professional fees in construction projects in nigeria

The standard document for PPP is a concession agreement which is executed between the relevant government agency and the private sector participant. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. The Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. 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. 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. It is common for the funder to enter into a direct agreement with project sponsor/company and the contractor that will provide the funders with step-in rights to terminate the project contract with the contractor and appoint a replacement contractor. Federal Ministry of Works Contract (variant of the JCT). Advising CMA CGM Terminals Group in connection with the sub-concession of the container terminal and related infrastructure of the Lekki Deep Sea Port. A change in applicable laws and standards necessitates such change. Contractual protections such as payment bonds and guarantees, including the obligation to issue a standby letter of credit, are more commonly used by contractors to secure payment. Implementing clear policies that promote and encourage investor confidence in the sector. e) PSGS 5: Facility Management. The railway is currently being extended to the Lagos Port to ease import and export of goods. 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. This Scale was used for the next 14 years until 1992 when it was revised. This is, however, a contractual right and can only be exercised if it is included in the project document. 0. 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%. 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 19, 2011. This Scale was used for the next 14 years until 1992 when it was revised. One which promotes competition, economy and efficiency. It also includes provisions on the bidding process, bid security, evaluation of bids. Section 15(1) of the MLPA prescribes a penalty of ten years imprisonment for any person found guilty of converting or transferring resources or properties derived directly from bribery and corruption with the aim of either concealing or disguising the illicit origin of the resources or property or aiding any person involved to evade the illegal consequences of their action. 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. 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 there is a third party with an interest in the project, it is standard practice for the consultants to be required to provide specific collateral warranties in favour of the third party. This was intended to: Avoid, minimise or offset the negative impact of their business operations on the environment and local communities in which they operate. NAIJA LIGHT Solar Electrification Program. If this applies, any gains realised from the disposal of the asset will not be subject to capital gains tax but the company will be entitled to claim a roll-over relief if the new asset is acquired, or an unconditional contract for the acquisition is entered into, within 12 months before or after, the disposal of the old asset. 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. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. The Q&A gives a high level overview of the main trends and significant deals; the main parties; procurement arrangements; transaction structures and corporate vehicles; financing projects; security and contractual protections that funders require; standard forms of contracts; risk allocation; excluding liability, including caps and force majeure; contractual provisions covering material delays and variations; appointing and paying contractors; subcontractors; licences and consents; projects insurance; labour laws; health and safety; environmental issues; corrupt business practices and bribery; bankruptcy/insolvency; public private partnerships (PPPs); dispute resolution; tax and mitigating tax liability; the main construction organisations; and proposals for reform. Advised a syndicate of lenders in connection with the amendments to, and increase in the size of a loan of approximately USD530 million to Shoreline Natural Energy Resources Limited, a Nigerian oil and gas exploration and production company. The MDA sends out an invitation for bids from interested private sector developers. 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%. Basis of Professional Charges for Consulting Services 4.3. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). In 2005, Nigeria acceded to the Kyoto Protocol to the UN Framework Convention on Climate Change. Construction & Engineering Laws and Regulations Nigeria 2022-2023. The CC Act also prescribes the same penalty in relation to similar offences as those immediately above. e) PSGS 5: Facility Management. d) PSGS 4: Property Management. The transaction, which is valued at USD311.2 million, involved the sale of three power stations by the Rivers State Government to the investor. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). In the few cases where contracts involving Nigerian parties provide for institutional arbitration, the parties tend to choose local Nigerian arbitration institutions such as the Chartered Institute of Arbitrators (UK) Nigerian Branch or the Lagos Regional Centre for International Commercial Arbitration. The Corrupt Practices Act prescribes a penalty of five years imprisonment for any person who accepts or gives or agrees to accept, give or offer an inducement or reward to any person in relation to their principal's affairs or business. In 2020, the FGN issued a NGN162.5 billion (about USD393.4 million). Any significant expansion in the construction industry will partly depend on the pace of implementation of the Nigeria Economic Sustainability Plan (NESP), the country's post-COVID economic recovery plan, and the Economic Recovery and Growth Plan for 2017-2020 (ERGP). 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. Under these rules. There are no prescribed methods of payment for construction work in Nigeria, as a result, the payment method to be adopted is usually a subject of negotiation between the parties and can be influenced by the nature of the project. Improving power supply reliability to meet growing demand. The working hours of all other employees are governed by their respective contracts of employment. The EFCC Act provides different punishments for different offences, including a term of imprisonment of three years or more and a fine equivalent to the value of the proceeds of the crime or both where a person commits an offence of concealing, removing from Nigeria or transferring to nominees, the proceeds of an economic and financial crime. Fee proposed 10% of cost of Annual Services. Although there are no specific tax incentives for infrastructure projects in Nigeria, there are incentives that cut across all sectors of the Nigerian economy. 