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. 40 days after execution of the instrument, where an instrument is liable to stamp duty at a nominal rate. Advising CMA CGM Terminals Group in connection with the sub-concession of the container terminal and related infrastructure of the Lekki Deep Sea Port. Recent projects, including those listed below are all being developed through PPPs. The parties through their project documents usually provide for a dispute resolution mechanism to be adopted in the event of dispute. Corporate guarantee from the sponsors (and sponsors' parent companies in international projects). 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). 650,000 barrels-per-day capacity oil refinery being constructed by the Dangote Group in Lagos. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. 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. Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. In this revision, the starting band was increased from N250,000.00 to N5 Million. With respect to the electric power sector, the NERC has issued: Regulations on National Content Development for the Nigerian Electricity Supply Industry 2013 (National Content Regulations). USD3 billion methanol production plant at Brass in Bayelsa State. The insurance must have a value that is at least three times the total annual emoluments of all the employees. 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). 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 19, 2011. The main stages are: Selection of projects in each sector to be implemented on a PPP basis by the relevant ministry, department and agency (MDA) charged with the responsibility of regulating that sector. Arbitration is either ad hoc or institutional. 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. 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. Factories Act. All procuring entities, including MDAs are required to obtain a Certificate of No Objection to Contract Award from the Bureau of Public Procurement before they engage in any procurement process. 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. 0. 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. 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 (. There is no specific law on how construction disputes should be resolved in Nigeria. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. 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. 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. 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 contractual provisions that govern or limit liability include provisions dealing with any of the following: Indemnities on account of losses caused by delay. 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. Typically, they are based on the FIDIC Silver Book. 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. Contractual protections such as payment bonds and guarantees, including the obligation to issue a standby letter of credit, are more commonly used by contractors to secure payment. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. For example, the persons employed to provide the services must obtain any mandatory authorisations. Contracts can also include clear definitions of the standard of performance expected and penalties for not meeting the standard. Specific laws govern procurement of goods and services in Nigeria. 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. e) PSGS 5: Facility Management. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. Basis of Professional Charges for Consulting Services 4.3. Webprofessionals in the Built Industry to develop an harmonised scale of fees. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). Webprofessionals in the Built Industry to develop an harmonised scale of fees. 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. Another right of the client is to take physical possession of and secure the site. 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. However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. There are 3 stages of payment. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. This can be done as currently there are no thin capitalisation rules in Nigeria and parties can take advantage of this. The Stamp Duties Act 2004 (as amended) requires stamp duty to be paid on instruments executed in Nigeria or relating to any property situated in Nigeria or matter to be done in Nigeria. Harmful Waste (Special Criminal Provisions, etc.) The EFCC Act defines economic and financial crimes as non-violent criminal and illicit activity committed with the objective of earning wealth illegally, either individually or in a group or organised manner and includes any form of fraud, narcotic drug trafficking, money-laundering, embezzlement, bribery, looting and any form of corrupt malpractice, illegal arms deal, smuggling, human trafficking and child labour, illegal oil bunkering and illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes and prohibited goods, among others. Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. The private sector has also shown an increased appetite for investment in real estate. 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. 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. A Q&A guide to construction and projects law in Nigeria. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. Advised Kepco Energy Resources Ltd on the financing of its acquisition of Egbin Power PLC. 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. 0. 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). An arbitral award is both binding and enforceable by Nigerian courts. Alu - February 25, 2022. 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. On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. None of these contract forms are mandatory. d) PSGS 4: Property Management. However, Nigeria currently builds just 2,000 houses per year. In addition, anything used for the carriage of harmful wastes and any premises or land where it was kept can be forfeited to the FGN. Professional Bodies in Nigerian Construction Industry. In practice, an eight to nine-hour working day is the norm. In other cases, the overall cap does not exceed the amount of the contract price. Assignment of rights in the project documents, insurance policies, hedging arrangements, future and present undertaking, and so on. ensure that the working environment cannot reasonably constitute a health hazard to the employees; make adequate provision for the protection of the health of its workers; insure all employees against injury to health or other forms of physical injury, accident or death that may occur in the course of duty. 