professional fees in construction projects in nigeria

Under Nigerian Law, certain professionals must have obtained the relevant licences to engage in construction projects: Engineers must be licensed by the Council for the Regulation of Engineering in Nigeria (COREN) under the Engineers (Registration, etc) Act) (, Quantity surveyors must be licensed by the Quantity Surveyors Registration Board of Nigeria under the Quantity Surveyors (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%): Builders must be licensed by the Nigerian Institute of Building. The Protocol has not yet been enacted in local legislation and, therefore, it is not yet being strictly enforced. 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. The Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN). Professional Bodies in Nigerian Construction Industry. There are 3 stages of payment. Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. 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. 0. Approval of project documents by lenders. 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. Change in law risk. 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. Types of Professional Fees 4.2. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 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 Contracts for the KanoJibia and Port Harcourtaiduguri lines were confirmed by the Federal Executive Council. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. In some cases, a project company may procure a single project insurance package and by virtue of the project agreements, share the benefit of the insurance cover with different project service providers. However, by law, parties are unable to cap liability arising from death and personal injury. The provisions that commonly govern contract variations are those that regulate issuing change orders or additional work. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. 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. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). Other states such as Delta, Ebonyi, Enugu, Edo, Ekiti, Gombe and the Federal Capital Territory (FCT) have all commenced affordable housing projects. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. Some projects are procured as wrapped-around engineering, procurement and construction projects. The slow implementation of government budgets, however, has been a perennial problem in Nigeria. 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! 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. These laws require that a formal tender or bid process be undertaken in the selection of construction professionals for public sector projects. 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. 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). 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. 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. In 2020, the FGN issued a NGN162.5 billion (about USD393.4 million). Professional Bodies in Nigerian Construction Industry. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) A special purpose vehicle used to execute the project will be liable to pay: 30% of its total profit (less any allowable deductions and capital allowances) if it has more than NGN100,000,000 turnover; 20% if it has a turnover between NGN25,000,000 and NGN100,000,000; or. Advised Actis on its investment in the 459 MW Azura-Edo gas fired independent power plant in Edo State. Cost is a vital element in every development. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. 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. An arbitral award is both binding and enforceable by Nigerian courts. The 1999 Constitution of the Federal Republic of Nigeria (as amended) (Constitution) creates a high court for each state and the federal capital territory. The rates payable will depend on which of Nigeria's 36 states the real property is located in. In Lagos State, under the Construction Workers Safety Law (. 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 company would also be liable to pay other applicable taxes and to make contributions to various funds such as the industrial training fund, employee compensation fund, and pension fund. d) PSGS 4: Property Management. The standard document for PPP is a concession agreement which is executed between the relevant government agency and the private sector participant. 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 funders may decide to call for the performance bond or take out the parent company guarantee provided by the contractor where such exists. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). Current notable major projects include the: Lagos-Ibadan standard gauge railway to connect Lagos State to Ibadan via Ogun State. There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. Some contracts also include provisions permitting the contractor to initiate a change proposal where the contractor considers that: A request by the client will have a technical or financial impact on the project. The 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. (. Webprofessionals in the Built Industry to develop an harmonised scale of fees. The Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. According to the Minister of Transport, the Kano-Maradi rail is aimed at facilitating bilateral trade between Nigerian and Niger. The CC Act also prescribes the same penalty in relation to similar offences as those immediately above. 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 (. Another right of the client is to take physical possession of and secure the site. Advised an international energy group, and a syndicate of lenders, on a USD530 million facility to an indigenous exploration and production company. However, in international projects, the project company is usually wholly owned by the sponsors through a holding company incorporated in a tax-friendly jurisdiction. Fee proposed 10% of cost of Annual Services. Risks associated with fitness are mitigated through performance guarantees from the contractors. 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. 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). 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). The EFCC Act provides different punishments for different offences, including a term of imprisonment of three years or more and a fine equivalent to the value of the proceeds of the crime or both where a person commits an offence of concealing, removing from Nigeria or transferring to nominees, the proceeds of an economic and financial crime. 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. Where there is a third party with an interest in the project, it is standard practice for the consultants to be required to provide specific collateral warranties in favour of the third party. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). Construction contracts involving only Nigerian parties tend to provide for ad hoc arbitration under the UNCITRAL Model Law on International Commercial Arbitration or the Nigerian Arbitration and Conciliation Act. 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. 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. However, Nigeria currently builds just 2,000 houses per year. 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 However, engineering, procurement and construction contracts typically include a payment schedule. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. The EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. The most common forms of dispute resolution in Nigeria are litigation and arbitration. Service fees are also liable to VAT at 7.5%. However, the following are typical significant approvals. 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. 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. Final EIA to be prepared and approval obtained at the end of detailed engineering design but before the commencement of any construction activities. Engage in direct procurement in cases of emergency. Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. 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. 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. 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. 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 (. Alu - February 25, 2022. In other cases, the overall cap does not exceed the amount of the contract price. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. 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). 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. 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. 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%): 2.50% Balance Percentage Fee Scales 4.4. 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