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Construction arbitration and infrastructure development: Role of quantity surveyors

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Civic center

Construction is very expensive business. BusinessNews, an online publication, estimated in its 2015 report that construction projects worth N700 billion would be delivered by 2018.

Some of these projects include the Nestoil Towers, Civic Towers and the British America Tobacco (BAT) building- mostly commercial office space on Lagos Island which have been indeed delivered.

In 2016, new office spaces built in Lagos equaled 20% of the then existing stock, according to the consulting firm, Estate Intel Limited. These figures clearly underscore the potential of the market, the sheer appetite for high-grade commercial property. I remain a Nigerian optimist. The recession of 2016 and the subsequent weak growth- below 2 % since we came out of recession- are only a blip.

Much stronger growth is on the horizon as our politicians develop a better grasp of policies that unlock investment and the deliberative skills to negotiate consensus on and successfully initiate them. About 40% of the funds that go into high-grade commercial property come from abroad.

As we improve policies, including those concerning mortgage banking and urban planning, we will see more foreign investment in closing our famed 17 million housing gap. There will be a similar boom in the construction of infrastructure for delivering gas and oil, including to power plants and industries, when Nigeria finally delivers new oil industry legislation popularly known as the Petroleum Industry Bills (PIBS) and resolves pricing issues surrounding gas and electricity.

These are big-ticket transactions. Where there is money, there is always risk. But any country that wants to attract a lot of money, i.e. investment, must take risk mitigation very seriously.

The practice of arbitration is a key tool in managing the perception of risk and stimulating investment in construction. But construction is also a complex and dynamic business, involving not only quite large sums but the engagement of diverse skills and industries, from law, to information technology, logistics renewable energy, economics and various fields of engineering. A multiplicity of contracts and parties are also usually involved, often from different legal traditions.

So, to stimulate big-ticket investments in construction through the practice of arbitration, construction professionals, especially Quantity Surveyors, must invest in acquiring globally up-to-date arbitration knowledge and skills.

The Quantity Surveyors Academy has partnered with the Institute of Chartered Arbitrators to enhance the knowledge of Quantity Surveyors and Cost Economists in the construction industry about arbitration. We will build on and deepen such partnerships to better position ourselves to leverage reforms that will see heightened interest in investing in construction in Nigeria.

Construction is fraught with all sorts of risks; from delayed delivery to cost overrun. For a country like Nigeria with a huge infrastructure gap and limited means of financing, we have no choice but to procure infrastructure increasingly using Public-Private Partnerships (PPPs).

Anyone who wishes to protest this point must first reflect on the fact that we now spend at least 50K out of every N1 the country earns on servicing debt, while we have the highest number of people living in extreme poverty in the world. Where will the funds required for urgent investment in infrastructure come from? If big-ticket construction projects are fraught with risks because they have considerable possibility for dispute, PPPs multiply the risk.

Arbitration is thus a means of considerably de-risking investment in construction generally and in projects procured through PPPs particularly.

This is my own idea as I am convinced that we need to attract private investment into infrastructure. We should certainly note that Global Infrastructure Partners, one of the biggest private investors in infrastructure which has in a bold and unprecedented move poached the President of the World Bank, Jim Yong Kim, is headed by one Adebayo Ogunlesi, a slightly Nigerian sounding name! His outfit, GIP, currently has $450 billion under management and has poached the World Bank President to guide and enhance their capacity to do deals in emerging markets.

Let me end by saying Nigeria should work hard to ready ourselves for receiving as much as possible of the projected investment. The Quantity Surveyors Academy, working in conjunction with the Nigerian Institute of Quantity Surveyors (NIQS) and the Quantity Surveyors Registration Board of Nigeria (QSRBN), have started this hard work.

The Quantity Surveyors Academy will be conducting high quality training in many other areas such as oil and gas and heavy engineering, focusing on new trends in construction in these areas, including economics and technology as well as private and public sector financing. It is my fervent hope that our colleagues in the public sector will also try as much as possible to take advantage of these courses, as we need a public-private partnership in to run a knowledge-based economy.

It’s obvious that the quality of public regulation and policies define the opportunities for investment and growth of the construction sector and the general economy.

Our ideas and technical know-how to do things more efficiently or stimulate investment would have far greater impact if we speak the same language with our public sector counterparts.

Alufohai, Chairman, Quantity Surveyors Academy Board


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