professional fees in construction projects in nigeria

Factories Act. In Lagos State, under the Construction Workers Safety Law (. Fee proposed 10% of cost of Annual Services. It also includes provisions on the bidding process, bid security, evaluation of bids. Types of Professional Fees 4.2. Advised Actis on its investment in the 459 MW Azura-Edo gas fired independent power plant in Edo State. 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. Alu - February 25, 2022. According to the Minister of Transport, the Kano-Maradi rail is aimed at facilitating bilateral trade between Nigerian and Niger. 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. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. Nigeria is signed up to the Paris Agreement which was ratified agreement in 2017. A special purpose vehicle used to execute the project will be liable to pay: 30% of its total profit (less any allowable deductions and capital allowances) if it has more than NGN100,000,000 turnover; 20% if it has a turnover between NGN25,000,000 and NGN100,000,000; or. Under the terms of the contract, a sub-contractor can suspend work or terminate a sub-contract on a main contractor becoming insolvent. However, the following are typical significant approvals. The PPA contains detailed provisions in respect of the procurement process, including the principles, planning, implementation and general conduct of public procurement. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. The obligations under the EGASPIN are in addition to any other environmental compliance requirement set out under any other law. National Environmental (Permitting and Licensing System) Regulations, SI No. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. Rivers State Public-Public Participation in Infrastructure Development Law 2009. In 2020, the FGN issued a NGN162.5 billion (about USD393.4 million). e) PSGS 5: Facility Management. 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. In February 2021, at commissioning of a 1.12 MW Captive Solar Hybrid Power Plant at the Abubakar Tafawa Balewa University, Bauchi which was executed under the Energizing Education Programme (EEP), the FGN stated that Nigeria intends to have 30% of its electricity supply from renewables by the year 2030. 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%. Draft EIA to be carried out and a report submitted to the DRP at the end of the project conceptual design and will form the basis for approval by the DPR of the detailed engineering design. This was submitted by the Association of Consulting Engineers in Nigeria and the Nigerian Society of Engineers to the Council for the Regulation of Engineering in In relation to construction professionals, each profession usually has a scale of professional fees which is applied to calculate the fees payable to the professional for the services provided on the project. 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). Risks associated with fitness are mitigated through performance guarantees from the contractors. Section 46 of BOFIA prescribes a penalty of up to five years imprisonment and fine of NGN5,000,000 or both for an employee or officer of a bank who asks for or receives or agrees to receive any gift, money, property or thing of value for their personal benefit, for procuring or trying to procure for any person, any advances, loans or credit facility from the bank, or any other service rendered in line with their duty as an employee of the bank. Typically, third parties and end users are not parties to the construction contract(s) and cannot enforce an action for breach against the contractors for the designs and construction. 30 days after execution where an instrument is liable to an ad valorem rate. The principal feature of the EIA Act is that it specifically requires that any public or private sector project must not be undertaken or started without a determination of its environmental effects. In July 2012, the Central Bank of Nigeria issued the Sustainable Banking Principles under which banks and other financial institutions undertook to integrate environmental and social considerations into business decision making. Covenants, representations and warranties. Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. 0. A change request will trigger an obligation on the contractor to submit a proposal describing how it will implement the requested change, together with any adjustments to the project timetable and fees payable as a result of such change. There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. The Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN). The continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. However, Nigeria currently builds just 2,000 houses per year. Professional Bodies in Nigerian Construction Industry. The EFCC Act prohibits anyone from concealing, removing from Nigeria or transferring to nominees, the proceeds of an economic and financial crime, on behalf of another, with the knowledge that such proceeds are as a result of criminal conduct by the principal. Professional Bodies in Nigerian Construction Industry. It is not clear whether a common law mechanic's lien will apply to construction projects where the contractor is unpaid. 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. However, there are no rules that are specific to the projects sector as the existing rules apply to every aspect of the Nigerian economy, including construction. 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. In the oil and gas industry, there are also environmental, health and safety requirements in the construction of oil and gas projects, such as depots, which require facilities to meet certain specified requirements. 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. 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. 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). 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. Construction professionals will usually seek to place a cap on their liability. Percentage Fee Scales 4.4. In this revision, the starting band was increased from N250,000.00 to N5 Million. Various states in Nigeria have also passed laws regulating PPP projects in their states. e) PSGS 5: Facility Management. Percentage Fee Scales 4.4. 0. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. The slow implementation of government budgets, however, has been a perennial problem in Nigeria. 