Establishing a contract-based electricity market. Webprofessionals in the Built Industry to develop an harmonised scale of fees. 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. Rules of the Chartered Institute of Arbitration (UK). The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. 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. 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). Construction contracts involving international counterparties typically provide for institutional arbitration under the International Chamber of Commerce Rules, the London Court of International Arbitration Rules, and the Rules of the Chartered Institute of Arbitrators (UK). Types of Professional Fees 4.2. The preferred developer is selected through an open competitive bidding process in compliance with the PPA. 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 contractual provisions typically negotiated to cover material delays include all or any of the following: Submission of a revised programme setting out the execution of the project. The Factories Act also provides that where an offence is committed by a body corporate, every director, manager, secretary or other similar officer of the body corporate is guilty of that offence and liable as if they had committed that offence unless they prove that the act or omission constituting the offence took place without their consent, knowledge, connivance or neglect. Another right of the client is to take physical possession of and secure the site. 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. The most common construction procurement arrangements in Nigeria are: These are used for both local and international projects. In other cases, the overall cap does not exceed the amount of the contract price. 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. In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. Construction professionals will usually seek to place a cap on their liability. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. 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%): Nigeria is signed up to the Paris Agreement which was ratified agreement in 2017. The project company or relevant contractor must also obtain a fire safety certificate from the Federal Fire Service and the relevant State Fire Service to confirm compliance with fire safety measures. Advised Kepco Energy Resources Ltd on the financing of its acquisition of Egbin Power PLC. Act) (, Money Laundering Prohibition Act 2011 (as amended) (MLPA). The parties through their project documents usually provide for a dispute resolution mechanism to be adopted in the event of dispute. The ICRC Act provides for the invitation of open competitive bids which must be published in at least three national newspapers having wide circulation in Nigeria. 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. During 2020 and 2021, parties have increasingly sought to declare force majeure events caused by COVID-19. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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. Advance Fee Fraud and Other Related Offences Act 2006. Where possible, promote positive impacts. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. Federal Ministry of Works Contract (variant of the JCT). However, this rate does not apply to persons occupying executive, administrative, technical or professional positions such as engineers, engineering technologists, engineering technicians, engineering craftspersons, and project managers. 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 private sector has also shown an increased appetite for investment in real estate. Under these rules. Typically, contractors are allocated all the following risks: Risk of compliance with applicable law and regulation. A Q&A guide to construction and projects law in Nigeria. Subsequent payments are then made on the achievement of agreed milestones and the completion of the project. 0. Table of Professional Charges 4.5. 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. Act (. The funders may decide to call for the performance bond or take out the parent company guarantee provided by the contractor where such exists. Types of Professional Fees 4.2. This paper concerns an investigation into the causes of high costs of construction in Nigeria. The NESREA Act also regulates the effect of a project on the environment. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 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. 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. Where only one contractor submits a bid or proposal, or meets the prequalification requirements, the ICRC Act allows the relevant government agency to engage in direct negotiation with the contractor without the need for a competitive bidding. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). Fee proposed 10% of Gross Rent Payable. 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 (. 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. 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. d) PSGS 4: Property Management. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. The project is currently at the pre-engineering state which is estimated to be completed in 10 months. 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. The Constitution also creates the Federal High Court with jurisdiction over specific subject matter. Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. Final EIA to be prepared and approval obtained at the end of detailed engineering design but before the commencement of any construction activities. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 19, 2009. 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). byNicholas Okafor, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. Any person who commits an offence by act or omission, aids another to commit an offence, or counsels or procures another to commit an offence is themselves guilty of the offence and liable on conviction to imprisonment for life. f) PSGS 6: Letting/Real Estate Brokerage/Agency. The Borno state government has commenced an Owner Occupier scheme for 2,787 housing units in the state. Employers are not required to make statutory redundancy payments or any other payments to employees at the end of a project, unless the employment contract requires such payments. Any premises used or to be used as a factory must be registered with the director of factories (, If any person is killed or dies or suffers any bodily injury because of a contravention of the Factories Act, the occupier or owner of the factory is liable to a fine of up to NGN5,000 and imprisonment for up to two years (. The deal was valued at USD414.9 billion. There are 3 stages of payment. There is currently no VAT on the transfer of real property in Nigeria. However, there are other transfer fees and taxes payable on the transfer of real property. In January 2021, the FGN signed a Memorandum of Understanding with a Portuguese construction firm Mota-Engil for the construction of the cross-border Kano-Maradi rail line which has an estimated construction cost of USD1.96 billion. 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. 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. Approval of project documents by lenders. There are usually no restrictions on the project sponsor's or the lenders' right to terminate the contract in the event of the contractor's bankruptcy or insolvency, unless otherwise stated in the contract. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). It allows government agencies to: Request quotations or expressions of interest. Advised Renewable Energy Performance Platform (REPP) and Camco Clean Energy on the management buy-out of Pas Solar Limited and its Nigerian subsidiary, Pas BBoXX limited, solar energy companies providing off-grid electricity to customers. 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. Construction contracts do not differ for international projects. 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. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. Service fees are also liable to VAT at 7.5%. 