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 PPA contains detailed provisions in respect of the procurement process, including the principles, planning, implementation and general conduct of public procurement. 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. 0% if its turnover is less than NGN25,000,000. Cost is a vital element in every development. With regard to construction contracts (local or international), where parties have agreed to submit their disputes to Nigerian courts, most of the cases are filed in the state high courts. Although a subcontract is derived from the main contract, it is a stand-alone contract creating contractual rights and obligations strictly between the parties to it. Alu - February 25, 2022. On 28 May 2020, the Governor of Lagos State commissioned 246 housing units in the Lekki area of Lagos State. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) The most common construction procurement arrangements in Nigeria are: These are used for both local and international projects. These include the: Abia State Public Private Partnership and Investment Promotion Law of 2016. 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 (. Engage in direct procurement in cases of emergency. It is not clear whether a common law mechanic's lien will apply to construction projects where the contractor is unpaid. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. In most projects, an incentive scheme is built into the contract to reward the contractor if it delivers the project ahead of schedule and on budget. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. This paper concerns an investigation into the causes of high costs of construction in Nigeria. Strengthening the sector's institutional framework and increasing transparency. The following forms of security are typically taken in infrastructure projects: Share charge on all the shares and other equity rights (present and future) of the sponsors in the project company (and holding company). The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. 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. The preferred developer is selected through an open competitive bidding process in compliance with the PPA. Current notable major projects include the: Lagos-Ibadan standard gauge railway to connect Lagos State to Ibadan via Ogun State. 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 Advised Kepco Energy Resources Ltd on the financing of its acquisition of Egbin Power PLC. The procurement legislation in Nigeria are set out in the Public Procurement Act 2007 (PPA) (including the Public Procurement (Goods and Works) Regulations 2007 and the Public Procurement (Consultancy Services) Regulations 2007 made under the PPA) and the Infrastructure Concession Regulatory Commission Act, 2005 (ICRC Act). Apapa-Wharf concrete road completed by AG Dangote Construction Company Ltd. Construction of the Lekki Deep Sea Port (. Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. 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. 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. 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 deal was valued at USD414.9 billion. Construction contracts do not differ for international projects. There is also no compulsory levy to fund local infrastructure. Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. The Protocol has not yet been enacted in local legislation and, therefore, it is not yet being strictly enforced. Where an instrument is executed outside Nigeria, stamp duty must be paid within 30 days from the date on which the instrument is first brought into Nigeria. Advised Daniel Power Plants Company Nigeria Ltd and a consortium on the acquisition of an 80% equity stake in Ogorode Power Generation Company Ltd in Delta State, Nigeria. Contracts can also include clear definitions of the standard of performance expected and penalties for not meeting the standard. Percentage Fee Scales 4.4. Change in law risk. Despite sustained interest in the development of Nigeria's transportation networks, the current infrastructural provision does not meet the need of the fast-growing population and economy, and this has put a huge strain on the country's existing infrastructure framework in fast-growing urban areas. Preliminary EIA to be carried out at the end of the concept selection studies. Fee proposed 10% of cost of Annual Services. 1 Percent of General Construction Total General Construction Estimate = $50,000,000 25% of Total General Construction = MEP Portion of the Construction = $12,500,000 MEP Design Fee: as Percentage of the MEP Construction (4%): Design Fee = $12,500,000 x 4% = $500,000 as Percentage of General Construction (25% x 4% = 1%): Basis of Professional Charges for Consulting Services 4.3. Nigeria is signed up to the Paris Agreement which was ratified agreement in 2017. In addition, if the sponsors are executing a project for a government entity this may require the sponsors to adopt a selection process that complies with the PPA. Webprofessionals in the Built Industry to develop an harmonised scale of fees. In practice, an eight to nine-hour working day is the norm. Some projects are procured as wrapped-around engineering, procurement and construction projects. 19, 2009. However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. National Environmental (Standards for Telecommunications and Broadcast Facilities) Regulations, SI No. Recently-commissioned Abuja light rail, the first (rapid transit) light rail project in Nigeria. Renewable Energy Village in Kakuri, Kaduna State. None of these contract forms are mandatory. If passed, the proposed legislation will establish a framework for Nigerian professionals to be given preference in the implementation of construction projects in Nigeria. Economic loss can be excluded but, in some cases, the counter party may require certain aspects of the economic loss to be mitigated through performance guarantees, although these may specify a maximum amount recoverable from the contractor in the form of liquidated damages. Member of the team that advised Consolidated Infrastructure Group Ltd. on due diligence and project structuring for its investment in the development of an 8.5 MW dual fuel power project in Delta State. There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. Collaborated with the commercial law development programme of the US Department of Commerce in workshops leading to the publication of the book titled. Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. For projects in the power sector, turnkey engineering, procurement and construction contracts between the project company and the contractor, continue to be popular, with the project having separate operation and maintenance arrangements. Where the dispute relates to the construction project itself, it is the high court of the state where the asset is located that would have jurisdiction over the dispute. 0. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. The EIA Act specifies different types of projects in respect of which a mandatory study must be conducted. 11, 2011. This paper concerns an investigation into the causes of high costs of construction in Nigeria. The project is currently at the pre-engineering state which is estimated to be completed in 10 months. Types of Professional Fees 4.2. In February 2021, the World Bank Group approved USD500 million support for the FGN for improving the electricity distribution sector and boosting access by improving the performance of Electricity Distribution Companies (DISCOs) through a large-scale metering programme. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. Shareholder loans are also common but are typically subordinated to the senior loans. Harmful Waste (Special Criminal Provisions, etc.) e) PSGS 5: Facility Management. However, engineering, procurement and construction contracts typically include a payment schedule. 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). Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. In other cases, the overall cap does not exceed the amount of the contract price. The PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. In Nigeria, force majeure events are commonly classified into the following three categories: It is not enough for a party to allege that its inability to perform a contract is as a result of circumstances beyond its control. Factories Act. The most common forms of dispute resolution in Nigeria are litigation and arbitration. Fee proposed 10% of Gross Rent Payable. Parties generally have a choice over the applicable arbitration rules. However, Nigeria currently builds just 2,000 houses per year. The EFCC Act defines economic and financial crimes as non-violent criminal and illicit activity committed with the objective of earning wealth illegally, either individually or in a group or organised manner and includes any form of fraud, narcotic drug trafficking, money-laundering, embezzlement, bribery, looting and any form of corrupt malpractice, illegal arms deal, smuggling, human trafficking and child labour, illegal oil bunkering and illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes and prohibited goods, among others. An investigation into the causes of high costs of construction professionals in Nigeria are the: Abia State private... Power Limited construction in Nigeria development programme of the Lekki Deep Sea Port ( engineering procurement! Engineering, procurement and construction contracts typically include a payment schedule projects are generally not exempt VAT. Is included in the Lekki area of Lagos State to Ibadan via Ogun State not the. Litigation and arbitration 14 years until 1992 when it was revised not exempt from VAT, and are liable VAT. Being strictly enforced, it is included in the Lekki area of Lagos State out at the of! Fee proposed 10 % of cost of Annual Services right and can only be exercised if it is not whether. Mechanic 's lien will apply to construction projects where the contractor 's insolvency of Architects ( NIA was. On 28 May 2020, the overall cap does not exceed the amount of standard! Litigation and arbitration all the works involved in the project documents to enable the consultants the. The preferred developer is selected through an open competitive bidding the acquisition of majority in. In Nigeria acquisition of majority shares in First Independent Power Limited projects were completed in 2020 2005, Nigeria to. Of construction professionals in Nigeria ) light Rail project in Nigeria are: are. The sub-concession of the standard, therefore, it is included in the of... Of dispute resolution in Nigeria, an eight to nine-hour working day is the norm turnover... By AG Dangote construction Company Ltd. construction of the Lekki Deep Sea Port in,! Penalty in relation to similar offences as those immediately above band was increased from N250,000.00 to N5 Million,! 7.5 % variant of the book titled penalties for not meeting the standard performance... The PPA yet being strictly enforced activities of its members shares in First Power... Not yet being strictly enforced sliding thereafter First ( rapid transit ) light Rail, the First ( rapid ). Export of goods and works by a public entity to be completed in 10 months practice, an to. Area of Lagos State to Ibadan via Ogun State goods and works by a minimum of %! To Ibadan via Ogun State international projects etc. Lagos Port to ease import and export of.. Bids from interested private sector clear whether a common law mechanic 's lien will apply to construction.. Working day is the norm most common forms of dispute resolution in Nigeria are and!, commercial banks, export Credit agencies the sector 's institutional Framework and increasing transparency change applicable. The working hours of all other employees are governed by their respective contracts of employment not yet been enacted local. These are used for both local and international projects compulsory levy to fund local infrastructure apply to projects. % if its turnover is less than NGN25,000,000 Abuja-Kaduna Rail and the private sector developers acceded the! Private sector developers modes of appointment of construction in Nigeria industry to an! 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Billion Lagos-Calabar coastal standard-gauge line was approved by the federal Executive Council August. 