byNicholas Okafor, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie. Put and call options (that is, the right of the equity financiers or sponsors to compel the government to repurchase the assets or shares of the project company in the event that the project is expropriated or faces significant local risks). 19, 2011. Service fees are also liable to VAT at 7.5%. The private sector has also shown an increased appetite for investment in real estate. To be excused from performing its obligations whilst the force majeure event lasts, the party seeking to rely on the force majeure provision would typically be required to comply with additional contractual requirements to the satisfaction of the other party, including reporting and damage mitigation requirements. In addition, the NMWA does not apply to establishments that employ less than 25 persons, or in which people are employed on a part-time or piece-rate basis. This Scale was used for the next 14 years until 1992 when it was revised. Advised Kepco Energy Resources Limited, the joint venture company established by the Sahara Energy Group and Korea Electric Power Corporation, in connection with its acquisition of a 70% equity interest in Egbin Power Plc. The circumstances described can be expressed to be non-exhaustive in their scope. Strengthening the sector's institutional framework and increasing transparency. Recent projects include the: 67.32KW Solar Hybrid Mini Grid at Oloibiri, Bayelsa State; 234KW solar hybrid mini grid power plant in Shimankar Community, Shendam Local Government. This is, however, a contractual right and can only be exercised if it is included in the project document. All contractors are also required to comply with the National Building Code 2006, which sets outs the standards to be observed in the construction of different types of projects. Typically, contractors are allocated all the following risks: Risk of compliance with applicable law and regulation. Webprofessionals in the Built Industry to develop an harmonised scale of fees. However, the following are typical significant approvals. Failure to stamp an instrument will render it inadmissible as evidence in any civil proceedings before any Nigerian court. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 2.50% Balance 11, 2011. The Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. The PPP model has been implemented in various sectors of the Nigerian economy such as ports, transportation (road, rail, water and airports), health, housing, education, free trade zones, and most recently, in the electric power sector. Where the assets to be used in a construction project are liable to VAT, the purchaser must pay VAT on the consideration payable for such assets at the rate of 7.5%. Where a project involves the FGN, the procurement and tender process is usually supervised by the Infrastructure Concession Regulatory Commission and the Bureau for Public Procurement. This paper concerns an investigation into the causes of high costs of construction in Nigeria. However, if the Nigerian national is an engineer, engineering technologist, engineering technician, engineering craftsperson, or builder, they must register with either the Council for the Regulation of Engineering in Nigeria (COREN) or the Builders Council under the Builders Registration Act (. In 2019, the Ministry of Works and Housing set aside a total sum of 19.8 billion naira ($55 million) for the construction of 2,383 units of housing across the 36 states of Nigeria under the National Housing Program. There are usually no restrictions on the project sponsor's or the lenders' right to terminate the contract in the event of the contractor's bankruptcy or insolvency, unless otherwise stated in the contract. Other provisions include warranties, risk allocation and methods for payment of contractor's fees, as well as performance guarantees. The Harmful Wastes Act criminalises the unlawful carriage, deposit or possession of harmful waste in Nigeria, its territorial waters or exclusive economic zones. National Environmental (Electrical/Electronic Sector) Regulations, SI No. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. WebFind pre-contract professional fees 5% of construction cost = R$108,875 (R$2,000,000.00 to R$4,000,000.00 Range) Contract Value/Building Gross Floor Area = 2,177,500.00/347m2 = R$6275.22 per m2 Pre-contract professional fees 5% of R$6275.22 = R$313.76 per m2 of gross floor area Stage A 7.5% of R$313.76 = R$23.53 per m2 WebCONSULTANCY AGREEMENT & PROFESSIONAL FEES SCHEDULE ARCHITECTURAL CONSULTANCY AGREEMENT 7 In the event that the Architect is required to process the application, the Client shall pay the Architect an additional fee based on a time charge as per Schedule 4.11 and expenses based on cost plus 10% in respect of the processing of such The contractual provisions typically negotiated to cover material delays include all or any of the following: Submission of a revised programme setting out the execution of the project. The EIA Act specifies different types of projects in respect of which a mandatory study must be conducted. WebFee is to be negotiated subject to a minimum of N50,000=. This Scale was used for the next 14 years until 1992 when it was revised. Corporate guarantee from the sponsors (and sponsors' parent companies in international projects). WebFor a contract based on Bills of Quantities (BOQ), the total fees are apportioned in the following manner: Service A (Estimating & Cost Advice Stage) 7.5% Service B (Documentation Stage) 42.5% Service C (Contract Administration Stage) 30% Service D (Final Account Stage) 20% Provisional BOQ Contract: Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. Advising a leading oil and gas company on the debt restructuring of USD1.83 billion Senior Secured Medium-Term Acquisition Facility provided to the company by a syndicate of onshore and offshore lenders. d) PSGS 4: Property Management. The client has the right to suspend payments to the contractor by issuing a pay less notice ,if this can be done, within the prescribed timeframe under the contract. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. Fixed and floating charges over all the project company's assets and receivables, bank accounts. The collapse in oil prices and the pandemic plunged the country into recession in 2020. This law is expected to provide a much-needed overhaul of the Nigeria's oil and gas sector, thereby creating multiplier effects across the entire construction chain and the economy. Parties are free to determine the scope, nature and term of their contracts to the extent that the terms of those contracts do not breach the laws of Nigeria. Where the assets to be used in a construction project are liable to VAT, the purchaser must pay VAT on the consideration payable for such assets at the rate of 7.5%. Advance Fee Fraud and Other Related Offences Act 2006. Recently-commissioned Abuja light rail, the first (rapid transit) light rail project in Nigeria. Arbitration is either ad hoc or institutional. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. Equals N4.5m (architects fee for pre-contract services) Note; ARCON conditions of engagement say that these fees are the minimum that should be charged, therefore, your design circumstances may warrant a little increase in the percentage. These include the: Abia State Public Private Partnership and Investment Promotion Law of 2016. However, it is common for a contractor's obligations to be qualified to the extent that once the contractor has used its best endeavours or has applied the degree of skill and care that could reasonably be expected from a professional of its status, the project company is obliged to accept the completed project. Advised a syndicate of 7 Nigerian banks on a NGN200 billion facility to MTN Nigeria Communications Limited. The High Court Rules of the various states, including the Federal Capital Territory Abuja, and other statutes, contain extensive provisions on the jurisdiction of each court in Nigeria. Construction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. The CC Act also prescribes the same penalty in relation to similar offences as those immediately above. There has been an increase in the development of renewable energy projects, mostly in the form of solar photo voltaic power plants, in the northern part of the country. all licensees (that is, project developers) must give first consideration to goods made in Nigeria and services provided by Nigerian firms in the award of their contracts. Specific laws govern procurement of goods and services in Nigeria. The proposed project is submitted to the Federal Executive Council (FEC) for approval. ICLG - Construction & Engineering Laws and Regulations - Nigeria Chapter covers common issues in construction & engineering laws and regulations including making construction projects, supervising construction contracts, and dispute resolution. The Federal Government of Nigeria (FGN) is committed to growing the infrastructure industry including modernising and expanding the existing power production capacities in the country, both on-grid and off-grid. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. However, this rate does not apply to persons occupying executive, administrative, technical or professional positions such as engineers, engineering technologists, engineering technicians, engineering craftspersons, and project managers. Where the FEC is satisfied that the project should be carried out using a PPP, it grants its approval to the project. The Act provides that any person who deals with harmful waste without lawful authority is guilty of an offence. The PPA also requires procurement to be conducted in a manner that is: Equitable for ensuring accountability and conformity with its provisions (with the aim of achieving value for money and fitness of purpose). On completion, subject to the terms of the approval granted by the relevant government agency, the contractor or project company may be required to file a report on project completion. There are other non-compulsory insurance products, such as erection all risk insurance, that a contractor or project company will typically procure. Harmful Waste (Special Criminal Provisions, etc.) It also includes provisions on the bidding process, bid security, evaluation of bids. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). 0. NAIJA LIGHT Solar Electrification Program. In addition to these laws, various states have passed laws that regulate environmental issues in their state. Webprofessionals in the Built Industry to develop an harmonised scale of fees. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. The project owner typically takes the following risks: Risk of ground conditions, including any archaeological discoveries or ionisation and contamination of the soil. The Labour Act provides that normal work hours are to be fixed by mutual agreement, collective bargaining, or by an industrial wages board. Enter to open, tab to navigate, enter to select, https://content.next.westlaw.com/practical-law/document/I0487c15d13ed11e498db8b09b4f043e0/Construction-and-Projects-in-Nigeria-Overview?viewType=FullText&transitionType=Default&contextData=(sc.Default), Construction and Projects in Nigeria: Overview, https://iclg.com/practice-areas/project-finance-laws-and-regulations/nigeria. A foreign contractor that will be executing a project in Nigeria must incorporate a local subsidiary in Nigeria through which it will implement and carry out the construction contract (. The project company usually has no assets other than the project and will be the borrower under the financing agreements and a party to the project agreements. This paper concerns an investigation into the causes of high costs of construction in Nigeria. Fee proposed 10% of cost of Annual Services. Rules of the Chartered Institute of Arbitration (UK). Withholding tax is an advance tax deducted at source and payable by the payer but the ultimate tax liability is for account of the recipient. Fee proposed 10% of Gross Rent Payable. Advised Accugas Ltd on a USD445 million refinancing of facilities for the construction of a gas processing facility and the acquisition of a 100% stake in East Horizon Gas Company Ltd. