Review of Contract Price Adjustment Practices of Foreign Contractors’ Road Construction Projects in Ethiopia
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Date
2019-12
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Addis Ababa University
Abstract
It is known that road construction projects are executed over spans of years in the country. In consideration of the long years of execution, and in recognition of the risk of rise or fall of cost of construction inputs from the time of tendering to the time of execution, contracts for most of projects afford a mechanism to administer the risk of change in the cost of construction inputs.
Therefore, this research project study the practices of contract price adjustments (CPA) resulting from the rise or fall of costs of construction inputs of road construction projects administered by the Ethiopian Roads Authority (ERA) focusing on exclusively on contracts awarded to foreign contractors through purposive selection of five case study projects from the five contract administrative regions of ERA.
Comparison of the practices of case study projects of ERA against literature recommendations and prior research works indicates that the practices have wide room for speculative choices of indices and prices which are important elements of adjusting contract prices using formula method of adjustment. Moreover, the research noted that the practice is not guided by institutional wide recognized framework thus letting loose a wide variety of practices and choices which would compromise the purpose of CPAs.
Findings from the case study projects studied revealed that the practices has uneven problems, gaps in terms of appropriateness of indices or prices in use and inaccuracy of the weightings. The inaccuracies are both upward or downward figures well beyond any acceptable ranges except very few of the weightings which are found within the acceptable ranges of estimates.
The research covers wide areas related to CPA starting from risk allocation through verification of accuracy of the weightings. In this course experience of few countries and international financial institutions guidelines and
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Keywords
Contract Price Adjustment, Cost, Indices, Prices, Foreign Contractors, Road Projects