professional fees in construction projects in nigeria

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). 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. 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). Other sanctions imposed under the EFCC Act include the forfeiture of assets (both within and outside Nigeria) and the freezing of bank accounts maintained by a person accused of the commission of a financial crime. Rules of the Chartered Institute of Arbitration (UK). 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.) 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. However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. 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. Legal or equitable mortgage on all of the project company's interest in the project site, land and buildings and fixed plant and machinery. Arbitration is either ad hoc or institutional. The Engineering Consultancy and Project Management Services Agreement, Charges and Conditions of Engagement produced by the Association of Consulting Engineers Nigeria (ACEN), the Council for the Regulation of Engineering in Nigeria (COREN) and the Nigerian Society of Engineers. 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. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 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. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. The transaction, which is valued at USD311.2 million, involved the sale of three power stations by the Rivers State Government to the investor. The project is currently at the pre-engineering state which is estimated to be completed in 10 months. For projects in the public sector, parties are mandatorily required to comply with procurement rules and regulations. The principal local Nigerian anti-corruption and anti-bribery legislation are as follows: Corrupt Practices and other Related Offences Act 2004 (, Economic and Financial Crimes Commission (Establishment, etc. 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. Escrow arrangements whereby contract prices are paid into escrow accounts held by third party banks or financial institutions for release on specified conditions also operate as a form of payment security for the contractor. There is also professional indemnity insurance which provides for cover against any liability for any damages arising due to professional negligence on the part of the professionals working on a construction project. 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. However, engineering, procurement and construction contracts typically include a payment schedule. The obligations imposed on the contractor or construction professional will depend largely on the parties to the contract. Cost is a vital element in every development. 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 (. However, Nigeria currently builds just 2,000 houses per year. Renewable Energy Village in Kakuri, Kaduna State. 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. 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. 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. Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. 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. 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. 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. Rivers State Public-Public Participation in Infrastructure Development Law 2009. This Scale was used for the next 14 years until 1992 when it was revised. Construction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. The obligations under the EGASPIN are in addition to any other environmental compliance requirement set out under any other law. 2.50% Balance Table of Professional Charges 4.5. 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. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. 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. Risks associated with fitness are mitigated through performance guarantees from the contractors. 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. 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. This paper concerns an investigation into the causes of high costs of construction in Nigeria. 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. 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. 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. 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. There is no limit to the number of hours an employee can work in a day. 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. 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 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 Borno state government has commenced an Owner Occupier scheme for 2,787 housing units in the state. Table of Professional Charges 4.5. 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 (. This is, however, a contractual right and can only be exercised if it is included in the project document. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). In some instances, there could be a combination of more than one funding arrangement, for instance, a term loan facility and a revolving credit facility being provided under a single financing arrangement to a project. National Environmental (Permitting and Licensing System) Regulations, SI No. WebFee is to be negotiated subject to a minimum of N50,000=. Another right of the client is to take physical possession of and secure the site. 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%. 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. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. This Scale was used for the next 14 years until 1992 when it was revised. e) PSGS 5: Facility Management. Fixed and floating charges over all the project company's assets and receivables, bank accounts. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. 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 The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. 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. 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. Construction & Engineering Laws and Regulations Nigeria 2022-2023. 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 Although there are no specific tax incentives for infrastructure projects in Nigeria, there are incentives that cut across all sectors of the Nigerian economy. The PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. 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 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%. 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. Most government and private agencies usually have standard form letters that are issued to a selected bidder, and the use of engagement letters is quite common. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) 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 relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. 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). Fee proposed 10% of Gross Rent Payable. The EIA Act sets out the principles, procedure and methodology for determining the environmental effects of public and private projects. A project company is required to obtain expatriate quota approvals for the relevant number of expatriate personnel it intends to employ. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 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. The main tax issues which arise on projects include whether there will be value added tax, the applicable rate of stamp duty on the transaction document(s), and transfer taxes in relation to land or other property. d) PSGS 4: Property Management. 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. 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 (. 0. Alu - February 25, 2022. 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. Typically, third parties and end users are not parties to the construction contract(s) and cannot enforce an action for breach against the contractors for the designs and construction. 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! In the industry June 2021 ( UK ) other environmental compliance requirement set under. Architect ( Registration, etc. VAT at 7.5 % ( scale of fees being charged in private! 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