This research identifies the causes and effects of construction contract termination in the western Oromia region. Identifying the causes and their effects on projects might prevent their failure in future contracts. However, because building projects are so complicated, their risk is also rather substantial.
Ethiopia's construction industry has contributed significantly to poverty reduction, aggregate employment expansion through small and medium firm development, and the job creation through the construction of low-cost housing in Addis Ababa, which has been replicated in other locations.
A sizable portion of the country's budget is devoted to fiscal development by financing infrastructure for educational and power development, the construction of railways and road projects that increase the road network's density, and the construction of health projects that increase access to water and sanitation infrastructure. The private sector's contribution to the value-added in a building is also considerable. The private sector invests its money in various fixed assets, including new machinery and equipment and the construction and maintenance of new structures.
Ethiopia has also announced successive public procurement reforms to adhere to decent governance principles; reform efforts have been undertaken to encourage reasonable offering for supplier selection and operational delivery of projects within budget and schedule constraints.
According to the owner's requirements and within a limited budget it was a very challenging task to achieve a virtuous result by the contractor of the project. The parties that engaged into a contract are responsible to perform and complete it according to the contract's provisions. Failure to comply with such requirements constitutes a breach of the contract, entitling the other party to an appropriate remedy under the contract.
In Ethiopia, Terminations of the project are one of the severe problems observed. In the last five years ago, about 3 to 5 projects were terminated in Burayou town municipality public projects such as; Serity Elementary School construction around Gefersa Guju Kebele, Youth center construction around Abdi Nono Kebele, whereas in the Western Oromia; Guliso Wereda G+2 Office building, Ebuntu preparatory school construction, Jimma University Agaro Compass construction, etc. were terminated projects those observed yet. Thus, the perceived problem is to be solved by concerning such issues within a current situation.
Table of Contents
I. INTRODUCTION
A. Construction project overview
B. Termination of Construction Contracts
C. Causes of Premature Termination
D. Effects of Premature Termination
II. METHODOLOGY
III. RESULTS AND DISCUSSION
A. Causes of Premature Project Termination
B. Effects of Premature Project Termination
C. Prevention Measures for Premature Termination
IV. CONCLUSION
V. REFERENCES
Research Objectives and Themes
This research aims to identify the primary causes and consequences of premature contract terminations in public building projects within the Western Oromia region of Ethiopia, while proposing effective remedial measures to mitigate such failures.
- Analysis of financial, managerial, and project-related causes of termination.
- Evaluation of the socio-economic impact of project termination on organizations and professionals.
- Investigation of stakeholder roles and the importance of professional project planning.
- Assessment of mitigation strategies including inflation consideration and payment management.
Excerpt from the Book
B. Termination of Construction Contracts
Any project with significant cost or time overruns, quality issues, or outright termination is considered a failed project. Work on a project has halted or slowed to the point where it is no longer progressing. Not all projects that have come to a halt are deemed to be terminated; some projects that have slowed significantly are also regarded to be ended [6].
In construction contracts, there were two core natures of termination typically mentioned. These were termination for convenience and termination for causes that was sometimes referred to as termination for default, as mentioned by Brumback M[7,8]. However, this paper mainly focused on premature termination of the projects. Work on the project has come to a halt because the project limits have been breached or the project objective has become irrelevant to the larger goals [7].
A contract is a legally enforceable agreement. A contract is an agreement between two or more parties that is legally enforceable [4]. Legally binding agreements are those that the courts will uphold.
A construction contract is particularly negotiated for building an item or a collection of assets closely tied or reliant on one another in terms of their design, technology, function, or final purpose or use. As Iyer defines it in [9]. Contract termination is the act of terminating contract work without resuming it shortly.
When a contract is cancelled, both parties are no longer required to perform under it. Even if the contract is canceled, the parties may still be held accountable for breach of contract damages. The termination provision in the construction contract specifies the type and extent of these damages once again[10].
Summary of Chapters
I. INTRODUCTION: Outlines the significance of the construction industry for Ethiopia's economic development and introduces the problem of premature contract termination in Western Oromia.
II. METHODOLOGY: Describes the descriptive and explanatory research approach, utilizing surveys, interviews, and statistical analysis (Relative Importance Index) among 57 respondents.
III. RESULTS AND DISCUSSION: Presents the primary causes and consequences of termination, highlighting financial and managerial issues, and suggests key mitigation strategies.
IV. CONCLUSION: Synthesizes the findings, emphasizing the need for better cost estimation, inflation consideration, and timely financial payments to prevent project failure.
V. REFERENCES: Lists the academic literature and sources used to support the research findings.
Keywords
Construction, Contract Termination, Western Oromia, Ethiopia, Project Management, Financial Causes, Managerial Causes, Relative Importance Index, Economic Growth, Stakeholders, Mitigation, Inflation, Procurement, Public Projects, Efficiency.
Frequently Asked Questions
What is the core focus of this research?
The research focuses on investigating why public building projects in Western Oromia suffer from premature contract termination and what consequences these failures have on the local economy and project stakeholders.
What are the central thematic areas?
The themes include the identification of project termination causes, the assessment of resulting impacts on social and economic factors, and the identification of professional remedial measures.
What is the primary goal of the study?
The goal is to determine the leading reasons and effects of contract terminations to provide a framework for future contract management that reduces the risk of project abandonment.
Which scientific methodology is utilized?
The study employs a systematic, descriptive, and field-based methodology, using the Relative Importance Index (RII) as a key statistical tool to rank various causes and effects.
What topics are covered in the main section?
The main sections cover project definitions, the nature of contract termination, the ranking of causes (financial, managerial, etc.), and suggested prevention strategies like inflation-adjusted estimation.
Which keywords characterize this paper?
Key terms include premature termination, construction contract, causes, effects, RII, and stakeholder management.
Why are financial factors ranked as the most significant cause?
Financial factors, such as lack of capital and delayed payments, directly impact the operational capability of contractors, often rendering them unable to continue work according to the contract.
How does project termination affect the country's economy?
Unnatural termination limits the country's construction capacity, stops crucial infrastructure development, and necessitates redundant budgeting, which negatively impacts overall GDP growth.
What role does material price fluctuation play in project failure?
With material costs often accounting for 40% of project budgets, failing to forecast price fluctuations leads to severe cost overruns and subsequent project termination.
How can owners help improve project success?
Owners can significantly contribute by ensuring timely payments to contractors, maintaining clear communication, and utilizing skilled professionals to provide accurate project estimates.
- Citar trabajo
- Dugasa Bayeta (Autor), 2023, Premature Contract Termination of Public Building Projects in Ethiopia. Case Study of Western Oromia, Múnich, GRIN Verlag, https://www.grin.com/document/1327884
