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 PPA contains detailed provisions in respect of the procurement process, including the principles, planning, implementation and general conduct of public procurement. Rules of the Chartered Institute of Arbitration (UK). It is not unusual for contractors to exclude liability for indirect and consequential loss, except for specific items carved out in the contract. The Borno state government has commenced an Owner Occupier scheme for 2,787 housing units in the state. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. Typically, contractors are allocated all the following risks: Risk of compliance with applicable law and regulation. Advised the International Finance Corporation (IFC), a member of the World Bank Group, in connection with its investment in a 120MW greenfield solar photovoltaic (PV) power project in Kogi State, Nigeria. However, in international projects, the project company is usually wholly owned by the sponsors through a holding company incorporated in a tax-friendly jurisdiction. 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. Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. Due to the increasing cost of key infrastructure projects in the country and dwindling government financing, the government has used public private partnership (PPP) arrangements to finance projects for which the government is not able to secure debt financing, for example the: Highway Development and Management Initiative, a PPP, which is expected to attract over NGN1 trillion in private investment for the development and maintenance of road networks. There is also no compulsory levy to fund local infrastructure. The licences and other consents a project must obtain will depend on the industry. The slow implementation of government budgets, however, has been a perennial problem in Nigeria. The Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN). Fee proposed 10% of cost of Annual Services. 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. Advised Actis on its investment in the 459 MW Azura-Edo gas fired independent power plant in Edo State. Final EIA to be prepared and approval obtained at the end of detailed engineering design but before the commencement of any construction activities. The transaction, which is valued at USD311.2 million, involved the sale of three power stations by the Rivers State Government to the investor. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. The repayment of the loan is structured in accordance with a repayment schedule by way of amortisation, or very rarely, a bullet repayment. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. There is no limit to the number of hours an employee can work in a day. 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. 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). WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. Alu - February 25, 2022. Preparation of an outline business case by the relevant MDA of the sector in which the PPP is to be implemented. 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. The Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. Advance Fee Fraud and Other Related Offences Act 2006. However, Nigeria currently builds just 2,000 houses per year. Basis of Professional Charges for Consulting Services 4.3. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 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. 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. Deep-sea port with a railway project connecting Calabar with Port Harcourt and Onne Deep Sea Port. In relation to construction projects, one mechanism is funding the project company with more debt than equity and so reducing the taxable income of the special purpose vehicle. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. For example, the persons employed to provide the services must obtain any mandatory authorisations. 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. The EIA Act sets out the principles, procedure and methodology for determining the environmental effects of public and private projects. During 2020 and 2021, parties have increasingly sought to declare force majeure events caused by COVID-19. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. Percentage Fee Scales 4.4. 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. 19, 2011. There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. 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. 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. WebFee is to be negotiated subject to a minimum of N50,000=. 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. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. 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. Table of Professional Charges 4.5. 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. 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. The current monthly minimum wage prescribed by the National Minimum Wage Act 2019 (NMWA) is NGN30,000. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. 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. It also includes provisions on the bidding process, bid security, evaluation of bids. 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. 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. 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. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). This trend has continued in 2021, and a report published by the World Bank in June 2021 (. 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. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. The Employee Compensation Act 2010 established the Employees' Compensation Fund (Fund) and requires every employer to make a minimum monthly contribution of 1% of its total monthly payroll into the Fund. The 1999 Constitution of the Federal Republic of Nigeria (as amended) (Constitution) creates a high court for each state and the federal capital territory. 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 Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. 23, 2011. In addition to local Nigerian laws, some foreign anti-corruption and anti-bribery laws have extra-territorial effect and may apply to certain categories of persons in relation to actions that are connected with Nigeria. 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. 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. London Court of International Arbitration Rules. 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. Alu - February 25, 2022. This paper concerns an investigation into the causes of high costs of construction in Nigeria. 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. Under these rules. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. 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. However, these are still subject to performance risks. 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. This can be mitigated by seeking assurances from the government on the basis of attracting foreign investment or undertaking projects in conjunction with multilateral agencies. 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. Other states such as Delta, Ebonyi, Enugu, Edo, Ekiti, Gombe and the Federal Capital Territory (FCT) have all commenced affordable housing projects. Various states in Nigeria have also passed laws regulating PPP projects in their states. 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. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. 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%. 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. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). 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. 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). Ibom Deep Seaport project, which is nearing realisation, following the opening of the bid process in Lagos which was won by Bollore Africa in November 2018. The circumstances described can be expressed to be non-exhaustive in their scope. Basis of Professional Charges for Consulting Services 4.3. On the basis of the President's directive that every seaport should have complementary rail infrastructure, we expect to see more developments in this sector in other states in the medium to long term. Professional Bodies in Nigerian Construction Industry. Section 2(i), part 2 of the Manual makes detailed provisions on fire safety, protection, evacuation, first responders and emergency planning. The REA's mandate is to increase electricity access to rural and underserved communities through public and private sector engagement. In many cases, the project company is a joint venture entity between a local sponsor and a foreign entity that will provide technical or management services to the project. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. 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. On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. 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. Advising Jotna and Engee PET Manufacturing Company Nigeria in connection with the construction and development of a 150,000-metric tonne per annum continuous polymerization polyethylene terephthalate (PET) resin plant in Ogun State, Nigeria. 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 The common contract forms used for local projects are: The Standard Bidding and Contract Documents produced by the Bureau of Public Enterprises (for public procurement works). The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. d) PSGS 4: Property Management. 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. Builders must be licensed by the Nigerian Institute of Building. The obligations imposed on the contractor or construction professional will depend largely on the parties to the contract. 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. Approval of project documents by lenders. Act (. 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: Types of Professional Fees 4.2. The relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. 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 However, Nigeria currently builds just 2,000 houses per year. 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%. In practice, an eight to nine-hour working day is the norm. 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. Generally, a Nigerian national does not require any authorisations to work in Nigeria. The FGN is taking steps towards reducing the infrastructure deficit through increased spending as part of a 30-year infrastructure plan (National Integrated Infrastructure Master Plan) (Infrastructure Plan) with a target date of 2043, which aims to bring Nigeria's infrastructure stock to the GDP level recommended by the World Bank.