Effect Of Unpredictable Price Fluctuation On Financial Capacity Of Micro-Enterprise Contractors: A Case Of Metu Town

Abstract

Coordination of a vast array of human, organizational, technological, and natural resources is necessary for managing construction projects. The costs have been proven to be a key component of project success. One of the many issues the construction industry is now dealing with is price fluctuations, which a significant influence on the micro enterprise construction contractors financial capacity. Investigation of the impact of price fluctuation on the financial capacity of micro enterprise is significant in order to notice the attention to specific areas of improvement for construction projects in Ethiopia in general and construction projects at the hands of micro-enterprise contractors in particular. Hence, an assessment of price fluctuation and adjustment problems on construction projects needs to be done in order to better support economic development. Accordingly, this research attempts to assess the effects of price fluctuations on the financial capacity of micro-enterprise contractors, to identify problems with unpredictable price fluctuation and adjustment and methods to manage unpredictable price fluctuation construction projects, which can serve as the way forward for future work in coping with this fluctuation. The data required for this study were collected through self-administered open and close-ended questionnaires, desk studies/archival records (four in number), and unstructured interviews. The data gathered through surveys was analyzed using the statistical methods of the Relative Importance Index and Spearman's correlation coefficient. Variables were in order of frequency based on the findings. In order to determine the degree of agreement among respondents, the respondent's correlation with ranking variables was also examined. The research result shows that the problem of price fluctuation occurs in an unpredictable manner. At least 27 % price was escalated of the construction inputs. Contractors lose at least 62 % of the expected profit. Few contractors are planning to address the future price fluctuations situation and the remaining others are not concerned about the future situation. The price adjustment clause is not favorable for micro-enterprise contractors. The price fluctuation system that is in place is limited to few a construction inputs. Moreover, micro-enterprise contractors get compensation only for port the on of the price increase of inputs. Project delay was found to be one of the major effects of price increase and delay caused by the contractors is affecting them by making them vulnerable to the effects of the price increase. It also identified the problems with price fluctuation and adjustment, such as an uncompensated increase in the cost of construction materials, construction price indices that may overestimate or underestimate market conditions.The main strategies preferred for managing/administering price variation in construction projects are contingencies and risk management protocols.36%, 20%, and 14%, respectively, of clients, consultants, and micro-enterprise contractors rated the current administration system (practice) for unpredictable price fluctuation in construction projects as being very good. Additionally, one of the goals of this thesis was to make suggestions for how to better manage unpredictable price fluctuations in construction projects in light of the research's Effect of unpredictable Price Fluctuation on Financial Capacity of Micro-Enterprise Contactors: A Case of Metu Town 2023 JiT/JU CONSTRUCTION ENGINEERING AND MANAGEMENT Page iii findings. As a result, the recommendation will concentrate on solving the main issues discovered during the research processes.A project should be properly planned in terms of time, cost, quality, and resource.Consultants should employ qualified technical staff to manage the project effectivelyBefore the project suffers, research the likelihood of unpredictable price fluctuations and devise a mitigation strategy The consultant should continue their regular follow-up meeting but focus on the effectiveness of each meeting Micro-Enterprises are encouraged to purchase construction materials on schedule Before submitting a bid, the Micro-enterprise contractor should carefully consider the impact of unpredictable price fluctuations.Micro-enterprise contractors should have a time schedule.