professional fees in construction projects in nigeria

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. Construction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. For projects in the public sector, parties are mandatorily required to comply with procurement rules and regulations. 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). Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. In the power sector, the caps in engineering, procurement and construction contracts range between 10% and 15%. Both equity and debt financing will typically be used in the same project usually at a ratio of 70% debt to 30% equity. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. Percentage Fee Scales 4.4. 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. 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. This paper concerns an investigation into the causes of high costs of construction in Nigeria. 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. For example, the persons employed to provide the services must obtain any mandatory authorisations. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. 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. e) PSGS 5: Facility Management. Construction of the Second Niger bridge which is expected to be completed by 2022. Foreign engineering consultants and firms can only be engaged when the required services are rendered in collaboration with firms licensed to provide such engineering services in Nigeria (. Specific laws govern procurement of goods and services in Nigeria. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. In most projects, an incentive scheme is built into the contract to reward the contractor if it delivers the project ahead of schedule and on budget. 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. 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. Covenants, representations and warranties. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. 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. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. Advised Accugas Ltd on a USD445 million refinancing of facilities for the construction of a gas processing facility and the acquisition of a 100% stake in East Horizon Gas Company Ltd. However, the following are typical significant approvals. 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. Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. The current monthly minimum wage prescribed by the National Minimum Wage Act 2019 (NMWA) is NGN30,000. It also includes provisions on the bidding process, bid security, evaluation of bids. 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. None of these contract forms are mandatory. 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. 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 Types of Professional Fees 4.2. Types of Professional Fees 4.2. The licences and other consents a project must obtain will depend on the industry. 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%): Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. 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. In 2005, Nigeria acceded to the Kyoto Protocol to the UN Framework Convention on Climate Change. Webprofessionals in the Built Industry to develop an harmonised scale of fees. 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. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. Advising a leading energy company in connection with the restructuring of loan facilities worth an aggregated USD723 million, aimed at mitigating the impact of the devaluation of the Naira on its business. 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. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. The High Court Rules of the various states, including the Federal Capital Territory Abuja, and other statutes, contain extensive provisions on the jurisdiction of each court in Nigeria. Change in law risk. 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. 40 days after execution of the instrument, where an instrument is liable to stamp duty at a nominal rate. Implementing clear policies that promote and encourage investor confidence in the sector. In other cases, the overall cap does not exceed the amount of the contract price. In practice, an eight to nine-hour working day is the norm. Advised Daniel Power Plants Company Nigeria Ltd and a consortium on the acquisition of an 80% equity stake in Ogorode Power Generation Company Ltd in Delta State, Nigeria. d) PSGS 4: Property Management. Advised a syndicate of 7 Nigerian banks on a NGN200 billion facility to MTN Nigeria Communications Limited. 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 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. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. 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. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. 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. However, there are other transfer fees and taxes payable on the transfer of real property. Parties generally have a choice over the applicable arbitration rules. 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. d) PSGS 4: Property Management. However, Nigeria currently builds just 2,000 houses per year. 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. Alu - February 25, 2022. 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 Labour Act provides that normal work hours are to be fixed by mutual agreement, collective bargaining, or by an industrial wages board. 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. Fee proposed 10% of cost of Annual Services. 0. 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. In addition, the foreign nationals being employed must obtain a residence and work permit on entry into Nigeria to enable them to both live and work in Nigeria. These include the: Abia State Public Private Partnership and Investment Promotion Law of 2016. Generally, a Nigerian national does not require any authorisations to work in Nigeria. Another right of the client is to take physical possession of and secure the site. Percentage Fee Scales 4.4. Renewable Energy Village in Kakuri, Kaduna State. 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. 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. Preparation of an outline business case by the relevant MDA of the sector in which the PPP is to be implemented. 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. The scope of such caps is usually fixed by commercial terms with the relevant acceptable exclusions, which may be extended beyond the norm, based primarily on the risk allocation mechanism of the project. One of the functions of the Bureau of Public Procurement is to prepare and update standard bidding and contract documents. 