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. Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. 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 Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). Member of the team that advised Falcon Kinetics Limited on the Construction of the Civil and Structural Works for the development of a 4,000MT LPG Bulk Gas Storage Facility and Jetty Project at Rumuolumeni, Saipem/Aker Base Road, Port Harcourt, Rivers State, Nigeria. 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. Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. Cost is a vital element in every development. Construction professionals will usually seek to place a cap on their liability. 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. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. Representations and warranties (the breach of which could trigger an event of default). 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. e) PSGS 5: Facility Management. 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. 19, 2009. 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. The circumstances described can be expressed to be non-exhaustive in their scope. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. 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 continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. 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 licences and other consents a project must obtain will depend on the industry. The provisions that commonly govern contract variations are those that regulate issuing change orders or additional work. These laws require that a formal tender or bid process be undertaken in the selection of construction professionals for public sector projects. 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. Table of Professional Charges 4.5. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. Webprofessionals in the Built Industry to develop an harmonised scale of fees. Professional Bodies in Nigerian Construction Industry. The deal was valued at USD414.9 billion. The EIA must be approved by the Department of Petroleum Resources (DPR). Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) 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%): 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%. In Lagos State, under the Construction Workers Safety Law (. 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. 2.50% Balance Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. In this revision, the starting band was increased from N250,000.00 to N5 Million. 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. 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 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. An arbitral award is both binding and enforceable by Nigerian courts. d) PSGS 4: Property Management. 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 fact that the employer has given their consent to the delegation of some of the main contractor's obligations to a subcontractor does not, therefore, give rise to any contractual relationship between the employer and the subcontractor and there is no privity of contract between the employer and subcontractor. 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 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. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. 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. Under these rules. The railway is currently being extended to the Lagos Port to ease import and export of goods. 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. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. Types of Professional Fees 4.2. A change in applicable laws and standards necessitates such change. 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. Alu - February 25, 2022. Advised a syndicate of lenders in connection with the amendments to, and increase in the size of a loan of approximately USD530 million to Shoreline Natural Energy Resources Limited, a Nigerian oil and gas exploration and production company. The 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, 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 (. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. Typically, contractors are allocated all the following risks: Risk of compliance with applicable law and regulation. Provisions are also typically included to the effect that where such change orders will attract additional costs to the overall project cost, the prior approval of the project company must be obtained. 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. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. Signed a six-year, NGN1.15 trillion (about USD3.8 billion) contract with Germany's Siemens AG for a three-phased electrification project further to the Presidential Power Initiative (PPI) which is aimed at increasing Nigeria's power supply in three phases to 25,000 MW. The NESREA Act also regulates the effect of a project on the environment. Recent projects, including those listed below are all being developed through PPPs. In addition to these laws, various states have passed laws that regulate environmental issues in their state. 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). 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. 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. 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. 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. 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. 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. This Scale was used for the next 14 years until 1992 when it was revised. The most common corporate structure for projects in Nigeria is a private company limited by shares. 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. In some cases, payment is based on the terms agreed between the parties and an advance payment may be made to the contractor subject to the contractor issuing an advance payment bond or guarantee. 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. 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 This Scale was used for the next 14 years until 1992 when it was revised. 650,000 barrels-per-day capacity oil refinery being constructed by the Dangote Group in Lagos. Including provisions that require interest on delayed payments is also one of the means of ensuring that contractual payments are made promptly and diligently. 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 (. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. 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. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. Some projects are procured as wrapped-around engineering, procurement and construction projects. 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. 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. WebFee is to be negotiated subject to a minimum of N50,000=. 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. 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. Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. 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. There are usually no restrictions on the client's right to terminate the contract in the event of the contractor's bankruptcy or insolvency, unless otherwise stated in the contract. 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 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. 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. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. 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. It also includes provisions on the bidding process, bid security, evaluation of bids. 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. 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. The entitlement of consultants to recovery from third parties in respect of additional costs or delays depends on the terms of their contracts and appointments. 2.50% Balance For example, the persons employed to provide the services must obtain any mandatory authorisations. Legal or equitable mortgage on all of the project company's interest in the project site, land and buildings and fixed plant and machinery. 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. 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. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. The insurance must have a value that is at least three times the total annual emoluments of all the employees. The contractor is, therefore, required to comply with health and safety regulations relating to employees that work in certain areas of the project or that operate certain machinery wearing protective clothing. 0% if its turnover is less than NGN25,000,000. Foreign engineering consultants and firms can only be engaged when the required services are rendered in collaboration with firms licensed to provide such engineering services in Nigeria (. 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. e) PSGS 5: Facility Management. 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. This is broken down into. Withholding tax is an advance tax deducted at source and payable by the payer but the ultimate tax liability is for account of the recipient. Types of Professional Fees 4.2. 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. 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. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. It is not unusual for contractors to exclude liability for indirect and consequential loss, except for specific items carved out in the contract. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. Rivers State Public-Public Participation in Infrastructure Development Law 2009. The project contract usually contains provisions that require payment to be made for the demobilisation and repatriation of foreign personnel to their home countries. Generally, a Nigerian national does not require any authorisations to work in Nigeria. 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. The Constitution also creates the Federal High Court with jurisdiction over specific subject matter. 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). 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. A Q&A guide to construction and projects law in Nigeria. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. Construction & Engineering Laws and Regulations Nigeria 2022-2023. 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 EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. 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. There are no specific laws in the Nigerian construction industry that give a contractor the right to maintain a lien on the employer's property or over the project where there is a payment default. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). 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. 23, 2011. 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. None of these contract forms are mandatory. 0. 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). Security, evaluation of bids modes of appointment of construction professionals will usually seek to place cap... Impact Assessment Act ( EIA Act ) procurement and construction projects the circumstances described can be provided project! Of 7.5 % ( scale of fees limitation of liability is usually capped at 25 % of Gross Payable! 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