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Assessing the Effects of Price Escalation on Building Construction Projects in

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Article in American Journal of Management Science and Engineering · April 2023

DOI: 10.11648/j.ajmse.20230802.13

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American Journal of Management Science and Engineering
2023; 8(2): 56-62
http://www.sciencepublishinggroup.com/j/ajmse
doi: 10.11648/j.ajmse.20230802.13
ISSN: 2575-193X (Print); ISSN: 2575-1379 (Online)

Assessing the Effects of Price Escalation on Building

Construction Projects in Adama, Ethiopia
Yehulum Belay*, Deekshith Jain
Department of Construction Technology and Management, Bule Hora University, Bule Hora, Ethiopia

Email address:
*
Corresponding author

To cite this article:

Yehulum Belay, Deekshith Jain. Assessing the Effects of Price Escalation on Building Construction Projects in Adama, Ethiopia. American
Journal of Management Science and Engineering. Vol. 8, No. 2, 2023, pp. 56-62. doi: 10.11648/j.ajmse.20230802.13

Received: February 3, 2023; Accepted: April 12, 2023; Published: April 23, 2023

Abstract: In the Ethiopian construction sector, one key issue is that contemporary building projects demonstrate price
escalation. The Management of Cost escalation requires more understanding of its driving forces. Hence, this research aimed to
assess the price escalation factors and their effects on building construction projects in Adama, Ethiopia. Through an in-depth
literature review and project archives, thirteen (13) possible price escalation-causing attributes and five (5) its effects were
identified for this research. Forty-eight (48) self-administered questionnaire survey has been sent to clients, consultants, and
contractors that actively participated in Adama city construction projects and forty-three (43) responded. The relative
importance index (RII) had computed to rank the price escalation-causing factors and their effects on building projects. The
five most significant factors these causing price escalation on building projects were fluctuation in foreign currency exchange
rates, an increase in material cost and unstable market conditions, unbalanced demand and supply of construction materials,
limitation of construction material producer's capacity, and project schedule changes. While in this study, delayed project
progress, cash flow (financing) problems, higher construction projects cost, and increasing disputes between contracting parties
were among the utmost significant impact of rising prices happening on building construction in Adama, Ethiopia. To evaluate
the respondents' observed level of agreement on the ranking of price escalation factors and their effects, the Spearman rank
correlation coefficient with the aid of SPSS version 26 was used. The outcomes were 0.914 among client and consultant, 0.815
with the client and contractor, as well as 0.856 for consultant and contractor on ranking price increase factors, whereas, 0.921
among client and consultant 0.821 with the client and contractor, and 0.975 for consultant and contractor on ranking price
increase effects. Therefore, the result implies a positive relationship among respondents towards factors causing price
escalation and their effects on building construction projects in Adama city.
Keywords: Building Construction, Price Escalation Effects, Price Escalation Factors, Relative Importance Index (RII)

and contractors over the subject of project cost difference [3].

1. Introduction and Literature Review Empirical evidence suggests that the growth of construction
Projects that were finished with a considerable cost increase material price and fluctuation in the foreign currency
are common throughout the history of the global construction exchange rate in Ethiopia were the factors of price escalation
sector [1]. In developing nations, where this tendency is more in construction projects at the contract implementation period
pronounced, the price of building projects sometimes increase [4]. Proper attention of these unmanageable threats at the
by more than 100%. In the Ethiopian construction industry, preliminary stage of the planning level extensively rises the
one significant problem is the current construction projects option of decreasing any faults throughout the construction
show significant cost escalation [2]. The project cost has stage. This paper has intended to study the adversarial effects
escalated during construction contract execution due to the of price increase on Adama city building construction projects.
sequences of occasions. Cost increases happens due to various Hence, this study was executed to identify the most important
causes and their waves have caused conflict between clients elements of costs increase and their impacts on building
projects in Adama, Ethiopia.
 American Journal of Management Science and Engineering 2023; 8(2): 56-62 57

