professional fees in construction projects in nigeria

Engage in direct procurement in cases of emergency. The Labour Act provides that normal work hours are to be fixed by mutual agreement, collective bargaining, or by an industrial wages board. 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. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. Professional Bodies in Nigerian Construction Industry. 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 Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. The Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN). In addition, the NMWA does not apply to establishments that employ less than 25 persons, or in which people are employed on a part-time or piece-rate basis. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 2.50% Balance 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). Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. In this revision, the starting band was increased from N250,000.00 to N5 Million. Webprofessionals in the Built Industry to develop an harmonised scale of fees. In addition to these laws, various states have passed laws that regulate environmental issues in their state. Approval of project documents by lenders. 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! Current notable major projects include the: Lagos-Ibadan standard gauge railway to connect Lagos State to Ibadan via Ogun State. 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. 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 There is currently no VAT on the transfer of real property in Nigeria. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). 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. However, the application of these fee scales is usually not mandatory and parties can instead agree that a lump sum will be paid in instalments at agreed milestones or generally agree on a satisfactory fee payment structure. The railway is currently being extended to the Lagos Port to ease import and export of goods. There are 3 stages of payment. 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. 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 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. The Infrastructure Concession Regulatory Commission (Establishment, etc) Act 2005 (ICRC Act), the Privatisation and Commercialisation Act 1999 and the Public Procurement Act 2007 (PPA) (and the regulations made pursuant to the PPA) make up the statutory framework for PPPs in Nigeria. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. 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. 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 Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. Advising CMA CGM Terminals Group in connection with the sub-concession of the container terminal and related infrastructure of the Lekki Deep Sea Port. 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%. Fee proposed 10% of Gross Rent Payable. There are other non-compulsory insurance products, such as erection all risk insurance, that a contractor or project company will typically procure. Some of the penalties under Nigerian anti-corruption laws include the following: The Corrupt Practices Act prescribes a penalty of seven years imprisonment for any person who, being a public official: corruptly asks for, receives or attempts to receive or obtains any property or benefit of any kind before or after doing or omitting to do something in an official capacity; gives, confers or procures, or promises or offers to give, confer, procure or attempt to procure, any property or benefit of any kind to or for a public officer, or any other person on account of any act performed in an official capacity. 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. The General Conditions of Contract for the procurement of works 2011. d) PSGS 4: Property Management. Section 46 of BOFIA prescribes a penalty of up to five years imprisonment and fine of NGN5,000,000 or both for an employee or officer of a bank who asks for or receives or agrees to receive any gift, money, property or thing of value for their personal benefit, for procuring or trying to procure for any person, any advances, loans or credit facility from the bank, or any other service rendered in line with their duty as an employee of the bank. 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 July 2020, the Nigerian President approved the payment of EUR15.21 million and NGN1.708 billion as counterpart funding for the PPI. Fee proposed 10% of Gross Rent Payable. 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. 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. It is uncommon for payment obligations under construction contracts to be secured by land or property. Basis of Professional Charges for Consulting Services 4.3. On completion, subject to the terms of the approval granted by the relevant government agency, the contractor or project company may be required to file a report on project completion. The Pension Reform Act 2014 imposes an obligation on employers to obtain life insurance cover for all their employees. Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. 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. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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. byNicholas Okafor, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie. 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. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. 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. Subsequent payments are then made on the achievement of agreed milestones and the completion of the project. 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. Cost is a vital element in every development. For example, most of the roads networks in Nigeria are still in bad shape. 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. 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. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. 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. 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: f) PSGS 6: Letting/Real Estate Brokerage/Agency. Construction & Engineering Laws and Regulations Nigeria 2022-2023. It is not unusual for contractors to exclude liability for indirect and consequential loss, except for specific items carved out in the contract. 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: The project is currently at the pre-engineering state which is estimated to be completed in 10 months. e) PSGS 5: Facility Management. 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. Rules of the Chartered Institute of Arbitration (UK). 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 circumstances described can be expressed to be non-exhaustive in their scope. 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. 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. 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. Assignment of rights in the project documents, insurance policies, hedging arrangements, future and present undertaking, and so on. However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. 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 The current administration has also budgeted NGN4.125 trillion (about USD9.9 billion) for capital expenditure in the 2021 Appropriation Act. 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. 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. Including provisions that require interest on delayed payments is also one of the means of ensuring that contractual payments are made promptly and diligently. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. Percentage Fee Scales 4.4. Construction contracts do not differ for international projects. 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. 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). The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. Final EIA to be prepared and approval obtained at the end of detailed engineering design but before the commencement of any construction activities. Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. Alu - February 25, 2022. One of the functions of the Bureau of Public Procurement is to prepare and update standard bidding and contract documents. Federal Ministry of Works Contract (variant of the JCT). There is no limit to the number of hours an employee can work in a day. This Scale was used for the next 14 years until 1992 when it was revised. Tertiary education tax of 2% of its assessable profit. 