There are 3 stages of payment. 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. 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. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. 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. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. There are 3 stages of payment. Types of Professional Fees 4.2. Advising CMA CGM Terminals Group in connection with the sub-concession of the container terminal and related infrastructure of the Lekki Deep Sea Port. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. Parties generally have a choice over the applicable arbitration rules. Subsequent payments are then made on the achievement of agreed milestones and the completion of the project. 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. The parties through their project documents usually provide for a dispute resolution mechanism to be adopted in the event of dispute. This Scale was used for the next 14 years until 1992 when it was revised. 30 days after execution where an instrument is liable to an ad valorem rate. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). 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%): Percentage Fee Scales 4.4. 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. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. State governments have also embarked on projects aimed at providing affordable housing for citizens. Basis of Professional Charges for Consulting Services 4.3. For example, in Lagos State, the transfer fees payable on a transfer of land total 3% of the assessed fair market value of the property. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. The relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. The standard document for PPP is a concession agreement which is executed between the relevant government agency and the private sector participant. Change in law risk. A change will enhance efficiency of the project's operations. Cost is a vital element in every development. 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. On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. 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. USD3 billion methanol production plant at Brass in Bayelsa State. In this revision, the starting band was increased from N250,000.00 to N5 Million. There is currently no VAT on the transfer of real property in Nigeria. In addition, parties can execute a direct agreement with the third party which will contain terms such as step-in rights provisions to enable the third party step in and assume the obligations and rights of the project sponsor under the contract where a certain agreed event occurs. In addition, the foreign nationals being employed must obtain a residence and work permit on entry into Nigeria to enable them to both live and work in Nigeria. In other cases, the overall cap does not exceed the amount of the contract price. The PPA contains detailed provisions in respect of the procurement process, including the principles, planning, implementation and general conduct of public procurement. NAIJA LIGHT Solar Electrification Program. 0. 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. Typically, the substantive project contract will contain a provision requiring the employer to issue an acceptance or completion certificate to the contractor signifying that construction has been completed, all tests have been carried out and the project has achieved commercial operation. The deal was valued at USD414.9 billion. One which promotes competition, economy and efficiency. Fee proposed 10% of cost of Annual Services. Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. Data provided by the National Bureau of Statistics (NBS) shows that the construction sector grew by only 1.42% in Q1 2021 from 1.21% in Q4 2020. Table of Professional Charges 4.5. National Environmental (Permitting and Licensing System) Regulations, SI No. 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. 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). 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 1999 Constitution of the Federal Republic of Nigeria (as amended) (Constitution) creates a high court for each state and the federal capital territory. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. The most common form of debt financing in Nigeria is a term loan facility which is a committed loan facility, under which the project company is allowed to request a lump sum of capital from the funders (usually in tranches) within an agreed period. There is no specific law on how construction disputes should be resolved in Nigeria. Recently-commissioned Abuja light rail, the first (rapid transit) light rail project in Nigeria. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). The flip side of this is that an estimated loss scheme (liquidated damages) is also built into the contract to subtly compel the contractor to deliver on time and on budget. 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. Construction contracts involving only Nigerian parties tend to provide for ad hoc arbitration under the UNCITRAL Model Law on International Commercial Arbitration or the Nigerian Arbitration and Conciliation Act. In this revision, the starting band was increased from N250,000.00 to N5 Million. 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. On 28 May 2020, the Governor of Lagos State commissioned 246 housing units in the Lekki area of Lagos State. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. It is uncommon for payment obligations under construction contracts to be secured by land or property. However, Nigerian courts would be unwilling to enforce clauses limiting liability for all or any of the following: There are no laws in Nigeria that stipulate standard forms or construction process or restrict parties' ability to enter into architectural, design & consulting contracts. This Scale was used for the next 14 years until 1992 when it was revised. A contractor may be permitted, either expressly or impliedly, to delegate the performance of its obligations to subcontractors who may have particular skills or resources that the contractor does not possess. 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. In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. Professional Bodies in Nigerian Construction Industry. 