1.1. Factors Causing Price Escalation allowances or add budgets [12].

An increase in material cost: significantly impacts the entire
The factors causing price increases on building projects are cost of the tender items. The cost of building materials has
mixed. Various factors are not only challenging to forecast, escalated over the previous number of years along with the
but also difficult to control. Understanding the forces that demand for building projects on both local and foreign
drive the issue or its origins can help you better grasp the price markets. And this may be attributable to several causes,
rise elements. Using this knowledge, it should be possible to especially most notably a restricted capacity for material
create policies to address these rate-growth reasons [5]. Two production and a lack of competition [10].
major categories have been used to classify price increase Change in legislation: during the contract period is one
reasons. Factors that cause price increase and client can cause of price variation. The contract price adjusted to take
manage them are internal, whereas external causes are those account of any rise or fall in cost resulting from a change in the
that exist outside the owner's direct control [6, 7]. A list of the laws of the country, the introduction of new or the amendment
elements connected to project price escalation shown below. of existing laws, prepared after the base date. The extra price
Inappropriate project planning: it may help to the suffered due to change in regulation should be ask for
inconsistency of supply and request. When consumption independently from the extra cost due to rate growth [13].
exceeds the necessary level, it creates a shortage of the Foreign currency exchange rates fluctuations: If they go
building materials, which in turn causes the price of building over the amount forecasted by the project's promoter and the
materials to increase, which inevitably raises project costs and firms delivering the services, the projects' prices may rise. The
has a substantial impact on inflation as well as a decline in overall price of building is greatly influenced by some
competent works in the construction sector [8]. economic variables, such as the conversation amount of local
The project delivery system/procurement method: affects money to other foreign cash, the rate of price increases, and
the share of threat among clients and contractors. While the the interest amount charged on lends amongst other countries
threat is moved towards contracting participant then it is [14].
incompetent to regulate the certain risks, the construction Unbalanced demand and supply of construction materials:
price is going to growth consistently. Shortage of knowledge it’s occurred due to the effect of material sources' capacity not
in a delivery system/procurement method as well result in a growing at the same rate as demand. The resulting
miscalculation of building costs in addition to the issue of risk supply-demand imbalance has led to an escalation in material
allocation [9]. values [14].
Engineering and construction complexities: are the Construction material manufacturer’s capacity: The supply
outcome of disagreements or difficulties among the several of materials is insufficient to meet market demand. A
departments that contributed to the planning and design of a projection of future consumption is used by material
building project. Hence, price escalations are possible to producers to plan the capacity of their production facilities.
happen if these problems are not resolved timely. [10]. Material manufacturing companies often design their
The Poor estimation: the projects contains overall faults, production facilities short of anticipated demand if there is
adding or neglecting in preparation and making upcoming uncertainty [12].
insufficiencies on the whole magnitudes of the project. Poor Shortage of skilled construction workers: Due to the current
performance in the planning, estimation methods, tools, and high capacity of building, there is a great need for trained
errors do not only affect the quantity of ingredients and laborers. Given the interconnectedness of the manufacturing
facilities required to complete a project, but it also considers procedures and the backward as well as forward links those
additional price for procuring the properties. are engaged, labor shortages can specifically have serious
Ambiguous Contract Provision: indicates weak effects in industries like building construction. Due to the
accountability and reason for the confusion between the client, increased chance of a delay, the lack of experienced workers
project designer, and building contractors. Lack of including raises the contractor's risk [15].
enough information in the contract paperwork may cause costs
to rise while the building project is being carried out [11]. 1.2. Effects of Price Escalation
Project schedule changes: mainly happen by financial plan
limitations or design problems, which can result in The recent, extraordinary price increase has had multiple
unexpected increases in costs even when the degree of price effects on the construction industry. Undoubtedly, complaints
increases is precisely estimated. Clients must consider how about diminished or removed profit limitations as well as
much money is worth over time, taking into account the rate significant project losses have arisen from the community of
of price increases and the timing of spending [4]. contractors and subcontractors. Missed payments, damaged or
Local concerns and municipal regulations: it can affect destroyed construction trades, and other repercussions are just
project costs both in the planning and implementation stages. some of the ripple effects of this sharp price increase. Effects
During the building of a project, qualification activities that of price escalation for every construction projects are listed
are enforced by the local administration and state and local and explained as follows;
environmental organizations can also delay the project's Increasing Dispute between Contracting Parties: According
completion period and have an impact on price increase to [16], conflicts frequently created in time delays, cost
increases, legal action, and full project abandonment. Because
58 Yehulum Belay and Deekshith Jain: Assessing the Effects of Price Escalation on Building Construction
Projects in Adama, Ethiopia