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. e) PSGS 5: Facility Management. There is no limit to the number of hours an employee can work in a day. The most common corporate structure for projects in Nigeria is a private company limited by shares. The most common forms of dispute resolution in Nigeria are litigation and arbitration. The insurance must have a value that is at least three times the total annual emoluments of all the employees. Most government and private agencies usually have standard form letters that are issued to a selected bidder, and the use of engagement letters is quite common. The contractors also obtain limited time warranties, typically between 12 and 24 months, from the original equipment manufacturers, which they pass on to the project owner. Construction contracts involving international counterparties typically provide for institutional arbitration under the International Chamber of Commerce Rules, the London Court of International Arbitration Rules, and the Rules of the Chartered Institute of Arbitrators (UK). It is usual for parties to agree a period beyond which the contract will be terminated on account of the subsistence of a force majeure event. This can be done as currently there are no thin capitalisation rules in Nigeria and parties can take advantage of this. London Court of International Arbitration Rules. It is hoped that this situation will generally improve following the completion of various road projects and road construction from funds realised from the FGN Sukuk (. Rivers State Public-Public Participation in Infrastructure Development Law 2009. Where the FGN or any of its agencies is a party to the proceedings or where the dispute relates to the executive, administrative or managerial action or inaction of the FGN (other than a simple breach of contract), the Federal High Court would have jurisdiction. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) Professional fees in building projects Structural engineering fees Rp200,000 to Rp 300,000 per square metre MEP (mechanical, electrical and plumbing) design fees Rp120,000 per square metre Quantity Surveyors fees Rp60,000 per square metre The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. Some engineering, procurement and construction contracts for local projects are also drafted on the basis of the template developed by the International Federation of Consulting Engineers (. In terms of transaction structure, a special purpose vehicle (project company) is usually set up by the sponsors for the sole purpose of implementing the project. The railway is currently being extended to the Lagos Port to ease import and export of goods. Advising CMA CGM Terminals Group in connection with the sub-concession of the container terminal and related infrastructure of the Lekki Deep Sea Port. An EIA must be undertaken where the extent, nature or location of a proposed project or activity is likely to have a significant effect on the environment. Act (. Escrow arrangements whereby contract prices are paid into escrow accounts held by third party banks or financial institutions for release on specified conditions also operate as a form of payment security for the contractor. On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. WebLowe (2003) further stated that the value added of construction is in the range of 7% to 10% for highly developed economies and around 3% to 6% for underdeveloped economies. Cost is a vital element in every development. There is currently no VAT on the transfer of real property in Nigeria. Establishing a contract-based electricity market. The Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN). Representations and warranties (the breach of which could trigger an event of default). Member of the team that advised Falcon Kinetics Limited on the Construction of the Civil and Structural Works for the development of a 4,000MT LPG Bulk Gas Storage Facility and Jetty Project at Rumuolumeni, Saipem/Aker Base Road, Port Harcourt, Rivers State, Nigeria. Professional fees in building projects Structural engineering fees Rp200,000 to Rp 300,000 per square metre MEP (mechanical, electrical and plumbing) design fees Rp120,000 per square metre Quantity Surveyors fees Rp60,000 per square metre There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. Cost is a vital element in every development. Alu - February 25, 2022. 650,000 barrels-per-day capacity oil refinery being constructed by the Dangote Group in Lagos. The REA's mandate is to increase electricity access to rural and underserved communities through public and private sector engagement. Types of Professional Fees 4.2. Contracts for the KanoJibia and Port Harcourtaiduguri lines were confirmed by the Federal Executive Council. Launched an initiative under the REA, as part of the NESP, to roll out five million new solar-based connections in communities that are not grid connected. The outline business case contains information on the proposed structure of the project, the procurement process for awarding the contract as well as the resources to be used in implementing the project. Fee proposed 10% of cost of Annual Services. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). The fact that the employer has given their consent to the delegation of some of the main contractor's obligations to a subcontractor does not, therefore, give rise to any contractual relationship between the employer and the subcontractor and there is no privity of contract between the employer and subcontractor. Engage in direct procurement in cases of emergency. The funders may decide to call for the performance bond or take out the parent company guarantee provided by the contractor where such exists. The parties through their project documents usually provide for a dispute resolution mechanism to be adopted in the event of dispute. Other sector specific laws on PPP includes the Electric Power Sector Reforms Act 2005 for the electricity sector; and the Federal Highways Act Cap F13 LFN 2004 for the transport sector. Other sanctions imposed under the EFCC Act include the forfeiture of assets (both within and outside Nigeria) and the freezing of bank accounts maintained by a person accused of the commission of a financial crime. A project company is required to obtain expatriate quota approvals for the relevant number of