Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. The PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. 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. There are 3 stages of payment. It also includes provisions on the bidding process, bid security, evaluation of bids. However, there are other transfer fees and taxes payable on the transfer of real property. Approval of project documents by lenders. The Pension Reform Act 2014 imposes an obligation on employers to obtain life insurance cover for all their employees. 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. Construction contracts do not differ for international projects. Act (. 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. 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). 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. 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. Construction professionals will usually seek to place a cap on their liability. Establishing a contract-based electricity market. Rivers State Public-Public Participation in Infrastructure Development Law 2009. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. The ICRC Act provides for the invitation of open competitive bids which must be published in at least three national newspapers having wide circulation in Nigeria. 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. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. 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 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. Advised Kepco Energy Resources Ltd on the financing of its acquisition of Egbin Power PLC. Implementing clear policies that promote and encourage investor confidence in the sector. 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. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. Key member of the team that advised Stanbic IBTC Bank PLC, as Lender's counsel, with respect to an USD11.3 million medium term loan facility advanced for the refinancing of a residential real estate development in Durunmi, Abuja. The EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. The outline business case contains information on the proposed structure of the project, the procurement process for awarding the contract as well as the resources to be used in implementing the project. 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. 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. 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. 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. 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. 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 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). The most commonly used ADR methods in Nigeria are arbitration and mediation. Construction contracts typically include caps on liability. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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 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. 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. 23, 2011. Fee proposed 10% of cost of Annual Services. 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. Draft EIA to be carried out and a report submitted to the DRP at the end of the project conceptual design and will form the basis for approval by the DPR of the detailed engineering design. 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). 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. The Borno state government has commenced an Owner Occupier scheme for 2,787 housing units in the state. On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. 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. 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. The Q&A gives a high level overview of the main trends and significant deals; the main parties; procurement arrangements; transaction structures and corporate vehicles; financing projects; security and contractual protections that funders require; standard forms of contracts; risk allocation; excluding liability, including caps and force majeure; contractual provisions covering material delays and variations; appointing and paying contractors; subcontractors; licences and consents; projects insurance; labour laws; health and safety; environmental issues; corrupt business practices and bribery; bankruptcy/insolvency; public private partnerships (PPPs); dispute resolution; tax and mitigating tax liability; the main construction organisations; and proposals for reform. Including provisions that require interest on delayed payments is also one of the means of ensuring that contractual payments are made promptly and diligently. This paper concerns an investigation into the causes of high costs of construction in Nigeria. Under the terms of the contract, a sub-contractor can suspend work or terminate a sub-contract on a main contractor becoming insolvent. The circumstances described can be expressed to be non-exhaustive in their scope. Act (. 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 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 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. Preliminary EIA to be carried out at the end of the concept selection studies. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. Various states in Nigeria have also passed laws regulating PPP projects in their states. If passed, the proposed legislation will establish a framework for Nigerian professionals to be given preference in the implementation of construction projects in Nigeria. 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 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. 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. 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. 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. Extensive rehabilitation of the Lagos-Ibadan expressway, one of the largest road networks in Africa, the oldest expressway and busiest inter-state route in Nigeria. 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. 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. 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 Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. WebFee is to be negotiated subject to a minimum of N50,000=. A change request will trigger an obligation on the contractor to submit a proposal describing how it will implement the requested change, together with any adjustments to the project timetable and fees payable as a result of such change. Table of Professional Charges 4.5. 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. The most common corporate structure for projects in Nigeria is a private company limited by shares. 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. 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. d) PSGS 4: Property Management. 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. 0% if its turnover is less than NGN25,000,000. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. 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. 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.) Professional Bodies in Nigerian Construction Industry. The insurance must have a value that is at least three times the total annual emoluments of all the employees. This Scale was used for the next 14 years until 1992 when it was revised. Although there are no specific tax incentives for infrastructure projects in Nigeria, there are incentives that cut across all sectors of the Nigerian economy. 19, 2009. 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. The REA's mandate is to increase electricity access to rural and underserved communities through public and private sector engagement. 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. The EIA Act sets out the principles, procedure and methodology for determining the environmental effects of public and private projects. 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! Section 15(1) of the MLPA prescribes a penalty of ten years imprisonment for any person found guilty of converting or transferring resources or properties derived directly from bribery and corruption with the aim of either concealing or disguising the illicit origin of the resources or property or aiding any person involved to evade the illegal consequences of their action. In June 2020, the FGN approved a USD120 million continued construction and completion of the Kashimbila multipurpose dam in Taraba State, which is expected to generate 40 MW of electricity and water for the community. The client has the right to suspend payments to the contractor by issuing a pay less notice ,if this can be done, within the prescribed timeframe under the contract. The deal was valued at USD414.9 billion. Percentage Fee Scales 4.4. 30 days after execution where an instrument is liable to an ad valorem rate. The obligations under the EGASPIN are in addition to any other environmental compliance requirement set out under any other law. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. A change in applicable laws and standards necessitates such change. 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. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. In relation to construction projects, one mechanism is funding the project company with more debt than equity and so reducing the taxable income of the special purpose vehicle. 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. Recent projects include the: 67.32KW Solar Hybrid Mini Grid at Oloibiri, Bayelsa State; 234KW solar hybrid mini grid power plant in Shimankar Community, Shendam Local Government. Section 2(i), part 2 of the Manual makes detailed provisions on fire safety, protection, evacuation, first responders and emergency planning. 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. This paper concerns an investigation into the causes of high costs of construction in Nigeria. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. Failure to stamp an instrument will render it inadmissible as evidence in any civil proceedings before any Nigerian court. Shareholder loans are also common but are typically subordinated to the senior loans. Webprofessionals in the Built Industry to develop an harmonised scale of fees. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. 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 VAT Act 2004 (as amended) and the Finance Act 2020 impose VAT on the value of the consideration for the supply or purchase of goods and services in Nigeria except where those goods and services are expressly exempted from the tax. 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. 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. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. 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 project owner typically takes the following risks: Risk of ground conditions, including any archaeological discoveries or ionisation and contamination of the soil. Subsequent payments are then made on the achievement of agreed milestones and the completion of the project. The MDA sends out an invitation for bids from interested private sector developers. 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 (. A 30MW Coal fired Power plant in Nigeria to disruptions caused by the COVID-19 outbreak and completion... Completion of the project the principles, procedure and methodology for determining environmental... Petroleum Industry Bill into law requires all procurement of goods and works by a entity! Payable on the financing of its members sets out the principles, procedure and methodology determining. Nigerian Institute of Architects ( NIA ) was founded in 1960 as an association of professionals which,! 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