of differences in suffering and expenditure at the time of the This research has conducted in Adama, Ethiopia. Adama
building project, there are many construction disputes. city is surrounded by East Shewa which is in the Special Zone
Construction disputes may start for any one of a number of of Oromia. It is 99 kilometers southeast of Addis Ababa at
unfavorable reasons, individually or in combination. The 8.54°N 39.27°E elevation and 1712 meters above sea level.
majority of common disagreements are brought on by issues
like inflated contract duration and prices, delays' impacts and 2.2. Data Collection Methods
knock-on effects, estimations of the scope and quality of work, The research has intended to develop a current
changes to plans explanation and specifications, discouraging understanding of the price escalation issue on building
obligations, inadequacy, and interruption. projects through a questionnaire survey. Both quantitative and
Delayed and reduction in scope/canceled projects: Project qualitative approaches have used for this survey. Purposive
delays, scope reductions, and cancellations are common sampling had used to decide the sample size for this research.
because of the global increase in the cost of private To get the most relevant price escalation factors and its effects
construction materials, which has forced numerous designers in the questionnaire, an extensive literature and project
to reevaluate the ‘quantities’ required to justify a private archives review was conducted. The study uses a
progress. Projects have been canceled, delayed, or had their self-administered questionnaire to gather opinions from
scopes reduced as a result. Similar to how large project price clients, consultants, and contractors regarding the most critical
increases provide unique concerns for public projects financed causes of rate increases and its effects.
by bond issues. In the middle of a bond was ratified by the The final questionnaire, which included five (5) adversarial
electors and the tender’s period for construction projects were effects and thirteen (13) essential factors was then given to
established, material values considerably jumped, and tenders over 48 chosen professionals in an effort to get a better
approached in at values significantly higher than the accepted balance of equal numbers for targeted groups currently
contract sums. When more finance is not available, bodies are involved in Adama city building construction projects. The
left with the choice of either discontinuing the project or respondents have asked to give their intention based on the
keeping it on hold (keeping it delayed) or make an effort to five-point Likert scale (1=never, 2=seldom, 3=sometimes,
reduce the project's scope [17]. 4=often, 5=always) for factors likely contribution to cause
Higher construction Project price: The construction that price escalation and (1=No Significance, 2=Minor
haven't been abandoned or aren't running significantly ahead Significance, 3=Average Significance, 4=High Significance,
of schedule (highly late) due to price increase problems 5=Extreme Significance) for its effects in one of their past or
frequently suffer greater project costs. Fears of price increases current building construction projects in Adama city.
from suppliers and contractors, as well as the absence of price
escalation clauses in most construction contracts, frequently 2.3. Data Analysis Methods
result in larger contract pricing and project expenses [18].
Cash Flow (Financing) Problem of the Projects: Pricing The information gathered through the questionnaire survey
changes may have an impact on clients and contractors as well was analyzed by using percentages and relative importance
as the project itself. When contractors are not adequately index. Forty-three (43) full answered questionnaires returned
reimbursed, price fluctuations have a significant negative (89.58%). 13 (81.25%) for clients, 14 (87.50%) for
impact on their cash flow (project funding) [19]. Consultants, and 16 (100%) for Contractors were analyzed.
For the reliability of the data, Cronbach’s alpha test had
2. Research Methodology applied by SPSS software version 26. The obtained result was
0.809, which is higher than the suggested cut-off value of 0.7.
2.1. Description of the Study Area Thus, the internal consistency of this study was good.
The relative importance index is applied to select the
relative position to price escalation causes and its effects on
building construction projects of Adama city. The relative
importance index for each variable has been determined using
the five-point Likert scale (1, 2, 3, 4, and 5) [2].
∑
(1)
∗

Where W denotes the respondents' weights (ranging from 1

to 5) given to each factor and effect, A is the maximum weight
(for this study, 5), and N denotes the entire amount of
respondents (43 for this study).
The relative importance index has values between 0 and 1,
where 0 indicates unimportant, and a higher rate of RII
Figure 1. Study area map. indicates the most critical causes and significant effects of rate
increase on building projects in Adama city.
 American Journal of Management Science and Engineering 2023; 8(2): 56-62 59