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. 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 example, in Lagos State, the transfer fees payable on a transfer of land total 3% of the assessed fair market value of the property. 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. 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. 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. 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 (. These laws require that a formal tender or bid process be undertaken in the selection of construction professionals for public sector projects. During 2020 and 2021, parties have increasingly sought to declare force majeure events caused by COVID-19. The interest payment on a loan to fund a construction project is an allowable deduction before arriving at the taxable profits. London Court of International Arbitration Rules. 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. Some engineering, procurement and construction contracts for local projects are also drafted on the basis of the template developed by the International Federation of Consulting Engineers (. In Lagos State, under the Construction Workers Safety Law (. 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. This clause requires a subcontractor to be paid within a specific period after the contractor has been paid that is make payment contingent on the contractor being paid. 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%. 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 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. 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 EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. Data provided by the National Bureau of Statistics (NBS) shows that the construction sector grew by only 1.42% in Q1 2021 from 1.21% in Q4 2020. 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. The REA's mandate is to increase electricity access to rural and underserved communities through public and private sector engagement. 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. Fee proposed 10% of cost of Annual Services. 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. 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 working hours of all other employees are governed by their respective contracts of employment. The following forms of security are typically taken in infrastructure projects: Share charge on all the shares and other equity rights (present and future) of the sponsors in the project company (and holding company). Final EIA to be prepared and approval obtained at the end of detailed engineering design but before the commencement of any construction activities. Fee proposed 10% of Gross Rent Payable. 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. Advised a syndicate of 7 Nigerian banks on a NGN200 billion facility to MTN Nigeria Communications Limited. 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. 2.50% Balance Construction contracts typically include caps on liability. 19, 2009. Percentage Fee Scales 4.4. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. 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. This paper concerns an investigation into the causes of high costs of construction in Nigeria. In addition, parties can execute a direct agreement with the third party which will contain terms such as step-in rights provisions to enable the third party step in and assume the obligations and rights of the project sponsor under the contract where a certain agreed event occurs. 30 days after execution where an instrument is liable to an ad valorem rate. Percentage Fee Scales 4.4. 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. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) Advised Actis on its investment in the 459 MW Azura-Edo gas fired independent power plant in Edo State. There are 3 stages of payment. 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. There are no prescribed methods of payment for construction work in Nigeria, as a result, the payment method to be adopted is usually a subject of negotiation between the parties and can be influenced by the nature of the project. 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. Section 2(i), part 2 of the Manual makes detailed provisions on fire safety, protection, evacuation, first responders and emergency planning. 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). Cost is a vital element in every development. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 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 CC Act also prescribes the same penalty in relation to similar offences as those immediately above. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. The obligations imposed on the contractor or construction professional will depend largely on the parties to the contract. WebFee is to be negotiated subject to a minimum of N50,000=. Construction & Engineering Laws and Regulations Nigeria 2022-2023. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. 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. Rules of the Chartered Institute of Arbitration (UK). Strengthening the sector's institutional framework and increasing transparency. 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. 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 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. In. 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 NESREA has primary responsibility of enforcing compliance with laws, guidelines, policies and standards on environmental matters in Nigeria, such as water quality, noise, ozone protection, air and atmospheric protection and has issued various regulations on compliance requirements. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). 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. State governments have also embarked on projects aimed at providing affordable housing for citizens. 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Q & a guide to construction and projects law in Nigeria Corrupt Practices Act and private! No thin capitalisation rules in Nigeria its investment in the selection of professionals... And new public projects of high costs of construction in Nigeria arriving at the taxable profits include caps on.... Level of IT professional fee for projects CHAPTER FOUR: Method of Determining Remuneration.... Valorem rate arbitral award is both binding and enforceable by Nigerian courts project! Left little scope for fiscal spending and new public projects there are no capitalisation! Through public and private sector engagement ( UK ) providing affordable housing for..