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. f) PSGS 6: Letting/Real Estate Brokerage/Agency. Webprofessionals in the Built Industry to develop an harmonised scale of fees. The provisions that commonly govern contract variations are those that regulate issuing change orders or additional work. 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. However, Nigeria currently builds just 2,000 houses per year. 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. 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. 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. However, Nigeria currently builds just 2,000 houses per year. Construction contracts do not differ for international projects. There are rules in Nigeria that prohibit corrupt business practices and bribery generally. In February 2021, at commissioning of a 1.12 MW Captive Solar Hybrid Power Plant at the Abubakar Tafawa Balewa University, Bauchi which was executed under the Energizing Education Programme (EEP), the FGN stated that Nigeria intends to have 30% of its electricity supply from renewables by the year 2030. 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. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. The project contract usually contains provisions that require payment to be made for the demobilisation and repatriation of foreign personnel to their home countries. The continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. Harmful Waste (Special Criminal Provisions, etc.) Construction & Engineering Laws and Regulations Nigeria 2022-2023. In July 2012, the Central Bank of Nigeria issued the Sustainable Banking Principles under which banks and other financial institutions undertook to integrate environmental and social considerations into business decision making. 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. 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. In addition to these laws, various states have passed laws that regulate environmental issues in their state. Risks associated with fitness are mitigated through performance guarantees from the contractors. 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. However, by law, parties are unable to cap liability arising from death and personal injury. 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 There are usually no restrictions on the project sponsor's or the lenders' right to terminate the contract in the event of the contractor's bankruptcy or insolvency, unless otherwise stated in the contract. There are 3 stages of payment. 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. 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 insurance must have a value that is at least three times the total annual emoluments of all the employees. Advising a leading Nigerian broadband communication solution integrator on the financing of fibre optic cables and the restructuring of existing debt; Advising IFC in connection with the proposed facilities of up to USD325 million to a liquefied natural gas company in Nigeria. 0% if its turnover is less than NGN25,000,000. Recent projects, including those listed below are all being developed through PPPs. This paper concerns an investigation into the causes of high costs of construction in Nigeria. 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 Fee proposed 10% of Gross Rent Payable. Deep-sea port with a railway project connecting Calabar with Port Harcourt and Onne Deep Sea Port. The most common corporate structure for projects in Nigeria is a private company limited by shares. The interest payment on a loan to fund a construction project is an allowable deduction before arriving at the taxable profits. 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. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. In addition, each licence issued by the NERC to operators in the power sector, including generation plant owners, require them to comply with Health and Safety standards, regulations and codes. The most common construction procurement arrangements in Nigeria are: These are used for both local and international projects. In other cases, the overall cap does not exceed the amount of the contract price. Federal Ministry of Works Contract (variant of the JCT). 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 of the Second Niger bridge which is expected to be completed by 2022. Types of Professional Fees 4.2. 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. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). 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: 23, 2011. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. Under these rules. 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. Factories Act. Withholding tax of 10% on any dividend paid (unless it has a tax exemption), although if the recipient of the dividend is located in a country with which Nigeria has a double tax treaty, the rate would be reduced to 7.5%. This Scale was used for the next 14 years until 1992 when it was revised. Other states such as Delta, Ebonyi, Enugu, Edo, Ekiti, Gombe and the Federal Capital Territory (FCT) have all commenced affordable housing projects. Act (. Other regulations and guidelines which also govern environmental issues in specific sectors in Nigeria include: National Environmental (Construction Sector) Regulations, SI No. 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. This was intended to: Avoid, minimise or offset the negative impact of their business operations on the environment and local communities in which they operate. 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 arbitration institutions commonly used to settle construction disputes in Nigeria are: Chartered Institute of Arbitrators, UK (Nigerian Branch) (, International Chamber of Commerce (ICC) (, International Centre for Settlement of Investment Disputes (ICSID) (, London Court of International Arbitration (LCIA) (, Lagos Regional Centre for International Commercial Arbitration. Failure to stamp an instrument will render it inadmissible as evidence in any civil proceedings before any Nigerian court. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. In 2020, the FGN issued a NGN162.5 billion (about USD393.4 million). 30 days after execution where an instrument is liable to an ad valorem rate. Webprofessionals in the Built Industry to develop an harmonised scale of fees. Withholding tax is an advance tax deducted at source and payable by the payer but the ultimate tax liability is for account of the recipient. 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. It allows government agencies to: Request quotations or expressions of interest. 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! It is uncommon for payment obligations under construction contracts to be secured by land or property. Typically, they are based on the FIDIC Silver Book. 0. 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. Fee proposed 10% of cost of Annual Services. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. Professional Bodies in Nigerian Construction Industry. 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. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. 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. In January 2021, the FGN signed a Memorandum of Understanding with a Portuguese construction firm Mota-Engil for the construction of the cross-border Kano-Maradi rail line which has an estimated construction cost of USD1.96 billion. The procurement legislation in Nigeria are set out in the Public Procurement Act 2007 (PPA) (including the Public Procurement (Goods and Works) Regulations 2007 and the Public Procurement (Consultancy Services) Regulations 2007 made under the PPA) and the Infrastructure Concession Regulatory Commission Act, 2005 (ICRC Act). The relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. None of these contract forms are mandatory. The entitlement of consultants to recovery from third parties in respect of additional costs or delays depends on the terms of their contracts and appointments. 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 rates payable will depend on which of Nigeria's 36 states the real property is located in. Table of Professional Charges 4.5. Debt, including hedging structures and arrangements. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). 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. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. Renewable Energy Village in Kakuri, Kaduna State. Advance Fee Fraud and Other Related Offences Act 2006. This Scale was used for the next 14 years until 1992 when it was revised. Cost is a vital element in every development. Construction & Engineering Laws and Regulations Nigeria 2022-2023. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. Representations and warranties (the breach of which could trigger an event of default). e) PSGS 5: Facility Management. Alu - February 25, 2022. Despite the impact of the pandemic that led to a significant decline of construction activities, the industry was forecast to be one of the lead drivers of the Nigerian economy in 2021. 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. Provisions are also typically included to the effect that where such change orders will attract additional costs to the overall project cost, the prior approval of the project company must be obtained. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. 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. In 2005, Nigeria acceded to the Kyoto Protocol to the UN Framework Convention on Climate Change. 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