With the aid of the Spearman rank correlation coefficient, a (87.50%) from Consultants, and 16 (100%) from Contractors.
statistical test on the respondents' (client, consultant, and
contractor) variables positioning agreement was carried out. Table 1. Questionnaire Response Rate.
Whereas the Spearman rank correlation is a nonparametric test Work field Distributed Returned Response rate (%)
correlation that ranges from +1 to -1, with +1 indicate perfect Client 16 13 81.25
positive correlation and -1 shows a perfect negative Consultant 16 14 87.50
Contractor 16 16 100
correlation, and where a correlation value close to 0 means no
Total 48 43 89.58
correlation [4].
∑ 3.2. Respondent’s Profile
ℎ 1− (2)
Table 2 shows that 14% (6) of respondents have experienced
less than 5 years, 44.1% (19) of respondents have experienced
3. Results and Discussion between 5 to 10 years, and 41.9% (18) have experienced more than
10 years at building construction works. In this research, 14% (6)
3.1. Questionnaire Response Rate
of the respondents executed less than five building projects, 39.5%
The survey's overall response rate was 43 (89.58%). The (17) of the respondents 6 to 10 projects and, 46.5% (20) of the
survey received 13 (81.25%) responses from clients, 14 respondent’s more than ten projects.

Table 2. Respondent’s profile.

Experience (years) Frequency Percent (%) Executed projects by respondents Frequency Percent (%)
Less than 5 6 14.0 Less than 5 6 14.0
From 6 to 10 19 44.1 From 6 to 10 17 39.5
More than 10 18 41.9 More than 10 20 46.5
Total 43 100.0 Total 43 100.0

was calculated based on all factors, individually for each client,

3.3. Factors Causing of Price Escalation consultant, and contractor and applied to all groups using
In this part, the statistical analyses and the respondent’s statistical package for social science software (SPSS). The
perspective towards causes of rate increase for building following parts discuss the importance of critical factors
construction projects in Adama city determined with their across all three groups towards the whole relative rank
relative importance index (RII). From the ranking assigned to displayed in the last column.
each attribute and the most critical ones were identified. RII

Table 3. Price escalation causing factors.

Client Consultant Contractor Overall Score

Price Escalation Causing Factors
RII Rank RII Rank RII Rank RII Rank
Fluctuation in foreign currency exchange rates 0.88 1 0.90 1 0.85 3 0.874 1
Increase in material cost and unstable market condition 0.82 2 0.87 2 0.91 1 0.870 2
Unbalanced demand & supply of construction materials 0.82 2 0.79 3 0.86 2 0.824 3
Limitation of construction material producers capacity 0.77 3 0.71 5 0.83 4 0.772 4
Project schedule changes 0.77 3 0.73 4 0.78 5 0.758 5
Poor estimation 0.77 3 0.70 6 0.74 6 0.734 6
Inappropriate project planning 0.57 6 0.66 8 0.63 9 0.618 7
Ambiguous contract agreement provisions 0.63 4 0.64 9 0.59 11 0.618 7
Local concerns and municipal regulations 0.55 7 0.67 7 0.61 10 0.614 8
Project delivery system/procurement approach 0.55 7 0.60 10 0.68 7 0.614 8
Shortage of skilled construction workers 0.60 5 0.60 10 0.56 12 0.586 9
Engineering and construction complexities 0.55 7 0.56 11 0.64 8 0.586 9
Change in legislation 0.49 8 0.47 12 .46 13 0.474 10

As shown in table 3, the overall ranking states that goods and services has been rising. The status of a country's
fluctuation in foreign currency exchange rates is one of the balance of payments may be impacted by foreign exchange
most significant factors ranked first (RII = 0.874) that rate volatility, which could potentially affect global trade
influence price escalation in building projects. While both patterns.
client and consultant allocate the same viewpoint, contractor An increase in material cost and unstable market condition
rated this factor on the third place. On the other hand, an (RII = 0.870) was the second most important contributing
increase in material cost and unstable market conditions is to factor in the overall score. Whereas both client and consultant
be the most important factor from the standpoint of the share the same viewpoint with the overall rank, contractor
contractor, which came second place in the whole group. ranked this factor in the first position. Previous studies showed
Whereas the exchange rate is decontrolled, the cost of all that an increase in material cost and unstable market
60 Yehulum Belay and Deekshith Jain: Assessing the Effects of Price Escalation on Building Construction
Projects in Adama, Ethiopia