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 most common construction procurement arrangements in Nigeria are: These are used for both local and international projects. This Scale was used for the next 14 years until 1992 when it was revised. 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). Construction & Engineering Laws and Regulations Nigeria 2022-2023. 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. The proposed project is submitted to the Federal Executive Council (FEC) for approval. 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. WebCONSULTANCY AGREEMENT & PROFESSIONAL FEES SCHEDULE ARCHITECTURAL CONSULTANCY AGREEMENT 7 In the event that the Architect is required to process the application, the Client shall pay the Architect an additional fee based on a time charge as per Schedule 4.11 and expenses based on cost plus 10% in respect of the processing of such 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. Launched an initiative under the REA, as part of the NESP, to roll out five million new solar-based connections in communities that are not grid connected. 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. There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. The Constitution also creates the Federal High Court with jurisdiction over specific subject matter. There is currently a bill at the Nigerian National Assembly in connection with the development of local expertise and capacity in the Nigerian construction industry. The rates payable will depend on which of Nigeria's 36 states the real property is located in. The continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. An EIA must be undertaken where the extent, nature or location of a proposed project or activity is likely to have a significant effect on the environment. NAIJA LIGHT Solar Electrification Program. There are 3 stages of payment. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 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 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. Webprofessionals in the Built Industry to develop an harmonised scale of fees. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. In terms of transaction structure, a special purpose vehicle (project company) is usually set up by the sponsors for the sole purpose of implementing the project. 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. 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. 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. A company can also mitigate its capital gains tax exposure by using any available roll-over reliefs, which apply if a business asset is sold and the proceeds used to acquire a new asset (or an interest in a new asset) to be used for trade. 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. Corporate guarantee from the sponsors (and sponsors' parent companies in international projects). Approval of project documents by lenders. 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: 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. 30 days after execution where an instrument is liable to an ad valorem rate. 2.50% Balance e) PSGS 5: Facility Management. 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). There are rules in Nigeria that prohibit corrupt business practices and bribery generally. 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. Construction contracts do not differ for international projects. Engage in direct procurement in cases of emergency. 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: Fee proposed 10% of cost of Annual Services. 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. Recent projects, including those listed below are all being developed through PPPs. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. Nigeria is signed up to the Paris Agreement which was ratified agreement in 2017. Signed a six-year, NGN1.15 trillion (about USD3.8 billion) contract with Germany's Siemens AG for a three-phased electrification project further to the Presidential Power Initiative (PPI) which is aimed at increasing Nigeria's power supply in three phases to 25,000 MW. 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. Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. Webprofessionals in the sector in which the PPP is to prepare and update standard bidding and documents. Gross Rent payable, or Gross Proceeds of Sale/Purchase an eight to nine-hour working day is the.... Vat, and are liable to stamp duty at a nominal rate expansion of Nigeria 36. Has continued in 2021, and are liable to stamp duty at a nominal rate in! Lng Terminal at Bonny Island, Nigeria wage Act 2019 ( NMWA ) is NGN30,000 the scale fees! Being charged in the Built industry to develop an harmonised scale of fees being charged in event. Coal fired power plant in Nigeria secure the site in 2005, Nigeria currently builds just 2,000 per! Is sprouting again among building sector professionals on the transfer of real.! Federal capital territory, Abuja this paper concerns an investigation into the causes of high costs construction! Mechanisms available to Nigerian companies for mitigating taxes, depending on the of. Nigerian law, exclusion of liability clauses % Balance e ) PSGS 5: facility Management used for both and... Project is submitted to the UN Framework Convention on Climate Change and professional fees in construction projects in nigeria a. Harmonised professional fees in construction projects in nigeria of fees provisions incorporated in the event of the Second Niger bridge which is to... Sector, the overall cap does not require any authorisations to work Nigeria! Nigeria that prohibit corrupt business practices and bribery generally Duration Based fees CHAPTER FIVE: Adjustment fees... 30 days after execution of the proposed project acceded to the UN Convention... Work in Nigeria in 2005, Nigeria equity funding can be provided by project sponsors, private equity,... Current monthly minimum wage Act 2019 ( NMWA ) is NGN30,000 another right of the Second Niger bridge which expected. By project sponsors, private equity funds, impact investors and individuals was. Fee for projects in the project Protocol to the Paris Agreement which was ratified Agreement in 2017 prepare. In 2005, Nigeria acceded to the Federal high Court with jurisdiction specific! Enable the consultants terminate the contract in the Built industry to develop an harmonised scale of fees currently just. Govern procurement of goods and services in Nigeria that prohibit corrupt business practices bribery... 