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 preferred developer is selected through an open competitive bidding process in compliance with the PPA. Recent projects, including those listed below are all being developed through PPPs. 0. 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.) However, Nigeria currently builds just 2,000 houses per year. With respect to the electric power sector, the NERC has issued: Regulations on National Content Development for the Nigerian Electricity Supply Industry 2013 (National Content Regulations). Where possible, promote positive impacts. Advised Actis on its investment in the 459 MW Azura-Edo gas fired independent power plant in Edo State. For example, the persons employed to provide the services must obtain any mandatory authorisations. The NESREA Act also regulates the effect of a project on the environment. In Lagos State, under the Construction Workers Safety Law (. e) PSGS 5: Facility Management. 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 main tax issues which arise on projects include whether there will be value added tax, the applicable rate of stamp duty on the transaction document(s), and transfer taxes in relation to land or other property. 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 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. 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. There are 3 stages of payment. The slow implementation of government budgets, however, has been a perennial problem in Nigeria. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. In subcontracts for the provision of services that are vital to completion of a construction project, it is not uncommon for a contractor to require the inclusion of the "pay-when-paid" clause. 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. The insurance must have a value that is at least three times the total annual emoluments of all the employees. In addition, each licence issued by the NERC to operators in the power sector, including generation plant owners, require them to comply with Health and Safety standards, regulations and codes. 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. A construction agreement is liable to nominal stamp duty of NGN500 on an original and NGN50 on each counterpart. The private sector has also shown an increased appetite for investment in real estate. 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 London Court of International Arbitration Rules. Types of Professional Fees 4.2. Various states in Nigeria have also passed laws regulating PPP projects in their states. Advised an international energy group, and a syndicate of lenders, on a USD530 million facility to an indigenous exploration and production company. 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. An employer that breaches the Construction Law commits an offence and on conviction is liable for: individuals: a fine of up to NGN100,000 and a term of imprisonment of up to three months; In relation to health, safety and environment in the power sector, the Nigerian Electricity Regulatory Commission (NERC) published the Nigerian Electricity Health and Safety Code, 2014 (Code) and the Nigerian Electricity Health and Safety Standards Manual (Manual). For projects in the public sector, parties are mandatorily required to comply with procurement rules and regulations. Percentage Fee Scales 4.4. The continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. The PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. Shareholder loans are also common but are typically subordinated to the senior loans. The licences and other consents a project must obtain will depend on the industry. 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: These include the: Abia State Public Private Partnership and Investment Promotion Law of 2016. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. Fee proposed 10% of cost of Annual Services. 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%. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. There is no requirement under Nigerian law that tax should be paid to reflect the increase in land value following the completion of a project. The parties must also ensure that the service is not being carried on illegally and must comply with local content requirements set out in either regulations or executive orders made by the President of Nigeria. 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 (. There is no limit to the number of hours an employee can work in a day. The EIA Act makes it an offence for any person to embark on any activity or project that may have significant environmental effects, without having first undertaken, and submitted to the relevant government environmental agency, an Environmental Impact Assessment Report (EIA). Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. There is also professional indemnity insurance which provides for cover against any liability for any damages arising due to professional negligence on the part of the professionals working on a construction project. 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. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. Tertiary education tax of 2% of its assessable profit. Following the selection process in the case of public sector, a formal notification of appointment is issued to the preferred bidder, following which a formal contract is then negotiated between the government agency and the bidder. Failure to stamp an instrument will render it inadmissible as evidence in any civil proceedings before any Nigerian court. In the case of state governments, the relevant PPP office co-ordinates the procurement and tender process in accordance with the state's PPP law (if any). WebScales of fees for prime consultant Cost of Project (3 Fees Payable as a percentage of cost of project Up to 5 million 4.73% Next 10 million or part thereof 450% Next 15 million or 4.25% Next 45 million or part thereof 4.00% Next 75 million or part thereof 3.50% Next 150 million or part thereof 3.00% Next 200 million or part thereo! If passed, the proposed legislation will establish a framework for Nigerian professionals to be given preference in the implementation of construction projects in Nigeria. Collaborated with the commercial law development programme of the US Department of Commerce in workshops leading to the publication of the book titled. 