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. The provisions that commonly govern contract variations are those that regulate issuing change orders or additional work. f) PSGS 6: Letting/Real Estate Brokerage/Agency. WebFee is to be negotiated subject to a minimum of N50,000=. The arbitration institutions commonly used to settle construction disputes in Nigeria are: Chartered Institute of Arbitrators, UK (Nigerian Branch) (, International Chamber of Commerce (ICC) (, International Centre for Settlement of Investment Disputes (ICSID) (, London Court of International Arbitration (LCIA) (, Lagos Regional Centre for International Commercial Arbitration. The rates payable will depend on which of Nigeria's 36 states the real property is located in. Introduced policies aimed at improving rural electrification through the Rural Electrification Strategy and Implementation Plan (RESIP), under which the Board of the Rural Electrification Agency (REA) Board was constituted. Current notable major projects include the: Lagos-Ibadan standard gauge railway to connect Lagos State to Ibadan via Ogun State. An alternative is to include a direct payment clause which allows for the employer to step in and pay the subcontractor directly where the contractor fails or is unable to make payments. 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). Other regulations and guidelines which also govern environmental issues in specific sectors in Nigeria include: National Environmental (Construction Sector) Regulations, SI No. The PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. 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. 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). Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. The repayment of the loan is structured in accordance with a repayment schedule by way of amortisation, or very rarely, a bullet repayment. The most common construction procurement arrangements in Nigeria are: These are used for both local and international 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. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). Preliminary EIA to be carried out at the end of the concept selection studies. Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. 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. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. Most construction contracts contain step-in right provisions that impose an obligation on the contractor to assign the subcontract to the employer in certain circumstances, for example, if the main contract is terminated. Types of Professional Fees 4.2. 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 WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. The Infrastructure Concession Regulatory Commission (Establishment, etc) Act 2005 (ICRC Act), the Privatisation and Commercialisation Act 1999 and the Public Procurement Act 2007 (PPA) (and the regulations made pursuant to the PPA) make up the statutory framework for PPPs in Nigeria. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. f) PSGS 6: Letting/Real Estate Brokerage/Agency. WebFee is to be negotiated subject to a minimum of N50,000=. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. The Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. 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. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. There is currently no VAT on the transfer of real property in Nigeria. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. 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. For example, the persons employed to provide the services must obtain any mandatory authorisations. 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. Builders must be licensed by the Nigerian Institute of Building. 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: 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 some instances, there could be a combination of more than one funding arrangement, for instance, a term loan facility and a revolving credit facility being provided under a single financing arrangement to a project. National Environmental (Electrical/Electronic Sector) Regulations, SI No. 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. It is common for a tender process to be carried out or for qualified professionals to be invited to submit bids or proposals in relation to private projects. In practice, an eight to nine-hour working day is the norm. Federal Ministry of Works Contract (variant of the JCT). This Scale was used for the next 14 years until 1992 when it was revised. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). This was submitted by the Association of Consulting Engineers in Nigeria and the Nigerian Society of Engineers to the Council for the Regulation of Engineering in Change in law risk. Advising a leading Nigerian broadband communication solution integrator on the financing of fibre optic cables and the restructuring of existing debt; Advising IFC in connection with the proposed facilities of up to USD325 million to a liquefied natural gas company in Nigeria. The current monthly minimum wage prescribed by the National Minimum Wage Act 2019 (NMWA) is NGN30,000. Debt, including hedging structures and arrangements. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. 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. Construction of the Second Niger bridge which is expected to be completed by 2022. The health and safety laws applicable to construction projects include the: for an individual offender, a fine of NGN100,000 or imprisonment for up to five years; for a corporate body offender, a fine of between NGN50,000 and NGN1 million. 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 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. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. 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. The Constitution also creates the Federal High Court with jurisdiction over specific subject matter. 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 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. 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 One which promotes competition, economy and efficiency. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. 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 (. A Q&A guide to construction and projects law in Nigeria. From the table above, an architect commissioned to undertake a project with an estimated total cost (ETC) of N 18,200,500 will be entitled to a professional fee of N823,521.25 Nevertheless, the proportion of the above total fee payable to the architect is determined by the amount of work done. Both equity and debt financing will typically be used in the same project usually at a ratio of 70% debt to 30% equity. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. d) PSGS 4: Property Management. A project company is required to obtain expatriate quota approvals for the relevant number of expatriate personnel it intends to employ. The Lagos State government has also partnered with Nigerian Mortgage Refinancing Company (NMRC) and private developers to construct and deliver 20,000 housing units to the state in the near future.
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