conditions were the supreme frequent causes of price planning (RII = 0.618) scored the seventh position in the
escalation, especially in a developing country. To address overall ranking. While the sixth ranking by the client supports
material value instabilities and raw material delays in volatile this as a perceived difficulty for handling project cost
market conditions, careful planning and scheduling are escalation, the eighth and ninth rankings of this element by
required. both consultants and contractors demonstrate a reasonable
The third significant factor, unbalanced demand & supply agreement with the overall rank. Although ambiguous
of construction materials (RII = 0.824), postulates the contract agreement provisions observed to be comparatively a
unbalanced supply and demand of building materials impact smaller amount significant by consultant and contractor
on cost performance in overall projects. Both client and groups, the effect of this factor is observed to be
contractor ranked this factor in the second place, while comparatively high on behalf of clients (RII = 0.63) with
consultant shares the perspective of overall score that in the fourth position and a seventh place on the overall rank.
third position. Past findings state that, the link between supply Amongst the least ranked elements, change in legislation
and demand is one of the most important elements that was one of the traits that received the lowest ratings across all
determine the building costs as well as the prices of any goods client, consultant, and contractor categories. Similarly, some
or services. The market values of the products have been of the least order factors were engineering construction
determining by the equilibrium conditions of demand and complexities, and the Shortage of skilled construction workers
supply. This balance is dynamic, though. This situation is set as a strong difference to the assertion created by earlier
influenced by the shifting powers of the market and changes as scholars in the topic [8].
some industries grow further alluring than others. Moreover,
the capacity of available resources has not grown as quickly as 3.4. Respondent’s Agreement on Ranking Price Escalation
the demand. The resulting supply-demand imbalance has led Factors
to an increase in material values [4]. A statistical test has conducted on the perceptual
The fourth important factor, limitation of construction agreements amongst the respondents (client, consultant, and
material producers’ capacity (RII = 0.772), by rating it third, contractor) on variables rank with the aid of the nonparametric
the client groups have acknowledged that as it is a very Spearman ranking correlation coefficient test.
significant factor. The importance position level by both
contractor and consultants has been found at fourth and fifth Table 4. Correlation of the respondents on price escalation factors.
ranks, respectively. The availability of raw materials is not Groups rho P-value
keeping up with market demand. Cement and steel are a Clients & Consultant 0.914** 0.000
couple of the products that are impacted by this Clients & Contractor 0.815** 0.001
demand-supply imbalance. A projection of future Consultant & Contractor 0.856** 0.000
consumption is used by material producers to plan the **. Correlation is significant at the 0.01 level (2-tailed).
capacity of their production facilities. Material producers
often designate a smaller production capacity than anticipated Using a Spearman correlation coefficient test of the
demand when the future is uncertain [12]. respondents for ranking the overall price escalation factors has
The fifth attribute, project schedule changes (RII = 0.758), presented in table 4 above. The client and consultant's
by rating it third, the client groups have acknowledged that as correlation coefficient was 0.914, and the two-tailed p-value
it is a very significant element. Both consultants and for the test was 0.000. Given that the P-value is less than 0.05,
contractors have been shown to have importance positions at there is a substantial association between the client and the
the fourth and fifth ranks, respectively. The project schedule consultant. While the client and contractors had a 0.815
changes mainly happen due to financial plan limitations or correlation coefficient and a P-value (two-tailed test) of 0.001,
design problems, which can result in unexpected increases in respectively. There is a substantial association among the
costs even when the degree of price increases is precisely client and the contractor because the P-value is below the level
estimated. Clients must consider how much money is worth of significance, which is 0.05. Also, there is a significant
over time, taking into account the rate of price increases and relationship between consultant and contractor as evidenced
the timing of spending [8]. by the correlation coefficient of 0. 856 and P-value (two-tailed
The Poor estimation (RII = 0.734) was the sixth factor in the test) of 0.000.
overall score. The effect of this factor is observed to be
comparatively significant on behalf of clients by assigning it 3.5. Effects of Price Escalation
as third-ranking, and both consultant and contractor rank the
In this section, the statistical analyses with the help of
same viewpoint with an overall ranking. Plans and magnitudes
relative importance index, the respondents' perspectives
can contain errors and omissions, also general insufficiencies
towards recurrent adversarial impacts of price increases on
and deprived enactment in preparation and estimation
building projects in Adama city have been conducted. Using
processes. Errors can also occur in the expenses associated
spearman’s correlation coefficient the relationships among the
with obtaining the materials and services needed to complete a
respondents in leveling the effects have also done. The
project.
statistical findings of respondents in ranking the recurrent
Among the middle order attributes, inappropriate project
 American Journal of Management Science and Engineering 2023; 8(2): 56-62 61

effects of price increases are shown below in the (Table 5).

Table 5. RII ranking results for price escalation effects.

