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). Webprofessionals in the Built Industry to develop an harmonised scale of fees. Rules of the Chartered Institute of Arbitration (UK). Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. The transaction, which is valued at USD311.2 million, involved the sale of three power stations by the Rivers State Government to the investor. Advised Actis on its investment in the 459 MW Azura-Edo gas fired independent power plant in Edo State. 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 Constitution also creates the Federal High Court with jurisdiction over specific subject matter. Construction contracts do not differ for international projects. 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. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). The continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. 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 CC Act also prescribes the same penalty in relation to similar offences as those immediately above. 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. In Nigeria, force majeure events are commonly classified into the following three categories: It is not enough for a party to allege that its inability to perform a contract is as a result of circumstances beyond its control. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. The obligations imposed on the contractor or construction professional will depend largely on the parties to the contract. 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 Strengthening the sector's institutional framework and increasing transparency. 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. Act (. 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. 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. 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. This Scale was used for the next 14 years until 1992 when it was revised. Parties generally have a choice over the applicable arbitration rules. 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. Fixed and floating charges over all the project company's assets and receivables, bank accounts. This paper concerns an investigation into the causes of high costs of construction in Nigeria. Act (. Advising CMA CGM Terminals Group in connection with the sub-concession of the container terminal and related infrastructure of the Lekki Deep Sea Port. Table of Professional Charges 4.5. 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 most common forms of dispute resolution in Nigeria are litigation and arbitration. 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. 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%. 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). 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, Nigeria currently builds just 2,000 houses per year. The standard document for PPP is a concession agreement which is executed between the relevant government agency and the private sector participant. 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. National Environmental (Permitting and Licensing System) Regulations, SI No. 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. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. Where the FEC is satisfied that the project should be carried out using a PPP, it grants its approval to the project. The collapse in oil prices and the pandemic plunged the country into recession in 2020. State governments have also embarked on projects aimed at providing affordable housing for citizens. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. 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: Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) Cost is a vital element in every development. 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). 0. National Environmental (Standards for Telecommunications and Broadcast Facilities) Regulations, SI No. Renewable Energy Village in Kakuri, Kaduna State. Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. 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 (. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. 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: Covenants, representations and warranties. 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. 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. Contracts can also include clear definitions of the standard of performance expected and penalties for not meeting the standard. Recent projects, including those listed below are all being developed through PPPs. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. Another right of the client is to take physical possession of and secure the site. Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. 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). 0. 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. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. d) PSGS 4: Property Management. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. In Lagos State, under the Construction Workers Safety Law (. With regard to construction contracts (local or international), where parties have agreed to submit their disputes to Nigerian courts, most of the cases are filed in the state high courts. 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). This Scale was used for the next 14 years until 1992 when it was revised. 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. The Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. In this revision, the starting band was increased from N250,000.00 to N5 Million. 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%. d) PSGS 4: Property Management. 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. 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. 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. Corporate guarantee from the sponsors (and sponsors' parent companies in international projects). 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 circumstances described can be expressed to be non-exhaustive in their scope. The proposed project is submitted to the Federal Executive Council (FEC) for approval. There is also no compulsory levy to fund local infrastructure. 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. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. In July 2020, the Nigerian President approved the payment of EUR15.21 million and NGN1.708 billion as counterpart funding for the PPI. There are rules in Nigeria that prohibit corrupt business practices and bribery generally. 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. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. Webprofessionals in the Built Industry to develop an harmonised scale of fees. Generally, a Nigerian national does not require any authorisations to work in Nigeria. 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). Parties are free to determine the scope, nature and term of their contracts to the extent that the terms of those contracts do not breach the laws of Nigeria. The General Conditions of Contract for the procurement of works 2011. 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). Risks associated with fitness are mitigated through performance guarantees from the contractors. WebFee is to be negotiated subject to a minimum of N50,000=. 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%): e) PSGS 5: Facility Management. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. Fee proposed 10% of cost of Annual Services. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. Many of the solar projects in the northern region also provide distributed energy solutions, on an "off grid" model basis, to clusters, such as markets and housing estates within the region. e) PSGS 5: Facility Management. 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. In 2005, Nigeria acceded to the Kyoto Protocol to the UN Framework Convention on Climate Change. The NESREA Act also regulates the effect of a project on the environment. Cost is a vital element in every development. Usually, the state where the construction contract is implemented or ought to be performed will determine the high court that will have jurisdiction over the contractual dispute. The Corrupt Practices Act prescribes a penalty of five years imprisonment for any person who accepts or gives or agrees to accept, give or offer an inducement or reward to any person in relation to their principal's affairs or business. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. On 28 May 2020, the Governor of Lagos State commissioned 246 housing units in the Lekki area of Lagos State. The licences and other consents a project must obtain will depend on the industry. Contracts for the KanoJibia and Port Harcourtaiduguri lines were confirmed by the Federal Executive Council. Some of the penalties under Nigerian anti-corruption laws include the following: The Corrupt Practices Act prescribes a penalty of seven years imprisonment for any person who, being a public official: corruptly asks for, receives or attempts to receive or obtains any property or benefit of any kind before or after doing or omitting to do something in an official capacity; gives, confers or procures, or promises or offers to give, confer, procure or attempt to procure, any property or benefit of any kind to or for a public officer, or any other person on account of any act performed in an official capacity. Section 2(i), part 2 of the Manual makes detailed provisions on fire safety, protection, evacuation, first responders and emergency planning. USD3 billion methanol production plant at Brass in Bayelsa State. This paper concerns an investigation into the causes of high costs of construction in Nigeria. Advance Fee Fraud and Other Related Offences Act 2006. 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professional fees in construction projects in nigeria