and price variables.
3.3.3. Improving the collection of road and bridge engineering
construction cost information for management requirement
3.3.3.1. Method to identify engineering construction cost
The author proposes that corporations apply the target costing
method to identify engineering construction cost and meet the cost


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information requirement of company executives in making timely cost
control decision, which help reduce the unit price of construction
products. The application of target costing method to identify
engineering construction cost is done with the following steps:
Step 1: Identifying target cost of each implementation process
of road and bridge construction.
Target cost is calculated for each work category to construct the
finished work volume. The calculation of target cost for each work
should be based on evaluating each work process’s importance; target
cost can be adjusted while total cost remains unchanged.
Step 2: Implementing the goal of cutting down road and
bridge engineering construction cost
This process combines actual results of engineering construction
cost in each implementation process so that the cost can be adjusted
appropriately according to the significance of each process. Actual cost
can be calculated for total construction work volume; if the actual cost

is higher than target cost, it is necessary to look into cost fluctuations in
each work category and find out the reasons to adjust, control and make
appropriate cost reduction; this helps corporations control costs and
achieve the projected target cost.
Step 3: Evaluating results of reducing road and bridge
engineering construction cost
When the implementation process of cutting down engineering
construction cost is estimated to complete, it is necessary to evaluate the
results in management accounting of engineering construction cost
through comparing the initial target of engineering construction cost
reduction with the actual implementation results. If the actual cost is
lower than the target cost, goods results are achieved for target profit
and engineering construction cost. In case actual cost does not surpass
ceiling cost but is equal to target cost, corporations need to check the
implementation procedures in all processes to cut down cost
appropriately.
In this scenario, the consistent application of
management tools, such as applying technology in construction and coordination among functional units in civil engineering construction
corporations are important to achieve the goal of reducing incurred
engineering construction cost.


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The author proposes that civil engineering construction
corporations establish cost centers according to the online functional
management model; they are divided into two groups: under
construction units and under the management unit.
3.3.3.2. Improving collection of implementation information of
engineering construction cost for management requirement
+ The document system to collect initial information of

engineering construction cost: To effectively carry out management
accounting of engineering construction cost, it is necessary to establish
and improve the accounting document system. Accounting documents
related to road and bridge engineering construction cost need to ensure
comparability between actual cost and estimated cost.
+ Improving the accounting account system for management
accounting of road and bridge engineering construction cost
according the location where cost is incurred: In the author’s opinion,
cost accounts need to be recorded in detail to meet the requirement of
financial accounting and cost management accounting. Through
encrypting account codes and applying software, it is quick and
efficient to synthesize data for cost management accounting report in
construction.
+ It is necessary to establish a synchronized system of
accounting books for management accounting of engineering
construction cost, including: accounting books for direct material cost,
direct labour cost, construction machine, general production cost, work
in progress... At present, account books of civil engineering
construction corporations have not met the requirement of providing
information to create estimates sand analyze information of
management accounting of engineering construction cost
+ Improving the report system of management accounting of
engineering construction cost: Based on the practical issues at
corporations, the author proposes two report systems: (1) Segment
reports; (2) Reports to provide information for decision making.
3.3.4. Improving analysis of road and bridge engineering
construction cost for company management
3.3.4.1. Improving analysis of differential cost
for controlling
engineering construction cost

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To help executives at construction corporations have necessary
information about differential cost, its is necessary to analyze cost based
on specific factors that cause such cost to incur.
3.3.4.2. Analyzing criteria of evaluating performance of cost centers
The aim of responsibility reports is to provide information to
evaluate responsibility in managing and using cost at units. Through
these reports, the head of each unit can manage cost effectively;
executives can have grounds for solutions of cutting down cost .
3.4. Implementation conditions of solutions to improve management
accounting of road and bridge engineering construction cost at civil
engineering construction corporations
3.4.1. From the government and state agencies
The government need to create a favorable environment for the
development of management accounting. The Ministry Finance should
issue circulars that provide guidelines in more details about the method,
scope and content of applying management accounting in types of
business. There should be supporting policies in place so that companies
can assess and apply management accounting of engineering construction
cost from developed countries. It is necessary to have standard training
programs about management accounting of engineering construction cost
at universities with upgraded content and teaching methods. Regarding
content, modern management accounting methods of engineering
construction cost should be put into the teaching program.
3.4.2. From civil engineering construction corporations
Regarding the competence of accountants:
Company executives need to know clearly what information they
need and have specific requirements for accountants. In addition, they

should provide clear information orientation via business strategies and
goals. Long-time accountants should receive additional training to
improve their knowledge of management accounting; new accountants
must pass training of management accounting before being recruited.
About organizing operating:
This has to be done based on specific conditions, business scale,
and financial management mechanism of civil engineering construction
corporations. They should improve the management mechanism by
decentralizing management level. In addition, they should identify the
relation among units and mong members of the accounting apparatus. It


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is necessary to proactively build the apparatus of management accounting
of engineering construction cost and from that step by step apply the
contents of management accounting of engineering construction cost
appropriately and improve the internal supervision system. The
connection between management accounting of engineering construction
cost with technology should be improved.
CONCLUSION OF CHAPTER 3
Based on general theoretical foundation of management
accounting of engineering construction cost and study about the reality of
management accounting of road and bridge engineering construction cost
at civil engineering construction corporations under the MOT in chapter
2, the thesis studies the improvement of management accounting of road
and bridge engineering construction cost at these corporations as follows:
improving the classification of engineering construction cost in relation
with activity level and scope of cost control; improving the creation of
internal system of norms and estimates of engineering construction cost;
improving the recognition of cost information in accounting documents,

accounts and books; improving the identification of engineering
construction cost according to target cost method to control engineering
construction cost effectively; improving the report system of management
accounting of engineering construction cost; improving cost analysis to
serve management requirements.
To implement solutions of management accounting of road and
bridge engineering construction cost, the author provides
recommendations for the government and corporations.
CONCLUSION
In the context of international economic integration, civil
engineering construction corporations need to have accurate and
effective policies in business management and operation which need to
be based on useful cost information provided by management
accounting of engineering construction cost.
The study about management accounting of road and bridge
engineering construction cost at civil engineering corporations under the