Assessment of Price Adjustment Practice on Public Building projects; The Case of Selected Projects in Addis Ababa
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Date
2025-04-01
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Addis Ababa University
Abstract
The construction sector contributes significantly to a nation's GDP, which is crucial for economic growth and development in terms of the development of physical infrastructure. Ethiopia allocates a huge amount of budget for the development of public projects. Even though most public projects in Ethiopia face challenges to complete successfully within in planned budget and specified time frame. Ethiopia's building industry has faced difficulties due to market price fluctuations and inadequacies of the necessary construction inputs. The study looks into how Addis Ababa's public building projects are affected by price escalation in terms of project performance in terms of project cost and time overrun. The study employed a case study methodology to investigate how escalation affects public construction projects. Systematic sampling techniques were applied for the selection of a few best fit cases and focused on detailed contextual analysis. To measure the impact of price escalation on public building projects, construction material prices were investigated for a different period, and contract documents were reviewed and analyzed to explore the current price adjustment practice to overcome the risk of escalation by crosschecking the provision of different conditions of contract forms. The research shows that the price adjustment practices observed in the selected cases were different on the subject of selected construction inputs for the price adjustment, non-adjustable portion, permissible weighting/ coefficient, and the source of price/index. The number of representative elements for the price adjustment component, fixing non-adjustable factor, and establishment of permissible weight/coefficient was not consistent in the selected cases in this study. On the other hand, Addis Ababa Construction Bureau implements price adjustment evaluation for projects having a duration of less than 18 months in setting a new unit rate in assessing the direct cost of each work item. Assessment of Price Adjustment Practice on Public Building projects; The Case of Selected Projects Hamdu Nesru , MSc In Construction Management 2025 vi In conclusion, escalation is a major challenge facing the construction sector in Ethiopia. The high escalation rate on the price of construction materials, labor and other inputs made it difficult to complete public building projects on schedule within budget.
Key Words: Construction Projects, Price Escalation, Price Adjustment