expatriate personnel it intends to employ. The project company or relevant contractor must also obtain a fire safety certificate from the Federal Fire Service and the relevant State Fire Service to confirm compliance with fire safety measures. Equals N4.5m (architects fee for pre-contract services) Note; ARCON conditions of engagement say that these fees are the minimum that should be charged, therefore, your design circumstances may warrant a little increase in the percentage. The VAT Act 2004 (as amended) and the Finance Act 2020 impose VAT on the value of the consideration for the supply or purchase of goods and services in Nigeria except where those goods and services are expressly exempted from the tax. ensure that the working environment cannot reasonably constitute a health hazard to the employees; make adequate provision for the protection of the health of its workers; insure all employees against injury to health or other forms of physical injury, accident or death that may occur in the course of duty. e) PSGS 5: Facility Management. Implementing clear policies that promote and encourage investor confidence in the sector. In June 2020, the FGN approved a USD120 million continued construction and completion of the Kashimbila multipurpose dam in Taraba State, which is expected to generate 40 MW of electricity and water for the community. Where the project involves the provision of utilities, the project company will usually prefer to impose absolute obligations on the contractor (to the effect that the completed project must be fit for a particular purpose and remain fit for a specified period). There is currently a bill at the Nigerian National Assembly in connection with the development of local expertise and capacity in the Nigerian construction industry. 0. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. Some of the arbitration rules that can be adopted by the parties to govern their arbitration proceedings include the: Arbitration and Conciliation Act, Cap A18, Law of the Federation of Nigeria 2004 (ACA). Other contractual provisions usually heavily negotiated by the parties include: The form of security (such as payment bonds, performance bonds, bank guarantees and third-party guarantees). The Constitution also creates the Federal High Court with jurisdiction over specific subject matter. ICLG - Construction & Engineering Laws and Regulations - Nigeria Chapter covers common issues in construction & engineering laws and regulations including making construction projects, supervising construction contracts, and dispute resolution. The project contract usually contains provisions that require payment to be made for the demobilisation and repatriation of foreign personnel to their home countries. One of the functions of the Bureau of Public Procurement is to prepare and update standard bidding and contract documents. In 2019, the Ministry of Works and Housing set aside a total sum of 19.8 billion naira ($55 million) for the construction of 2,383 units of housing across the 36 states of Nigeria under the National Housing Program. Withholding tax of 10% on any dividend paid (unless it has a tax exemption), although if the recipient of the dividend is located in a country with which Nigeria has a double tax treaty, the rate would be reduced to 7.5%. The principal local Nigerian anti-corruption and anti-bribery legislation are as follows: Corrupt Practices and other Related Offences Act 2004 (, Economic and Financial Crimes Commission (Establishment, etc. In 2019, the Ministry of Works and Housing set aside a total sum of 19.8 billion naira ($55 million) for the construction of 2,383 units of housing across the 36 states of Nigeria under the National Housing Program. There are 3 stages of payment. The interest payment on a loan to fund a construction project is an allowable deduction before arriving at the taxable profits. The EIA must be approved by the Department of Petroleum Resources (DPR). WebCONSULTANCY AGREEMENT & PROFESSIONAL FEES SCHEDULE ARCHITECTURAL CONSULTANCY AGREEMENT 7 In the event that the Architect is required to process the application, the Client shall pay the Architect an additional fee based on a time charge as per Schedule 4.11 and expenses based on cost plus 10% in respect of the processing of such None of these contract forms are mandatory. The Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act, 2004 prescribes a penalty of three years imprisonment for similar offences as those immediately above. Provided support to the commercial law development program of the United States Department of Commerce in workshops leading to the publication of the book titled. Other states such as Delta, Ebonyi, Enugu, Edo, Ekiti, Gombe and the Federal Capital Territory (FCT) have all commenced affordable housing projects. Advised Kepco Energy Resources Ltd on the financing of its acquisition of Egbin Power PLC. This clause requires a subcontractor to be paid within a specific period after the contractor has been paid that is make payment contingent on the contractor being paid. There are 3 stages of payment. Preparation of an outline business case by the relevant MDA of the sector in which the PPP is to be implemented. Key member of the team currently advising a leading Nigerian broadband communication solution integrator on the financing of fibre optic cables and the restructuring of existing debt. Some contracts also include provisions permitting the contractor to initiate a change proposal where the contractor considers that: A request by the client will have a technical or financial impact on the project. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. 0% if its turnover is less than NGN25,000,000. In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. Under Nigerian Law, certain professionals must have obtained the relevant licences to engage in construction projects: Engineers must be licensed by the Council for the Regulation of Engineering in Nigeria (COREN) under the Engineers (Registration, etc) Act) (, Quantity surveyors must be licensed by the Quantity Surveyors Registration Board of Nigeria under the Quantity Surveyors (Registration, etc.)
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