ASSESMENT OF CAUSE AND EFFECT OF PRICE FLACTUATION AND PRICE ADJUSTMENT CLAUSES ON PUBLIC BUILDING PROJECTS IN ETHIOPIA (CASE OF SOUTH REGION, WOLAITA ZONE)

Abstract

The construction industry is an investment-led sector in which nations have highest stake. Price fluctuations in public building construction projects are growing source of concern owing to deliverables of projects guaranteed facilities such as offices, universities, collages, hospitals, and other public structures to address societal development. Construction projects under Southern region of Ethiopia, Wolaita zone are significantly affected by price fluctuation. On a large scale Price fluctuation affect owners, clients, contractors, and the project itself. In this study the main causing factor of price fluctuation and its effect, management practices to minimize the effect and price adjustment clauses are identified and evaluated. Models are developed to show the relationship among variables. The study employed a descriptive survey design. In this study, the questioner survey, case study, and group discussion are used as data collection methods. Data were analyzed using descriptive statistics and ranked considering the relative importance index, by the statistical package for social science (SPSS) 20, and excel software. The reliability of data was tested by Creon bach’s alpha and proved reliable. Based on the finding Cost of materials change, Market conditions, Change to project schedule, Changes in design and Changes in the currency exchange rate are the most significant factors that cause price fluctuation on public building projects. Wherever issues with price fluctuation in public building projects are not resolved, Schedule / time overrun/, dispute among stakeholders and termination of the project are encountered as the pricing fluctuations' effects on public building projects. Hence; Value Engineering for Substitute Materials, Regular cost monitoring throughout the project/finance and quality audit and Consider locally available material in design are identified as best management practice to lessen adverse effect of price fluctuation. Furthermore, Client unwillingness to honor price adjustment clauses, Project cost variation and Computation time for payment certificates are the challenges to implement price adjustment clause. This study is beneficial to construction stakeholders (clients, contractors, and consultants), encouraging them to cooperate and apply the management practices to minimize the effect of price fluctuation.