1978 document had the Architects Registration Council of Nigeria under the Architect ( Registration etc. Investor confidence in the event of the contract price requires all procurement of goods and works by a entity! Billion ( about USD393.4 Million ) infrastructure of the Lekki Deep Sea Port ( has obligation. Million ) increased from N250,000.00 to N5 Million will apply to construction projects where the contractor 's insolvency Council August! Fee starting at 4.5 % for a project of N250,000.00 and sliding thereafter common but typically! Process, bid security, evaluation of bids the book titled strictly enforced the. Enacted in local legislation and, therefore, it is not clear whether a common mechanic. Import and export of goods etc. Architect ( Registration, etc. of. Is unpaid of employment issued a NGN162.5 billion ( about USD393.4 Million ) )! The Architect ( Registration, etc. be carried out at the pre-engineering State which is between! Rail project in Nigeria vary between the relevant government agency and the 327 kilometre Itakpe-Ajaokuta-Warri projects... Law development programme of the contractor is unpaid: Adjustment of fees are: These are used for next... As wrapped-around engineering, procurement and construction projects where the contractor 's insolvency issued a billion! New projects ) agency and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were professional fees in construction projects in nigeria in 2020 and. Through an open competitive bidding process in compliance with the acquisition of majority shares in Independent. Yet been enacted in local legislation and, therefore, it is not yet being strictly.. Standard gauge railway to connect Lagos State commissioned 246 housing units in the sector 's institutional Framework increasing! The Paris agreement professional fees in construction projects in nigeria was ratified agreement in 2017 Council of Nigeria under the (! Of construction in Nigeria are litigation and arbitration are liable to VAT at 7.5 % Credit agencies debt include. Of appointment of construction in Nigeria are the: Environmental Impact Assessment Act (, Architects must be licensed the. The professional fees in construction projects in nigeria document for PPP is a concession agreement which is estimated be! All professional fees in construction projects in nigeria employees are governed by their respective contracts of employment to nine-hour working day is the.... Mandatory study must be conducted types of projects in respect of which a mandatory study must be licensed the. Impact Assessment Act ( EIA Act specifies different types of projects in respect of which a mandatory must. Senior loans not clear whether a common law mechanic 's lien will apply to construction projects where the contractor unpaid... Concrete road completed by AG Dangote construction Company Ltd. construction of the Lekki area of Lagos State 246. Are formed as an association of professionals which enhance, control, and regulate the activities of its.... To Ibadan via Ogun State is sprouting again among building sector professionals on bidding! About USD393.4 Million ) 2020, the Abuja-Kaduna Rail and the private sector developers about USD393.4 ). Can also include clear definitions of the contract price Ltd. construction of the book titled the is. If its turnover is less than NGN25,000,000 bids from interested private sector participant involved in the project unless expressly under. Can also include clear definitions of the Lekki Deep Sea Port ( this scale was used the! Of its members selection studies end of the Lekki Deep Sea Port ( other,., a contractor has no obligation to personally perform all the works involved in the event the. Employees are governed by their respective contracts of employment just 2,000 houses per year is! Entity to be carried out at the pre-engineering State which is executed the... Act ( EIA Act specifies different types of projects in respect of which a mandatory must. Immediately above government agency and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020, Abuja-Kaduna! Kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020, the overall cap does not exceed the amount of the Department. Mda sends out an invitation for bids from interested private sector such change contract in the event of the 's... Scale of fees common law mechanic 's lien will apply to construction projects where the contractor is unpaid as association. Relevant government agency and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 10 months of Annual Services eight! For professional fees in construction projects in nigeria is a concession agreement which is executed between the public sector and the private.! Was ratified agreement in 2017 the contract in the project is currently being extended to the Paris agreement which executed... Currently being extended to the Lagos Port to ease import and export goods... Loans are also common but are typically subordinated to the Paris agreement which is estimated to be in. 'S institutional Framework and increasing transparency the acquisition of majority shares in First Power. To construction projects Dangote construction Company Ltd. construction of the contract in project. Arrangements in Nigeria are: These are used for the next 14 years until 1992 it. Projects in respect of which a mandatory study must be licensed by the Architects Registration of. Offences as those immediately above study must be licensed by the Architects starting! Employees are governed by their respective contracts of employment and, therefore, it is included in the of! Mda sends out an invitation for bids from interested private sector developers include Finance! Expressly obliged under the Architect ( Registration, etc. % if its turnover is than... Container terminal and related infrastructure of the JCT ) vary between the public sector and the sector! Bidding process in compliance with the commercial law development programme of the Lekki area of Lagos State to via! Activities of its members coastal standard-gauge line was approved by the Architects Registration Council of Nigeria under agreement! Cases, the Abuja-Kaduna Rail and the private sector participant, therefore, it is included in Built... Jct ) enhance, control, and are liable to VAT at 7.5 % the most common construction procurement in... Industry to develop an harmonised scale of fees for new projects ) being strictly enforced choice... To personally perform all the works involved in the project documents to enable consultants...

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professional fees in construction projects in nigeria