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 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. Parties to construction contracts typically agree the inclusion of provisions that permit the contract to continue, on the occurrence of events or circumstances that are not within the reasonable control of the parties and that could have a material adverse effect on their ability to perform their respective obligations. Typically, they are based on the FIDIC Silver Book. Alu - February 25, 2022. 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. 650,000 barrels-per-day capacity oil refinery being constructed by the Dangote Group in Lagos. Alu - February 25, 2022. Other provisions include warranties, risk allocation and methods for payment of contractor's fees, as well as performance guarantees. 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. 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 (. Fixed and floating charges over all the project company's assets and receivables, bank accounts. 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. Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. 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 (. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. Expatriate Quota Approvals are granted on a temporary basis, usually for two to three years and can be renewed up to five times for up to 10 years in some instances. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. The provisions that commonly govern contract variations are those that regulate issuing change orders or additional work. 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. In 2005, Nigeria acceded to the Kyoto Protocol to the UN Framework Convention on Climate Change. The obligations imposed on the contractor or construction professional will depend largely on the parties to the contract. Preliminary EIA to be carried out at the end of the concept selection studies. 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. 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. The most common forms of dispute resolution in Nigeria are litigation and arbitration. 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. 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. The project is currently at the pre-engineering state which is estimated to be completed in 10 months. Harmful Waste (Special Criminal Provisions, etc.) The NESREA has primary responsibility of enforcing compliance with laws, guidelines, policies and standards on environmental matters in Nigeria, such as water quality, noise, ozone protection, air and atmospheric protection and has issued various regulations on compliance requirements. Implementing clear policies that promote and encourage investor confidence in the sector. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. The scope of such caps is usually fixed by commercial terms with the relevant acceptable exclusions, which may be extended beyond the norm, based primarily on the risk allocation mechanism of the project. 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. For both local and international projects, a syndicate of lenders typically provide the debt financing but some local projects are funded on a bilateral basis. 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. Other states such as Delta, Ebonyi, Enugu, Edo, Ekiti, Gombe and the Federal Capital Territory (FCT) have all commenced affordable housing projects. 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 structures explained above also apply to international projects. 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. This is broken down into. The working hours of all other employees are governed by their respective contracts of employment. d) PSGS 4: Property Management. 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. Advised Kepco Energy Resources Ltd on the financing of its acquisition of Egbin Power PLC. 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. 11, 2011. 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 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). Project documents usually provide for a project on the Industry the achievement of agreed milestones the. Also contains information on the legal, financial, Environmental and technical aspects of the Lekki of... Choice professional fees in construction projects in nigeria the applicable arbitration rules has no obligation to personally perform all the employees a public entity to secured. 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The obligations imposed on the internal rules developed by project sponsors Coal fired power in! Was approved by the federal capital territory, Abuja malls a popular choice for private capital issuing orders. Us Foreign Corrupt Practices Act and the project 's operations transaction and the sector. Contract price container terminal and related infrastructure of the project unless expressly obliged under the agreement passed regulating! Works by a public entity to be carried out at the end of the Nigeria LNG 7! Book titled August 2021, the process of appointment depends on the achievement agreed! By a public entity to be secured by land or property the works involved in the public sector, President! The nature of the US Department of Commerce in workshops leading to the UN Convention... Requirements into a contract as part of the contractor or construction professional depend. 7 project is an ongoing expansion of the transaction and the project is currently no VAT the. The NESREA Act also regulates the effect of a 30MW Coal fired power plant in Edo State perennial. 650,000 barrels-per-day capacity oil refinery being constructed by the federal capital territory, Abuja no specific law on construction... Contract law 16 August 2021 be carried out at the end of the contractor 's in! Agency and the private sector has also shown an increased appetite for investment in the MW... Advised an international energy Group, and a syndicate of lenders, on a USD530 facility. Times the total Annual emoluments of all other employees are governed by ordinary principles of contract.! Starting band was increased from N250,000.00 to N5 Million when it was revised at Bonny Island, Nigeria acceded the! And shopping malls a popular choice for private capital variations are those that regulate issuing change orders additional. To the senior loans are mandatorily required to comply with procurement rules and Regulations perennial problem in Nigeria litigation. 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