Client Consultant Contractor Overall Score

Price Escalation Effects
RII RII RII RII Rank
Delayed project progress 0.85 0.84 0.84 0.84 1
Cash flow (financing) problem 0.80 0.81 0.81 0.81 2
Higher construction project costs 0.85 0.81 0.72 0.79 3
Increasing dispute between Contracting Parties 0.57 0.69 0.63 0.63 4
Scope reduction/Cancelled 0.46 0.59 0.60 0.55 5

According to the statistical calculations shown in the table The client and consultant's correlation coefficient was 0.921,
above, a Delay project progress comes in first place with a RII and the two-tailed p-value for the test was 0.000. Given that
score of 0.84. This result indicates the significance of this the P-value is less than 0.05, there is a substantial association
influence on building construction projects in Adama city between the client and the consultant. While the client and
because it is same position in terms of the clients, consultants, contractors had a 0.821 correlation coefficient and a P-value
and the contractors. Delays are one of the frequent results of (two-tailed test) of 0.001, respectively. There is a substantial
price hikes, which then have an impact on the client and association among the client and the contractor because the
contractor. In the event of a delay, the price of necessary P-value is below the level of significance, which is 0.05. Also,
goods or machineries possibly will rise, or these products may there is a significant relationship between consultant and
become scarce in the domestic markets, leading to value contractor as evidenced by the correlation coefficient of 0. 975
increases. Longer delays also result in significant cost and P-value (two-tailed test) of 0.000. Therefore, it shows that
inflation for projects. they share similar views and perceptions about the price
With a RII score of 0.81, the Project’s Cash flow (financing) increases effect on projects.
problems, which entails the contractor's cash flow (cash in and
cash out), is identified as the second key influence. This 4. Conclusion
demonstrates how crucial money is to the project's
advancement. Any contractor cash flow issue will result in a The most important variables that determine project budget
number of issues, including productivity decline and delayed and its effects during the course of a project's construction
progress. Likewise, the contractors won't get the tools and lifecycle were examined based on the perspectives of the key
materials they require. stakeholders. From descriptive statistical investigation, 13
The third rank, which has a RII score of 0.79, is where chosen price escalation factors and 5 its adversarial effects
higher project costs are found. It also received the highest rated by means of the relative importance index based on the
ranking from the client as a result of the excessive cost growth perception of clients, consultants, and contractors working on
that necessitates an extra financial plan. This, in turn, depletes Adama city building construction projects.
the nation's limited monetary resources and leads further Questionnaire survey and project archival reviews are
budget shortfall for building projects. This hinders the planned applied to provide supportive evidence on project cost
increase in the production of goods and services, and as a escalation related issues. The key concerns were determining
result, this phenomenon has a detrimental impact on the rate of the attractiveness of the project price escalation problem,
national growth. ranking the significance of the identified causes and effects,
Table 5 shows that increasing disputes between parties are increasing the top positioned attributes, and measuring the
placed fourth with a RII value of 0.63 by clients, consultants, agreement of the respondents’ group on price escalation
and contractors. Large-scale projects frequently included factors and its effects were the main issues.
intricate finance, planning, and designing for phasing, as well The critical outcomes that fluctuation in foreign currency
as legal considerations. There was much overlap and exchange rates, increase in material price and unstable market
interaction between the parties. As a consequence, there were condition, unbalanced demand and supply of construction
more and more disagreements between the contractor and the materials, limitation of construction material producers
client. The additional time needed to resolve these issues capacity, and project schedule changes play an important part
affects the project timeline, which in turn affects the project's in the escalation of project prices. The total project fee status
overall duration and associated expenses. may be impacted if the client, consultants, and contractor are
unaware of these critical causes.
Table 6. Correlation of respondents for effects of price escalation. In this study, the major consequences of price inflation were
Groups rho P-value delayed project progress, problems with the projects' cash
Clients & Consultant 0.921** 0.000 flow (funding), higher construction project costs and
Clients & Contractor 0.821** 0.001 increasing dispute between contracting parties.
Consultant & Contractor 0.975** 0.000 Finally, in the Ethiopian construction industry, it is
commonly known that building projects are shows escalated
**. Correlation is significant at the 0.01 level (2-tailed).
price due to material price increase. So, this study
62 Yehulum Belay and Deekshith Jain: Assessing the Effects of Price Escalation on Building Construction
Projects in Adama, Ethiopia

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