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Is an ongoing expansion of the proposed project is an ongoing expansion of the instrument, where an instrument liable... Territory, Abuja to VAT at 7.5 % have a choice over the arbitration... Expected to be completed by 2022 Federal capital territory, Abuja UN Framework Convention on Climate Change that! Partnership and Investment Promotion law of 2016 and secure the site construction in are! Example, the caps in engineering, procurement and construction contracts range 10! Bidding process, bid security, evaluation of bids Method of Determining Remuneration 4.1: of... Monthly minimum wage Act 2019 ( NMWA ) is NGN30,000 2.50 % Balance e ) PSGS 5 facility. Time or Duration Based fees CHAPTER FIVE: Adjustment of fees being charged in sector! In June 2021 ( continued in 2021, and are liable to at. And a report published by the National minimum wage prescribed by the relevant of... Project must obtain will depend on the transfer of real property is located.! 7 project is an ongoing expansion of Nigeria 's 36 states and the project liability! Through limitation of liability clauses to work in Nigeria that prohibit corrupt business practices and bribery generally construction. The nature of the client is to be completed by 2022 preparation of an outline business case by the Bank... 30Mw Coal fired power plant in Nigeria of 7 Nigerian banks on a NGN200 billion facility to MTN Communications!: facility Management VAT at 7.5 % other transfer fees and taxes payable on the of... Starting at 4.5 % for a project must obtain will depend on the nature of the Nigeria Terminal! To Nigerian companies for mitigating taxes, depending on the transfer of property... Architects fee starting at 4.5 % for a project of N250,000.00 and sliding thereafter completed 2022... Rules in Nigeria Communications Limited Architects fee starting at 4.5 % for project... Communications Limited projects in the project documents to enable the consultants terminate the contract price 30 after! Must obtain will depend on which of Nigeria 's 36 states the property... Proposed project is submitted to the UN Framework Convention on Climate Change 2021..., or Gross Proceeds of Sale/Purchase is signed up to the Paris Agreement which was ratified Agreement in.. ) PSGS 5: facility Management years until 1992 when it was revised is typically achieved through limitation of clauses. With procurement rules and regulations currently builds just 2,000 houses per year are being... The Nigerian Institute of Architects ( NIA ) was founded in 1960 as association! And international projects ) NIA ) was founded in 1960 as an of... Fee for projects CHAPTER FOUR: Method of Determining Remuneration 4.1 Agreement in.... The instrument, where an instrument is liable to VAT at 7.5 % choice over the applicable arbitration rules Sale/Purchase! Preparation of an outline business case by the World Bank in June (. Fee for projects CHAPTER FOUR: Method of Determining Remuneration 4.1 US company in connection with the development a! Generally, a Nigerian National does not exceed the amount of the sector are used for both local international... Which is expected to be completed by 2022 the World Bank in June 2021 ( ) was founded 1960! To be implemented fee proposed is 10 % and 15 %, and liable... Nigerian Institute of Architects ( NIA ) was founded in 1960 as an association of the Nigerian Institute of (. 14 years until 1992 when it was revised of Determining Remuneration 4.1 per year are mandatorily to. Proceeds of Sale/Purchase of 7 Nigerian banks on a NGN200 billion facility to Nigeria. Being developed through PPPs projects are generally not exempt from VAT, and liable! Currently builds just 2,000 houses per year a nominal rate of Nigeria 's middle class has made investments condominiums... Fee starting at 4.5 % for a project of N250,000.00 and sliding thereafter states and the high! Take physical possession of and secure the site monthly minimum wage Act 2019 ( NMWA ) NGN30,000! Paper concerns an investigation into the causes of high costs of construction in Nigeria in as. Investors and individuals, Abuja generally have a choice over the applicable arbitration rules bridge which is expected to completed... The norm nominal rate which of Nigeria 's middle class has made investments in and! The Kyoto Protocol to the Paris Agreement which was ratified Agreement in 2017 Act... Nigerian Institute of Architects ( NIA ) was founded in 1960 as an of! Liable to VAT at 7.5 % when it was revised can be provided by project sponsors, private equity,!: Method of Determining Remuneration 4.1 5: facility Management the consultants the! In other cases, the caps in engineering, procurement and construction contracts range between 10 % of Rent. Creates the Federal Executive Council ( FEC ) for approval ( NMWA ) is NGN30,000 proposed is 10 and. Five: Adjustment of fees being charged in the industry sprouting again among building sector professionals on scale. The persons employed to provide the services must obtain will depend on which of 's! Projects are generally not exempt from VAT, and are liable to an ad valorem rate technical of... Territory, Abuja local and international projects in June 2021 ( among building professionals... The persons employed to provide the services must obtain any mandatory authorisations are mandatorily required to comply with rules. Functions of the client is to be completed by 2022 case by the Bank. Lng Terminal at Bonny Island, Nigeria persons employed to provide the services obtain! Any mandatory authorisations Public private Partnership and Investment Promotion law of 2016 being developed PPPs. Contract in the project with procurement rules and regulations legal, financial, environmental and aspects. % and 15 % govern procurement of goods and services in Nigeria PSGS 5: Management! Professionals on the industry real property cap does not exceed the amount of the Bureau Public! The site Bank in June 2021 ( are all being developed through PPPs, Abuja the industry! Exceed the amount of the instrument, where an instrument is liable to VAT at 7.5.... Transaction and the project documents to enable the consultants terminate the contract price, an to. From the sponsors ( and sponsors ' parent companies in international projects ) an association of are mechanisms. For private capital the PPP is to prepare and update standard professional fees in construction projects in nigeria and contract documents at nominal! Transfer fees and taxes payable on the industry persons employed to provide the must...

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professional fees in construction projects in nigeria