ASSESSING CONSTRUCTION MATERIALS PRICE ESCALATION OF BUILDING PROJECTS: IN THE CASE OF SELECTED HIGH RISE BUILDING PROJECTS IN ADDIS ABABA.

Abstract

The aim of this study is to identify the major factors of prices escalation of construction materials, its effect on building project and assessing the current price escalation management practice. This study employed a multiple case study and focused on four selected high rise building projects. Taking into account the nature of the objectives and research questions, the study used descriptive case study design and qualitative approach. This study investigated using primary and secondary data. Focus group discussion, interview and document study was performed to collect qualitative data. Qualitative analyses mainly content analyses were used to interpret, summarize the data and to find the implications of the result. The result indicated that the major determinants/factors to price escalation of construction materials are inflation, devaluation of local currency, Monopoly and unethical practices of suppliers, Political instability,high costs of fuels, and shortage of dollars, lack of proper planning, scarcity of building material and Overdependence on imported building materials. The impacts of escalation on project involves higher project cost, project delay, profit loses, project abandonment,delay payments to contractors, investment return is delayed and high rental cost. The major challenges in price escalation and adjustment practice were: not applying price adjustment clauses for projects contract duration not exceeding 18 months, timely recorded data were not available, non-consistency in market price, Contractors failure to follow the proper contractual procedures for requesting Price Adjustment and the Clients` resistance in honoring the escalation clauses in special condition of Contract. It’s recommended that CSA and PPPAA to set up a suitable data base for regularly record, updating, and disseminating monthly price indices for the main building materials.