It is common for the funder to enter into a direct agreement with project sponsor/company and the contractor that will provide the funders with step-in rights to terminate the project contract with the contractor 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. 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. A change in applicable laws and standards necessitates such change. 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. The Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN). Fee proposed 10% of Gross Rent Payable. 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. The working hours of all other employees are governed by their respective contracts of employment. 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%. 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%): Alu - February 25, 2022. The project owner typically takes the following risks: Risk of ground conditions, including any archaeological discoveries or ionisation and contamination of the soil. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. e) PSGS 5: Facility Management. 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. The PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 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. 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%): An alternative is to include a direct payment clause which allows for the employer to step in and pay the subcontractor directly where the contractor fails or is unable to make payments. The NESREA Act also regulates the effect of a project on the environment. Table of Professional Charges 4.5. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. Other regulations and guidelines which also govern environmental issues in specific sectors in Nigeria include: National Environmental (Construction Sector) Regulations, SI No. 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. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) Approval of project documents by lenders. Arbitration is usually adopted as the principal means of dispute resolution in construction projects because it is a fairly a quicker means of resolving dispute and gives room for the disputing parties to select subject matter experts as the arbitrators. The Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. 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. There are 3 stages of payment. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. In the oil and gas industry, there are also environmental, health and safety requirements in the construction of oil and gas projects, such as depots, which require facilities to meet certain specified requirements. 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. 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. 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. 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. 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, 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. 2.50% Balance 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%. 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. 0. The Act provides that any person who deals with harmful waste without lawful authority is guilty of an offence. 2.50% Balance Parties generally have a choice over the applicable arbitration rules. None of these contract forms are mandatory. The Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. 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. 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. 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. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. 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. 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 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. Due to the increasing cost of key infrastructure projects in the country and dwindling government financing, the government has used public private partnership (PPP) arrangements to finance projects for which the government is not able to secure debt financing, for example the: Highway Development and Management Initiative, a PPP, which is expected to attract over NGN1 trillion in private investment for the development and maintenance of road networks. If passed, the proposed legislation will establish a framework for Nigerian professionals to be given preference in the implementation of construction projects in Nigeria. Factories Act. byNicholas Okafor, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie. 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. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. 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. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. 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%): 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. Construction contracts typically include caps on liability. It also includes provisions on the bidding process, bid security, evaluation of bids. Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. 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. The most commonly used ADR methods in Nigeria are arbitration and mediation. The PPA contains detailed provisions in respect of the procurement process, including the principles, planning, implementation and general conduct of public procurement. Construction professionals will usually seek to place a cap on their liability. 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. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. Risks associated with fitness are mitigated through performance guarantees from the contractors. 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). The deal was valued at USD414.9 billion. Table of Professional Charges 4.5. (. Percentage Fee Scales 4.4. The Central Bank of Nigeria (CBN) and the National Insurance Commission have also issued anti-money laundering regulations applicable to the banking and financial and insurance sectors respectively. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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). In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. 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! 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 Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. 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. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. 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. There are other non-compulsory insurance products, such as erection all risk insurance, that a contractor or project company will typically procure. It is uncommon for payment obligations under construction contracts to be secured by land or property. Types of Professional Fees 4.2. 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. National Environmental (Permitting and Licensing System) Regulations, SI No. 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. 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. Arbitration is either ad hoc or institutional. 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. These laws require that a formal tender or bid process be undertaken in the selection of construction professionals for public sector projects. Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. 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. Provided support to the commercial law development program of the United States Department of Commerce in workshops leading to the publication of the book titled. 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. A change will enhance efficiency of the project's operations. Rivers State Public-Public Participation in Infrastructure Development Law 2009. In practice, an eight to nine-hour working day is the norm. 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