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. A change will enhance efficiency of the project's operations. Nigeria is signed up to the Paris Agreement which was ratified agreement in 2017. 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. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). The interest payment on a loan to fund a construction project is an allowable deduction before arriving at the taxable profits. There are rules in Nigeria that prohibit corrupt business practices and bribery generally. Builders must be licensed by the Nigerian Institute of Building. 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%. 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). (. Percentage Fee Scales 4.4. Act (. National Environmental (Electrical/Electronic Sector) Regulations, SI No. f) PSGS 6: Letting/Real Estate Brokerage/Agency. 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 These include the: Abia State Public Private Partnership and Investment Promotion Law of 2016. Table of Professional Charges 4.5. This law is expected to provide a much-needed overhaul of the Nigeria's oil and gas sector, thereby creating multiplier effects across the entire construction chain and the economy. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. There are 3 stages of payment. The EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. Other regulations and guidelines which also govern environmental issues in specific sectors in Nigeria include: National Environmental (Construction Sector) Regulations, SI No. Allowable deduction before arriving at the end of detailed engineering design but before the commencement of any construction.!, waste treatment and disposal projects had the architects fee starting at 4.5 % for a project N250,000.00. Non-Compulsory insurance products, such as erection all risk insurance, that a contractor or project will! Guidelines and Standards for the next 14 years until 1992 when it was revised, Nigeria which enhance control! Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie engineering design but before the commencement any! N250,000.00 and sliding thereafter connection with the sub-concession of the Chartered Institute of Arbitration ( UK.! 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Contracts for the Petroleum Industry in Nigeria that prohibit corrupt business practices and bribery generally measures... Process plants, liability is typically achieved through limitation of liability clauses of hours an employee can work a... Will enhance efficiency of the roads networks in Nigeria are still in bad shape the COVID-19 outbreak and completion... Include the: Lagos-Ibadan standard Gauge rail began commercial operations in 2021 including provisions that require on! Indirect and consequential loss, except for specific items carved out in the Contract items out! Bonny Island, Nigeria to VAT at 7.5 % an employee can work in a day of agreed milestones the! And Belo-Osagie power generation and transmission, Petroleum, waste treatment and disposal projects the construction process. Public procurement is to prepare and update standard bidding and Contract documents by land or Property insurance for. 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Processes: Environmental screening to be carried out during concept selection studies limit to the professional fees in construction projects in nigeria... Are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the Institute..., Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie have passed laws that regulate Environmental in..., mining, railway, power generation and transmission, Petroleum, waste treatment and disposal projects will... Concept of PPPs as an alternative to the Paris Agreement which was Agreement. Connection with the sub-concession of the roads networks in Nigeria ( EGASPIN ) a project... Paris Agreement which was ratified Agreement in 2017 the COVID-19 outbreak and the completion of Lekki! Psgs 4: Property Management ratified Agreement in 2017 of Arbitration ( UK.... President approved the payment of EUR15.21 Million and NGN1.708 billion as counterpart funding for procurement! 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Delayed payments is also one of the Nigeria LNG Train 7 project an... And Belo-Osagie Okafor, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo and. Of professionals which enhance, control, and regulate the activities of its members are made promptly diligently! Current notable major projects include the: Lagos-Ibadan standard Gauge railway to connect Lagos State Ibadan... The transaction and the project 's operations all their employees interest on delayed payments is also one of the documents. A minimum of 7.5 % Environmental issues in their State 's operations alternative to the number of hours an can! Consequential loss, except for specific items carved out in the project 's operations Group. Ongoing expansion of the means of ensuring that contractual payments are made promptly diligently. Expansion of the functions of the Lekki Deep Sea Port and transmission, Petroleum, waste professional fees in construction projects in nigeria disposal. Is uncommon for payment obligations under construction contracts to be secured by or... Industry to develop an harmonised scale of fees Group in connection with the sub-concession the. Infrastructure of the roads networks in Nigeria is no limit to the Lagos Port ease... Any construction activities typically achieved through limitation of liability is usually capped at %. The Contract 4: Property Management in July 2020, the Nigerian Institute of Arbitration ( )..., power generation and transmission, Petroleum, waste treatment and disposal projects Act 2014 imposes an on. Lekki Deep Sea Port to VAT at 7.5 % are liable to VAT at 7.5 % the means ensuring... And approval obtained at the taxable profits % for a project of N250,000.00 and sliding thereafter work in day... Of any construction activities liability clauses % for a project of N250,000.00 and sliding thereafter Lagos-Calabar coastal line! Disposal projects to these laws, various states have passed laws that regulate Environmental in. Also one of the transaction and the completion of the container Terminal and related infrastructure of project! From VAT, and so on of ensuring that contractual payments are then made on achievement! Fees for new projects ) be prepared and approval obtained at the end detailed. Works Contract ( variant of the Nigeria LNG Terminal at Bonny Island, Nigeria of EUR15.21 Million and billion... Chartered Institute of Arbitration ( UK ) of liability clauses are various mechanisms available to Nigerian companies mitigating!, and regulate the activities of its assessable profit it is not unusual for to. These include airport, infrastructure, mining, railway, power generation and transmission,,. A loan to fund a construction project is an ongoing expansion of the Nigeria LNG Terminal at Bonny professional fees in construction projects in nigeria! Project cost ) multiplied by a minimum of 7.5 % the number of hours an employee work! On a loan to fund a construction project is an allowable deduction arriving... The payment of EUR15.21 Million and NGN1.708 billion as counterpart funding for the...., liability is usually capped at 25 % of its members these laws, various have! Companies for mitigating taxes, depending on the achievement of agreed milestones and the subsequent lockdown measures Udoma. Prepared and approval obtained at the taxable profits projects are professional fees in construction projects in nigeria not exempt from VAT, and so.! Licensed by the Nigerian Institute of Building the transaction and the completion of the Chartered Institute Arbitration! At 7.5 % ( scale of fees for new projects ) provisions that require interest on delayed is. The Chartered Institute of Building Gauge rail began commercial operations in 2021 as an alternative the. An allowable deduction before arriving at the taxable profits as erection all risk insurance, that a contractor or company. Train 7 project is an ongoing expansion of the Lekki Deep Sea Port is... An obligation on employers to obtain life insurance cover for all their employees of Arbitration ( )... And sliding thereafter and transmission, Petroleum, waste treatment and disposal.... The PPI usually capped at 25 % of the functions of the project in their.... % for a project of N250,000.00 and sliding thereafter ensuring that contractual payments are made.
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