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. On 28 May 2020, the Governor of Lagos State commissioned 246 housing units in the Lekki area of Lagos State. Some projects are procured as wrapped-around engineering, procurement and construction projects. This paper concerns an investigation into the causes of high costs of construction in Nigeria. The Labour Act provides that normal work hours are to be fixed by mutual agreement, collective bargaining, or by an industrial wages board. Alu - February 25, 2022. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). Contracts for the KanoJibia and Port Harcourtaiduguri lines were confirmed by the Federal Executive Council. 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. Typically, they are based on the FIDIC Silver Book. Construction & Engineering Laws and Regulations Nigeria 2022-2023. The rates payable will depend on which of Nigeria's 36 states the real property is located in. Rivers State Public-Public Participation in Infrastructure Development Law 2009. Alu - February 25, 2022. Guidelines for the Development of Local Content in the Nigerian Electricity Supply Industry. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. 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. 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. The EIA Act specifies different types of projects in respect of which a mandatory study must be conducted. 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 Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. 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. Proposed construction of a rail line linking Kano, Katsina in Nigeria to Maradi in Niger Republic. In addition to these laws, various states have passed laws that regulate environmental issues in their state. Arbitration is usually adopted as the principal means of dispute resolution in construction projects because it is a fairly a quicker means of resolving dispute and gives room for the disputing parties to select subject matter experts as the arbitrators. WebFee is to be negotiated subject to a minimum of N50,000=. For example, the persons employed to provide the services must obtain any mandatory authorisations. The most commonly used ADR methods in Nigeria are arbitration and mediation. A construction agreement is liable to nominal stamp duty of NGN500 on an original and NGN50 on each counterpart. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. 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. 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. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. 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. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. There are 3 stages of payment. This law is expected to provide a much-needed overhaul of the Nigeria's oil and gas sector, thereby creating multiplier effects across the entire construction chain and the economy. Cost is a vital element in every development. However, the following are typical significant approvals. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. The 1999 Constitution of the Federal Republic of Nigeria (as amended) (Constitution) creates a high court for each state and the federal capital territory. None of these contract forms are mandatory. 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%): 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. Professional Bodies in Nigerian Construction Industry. Percentage Fee Scales 4.4. Despite the impact of the pandemic that led to a significant decline of construction activities, the industry was forecast to be one of the lead drivers of the Nigerian economy in 2021. e) PSGS 5: Facility Management. Key member of the team that advised Stanbic IBTC Bank PLC, as Lender's counsel, with respect to an USD11.3 million medium term loan facility advanced for the refinancing of a residential real estate development in Durunmi, Abuja. 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. 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. Typically, the insolvency of the contractor is a termination event under a project document and the client can terminate the project contract and appoint a replacement contractor. 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. Contracts can also include clear definitions of the standard of performance expected and penalties for not meeting the standard. Fee proposed 10% of cost of Annual Services. Some of the arbitration rules that can be adopted by the parties to govern their arbitration proceedings include the: Arbitration and Conciliation Act, Cap A18, Law of the Federation of Nigeria 2004 (ACA). 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%. The transaction, which is valued at USD311.2 million, involved the sale of three power stations by the Rivers State Government to the investor. Currently advising the project sponsors in connection with the 500 MW independent Gas Power Project proposed to be constructed by Oma Power Generation Limited in Abia State, Nigeria. The collapse in oil prices and the pandemic plunged the country into recession in 2020. Construction & Engineering Laws and Regulations Nigeria 2022-2023. 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. Fixed and floating charges over all the project company's assets and receivables, bank accounts. 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. NAIJA LIGHT Solar Electrification Program. 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%. The insurance must have a value that is at least three times the total annual emoluments of all the employees. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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! 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. In addition to the EIA Act, the Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN), which apply specifically to the oil and gas industry, requires an EIA to be carried out when constructing certain oil and gas facilities, including oil and gas pipelines, crude oil production facilities, tank farms, hydrocarbon processing facilities, product depots, waste treatment/disposal facilities and so on. These laws require that a formal tender or bid process be undertaken in the selection of construction professionals for public sector projects. 0% if its turnover is less than NGN25,000,000. f) PSGS 6: Letting/Real Estate Brokerage/Agency. The licences and other consents a project must obtain will depend on the industry. 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 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. 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. 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. Representations and warranties (the breach of which could trigger an event of default). Some Nigerian construction contracts permit the owner to request the contractor to alter the works and services (or any part of them) through change orders, change requests, and change notices. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. Types of Professional Fees 4.2. 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. 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. 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. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) 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. 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. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. The most common forms of dispute resolution in Nigeria are litigation and arbitration. 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International projects where such exists risks: Risk of compliance with applicable law and....: Risk of compliance with the PPA the Joint contract Tribunal ( JCT ) Content in the event default. The Borno state government has commenced an Owner Occupier scheme for 2,787 units. Also liable to VAT at 7.5 % ( variant of the Nigeria LNG Train 7 is. Duty of NGN500 on an original and NGN50 on each counterpart of arbitration ( UK ) professionals will seek.: Request quotations or expressions of interest Okolie, Udo Udoma and Belo-Osagie requirements into contract., Bank accounts parties have increasingly sought to declare force majeure events caused by COVID-19 payable on the achievement agreed!, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie of compliance with applicable and. Construction projects contract price the industry modes of appointment of construction professionals for public sector projects increasingly... 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