Group One Final Thesis

ASSESSMENT OF CONTRACT TYPE AND DELIVERY
SYSTEM SELECTION IN WOLKITE UNIVERSITY

CONSTRUCTION PROJECTS
By Group One
Advisors: Mr. Weredekal and Mr. Tariku
BSc. Thesis
To College of Engineering and Technology
Department of Construction Technology and Management
Sub. Date: June, 16/2022 G.C

COLLEGE OF ENGINEERING AND TECHNOLOY
DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND
MANEGEMENT
A THESIS ON: ASSESSMENT OF CONTRACT TYPE AND DELIVERY
SYSTEM SELECTION IN WOLKITE UNIVERSITY CONSTRUCTION
PROJECTS
BSc. THESIS
BY:
1. Abdurehman Kedir ENGR/030/10
2. Biruk Asefa ENGR/225/10
3. Ebise Getachew ENGR/314/10
4. Kaleb Seifu ENGR/512/10
5. Mentesinot Dawit ENGR/621/10
6. Natei Nigussie ENGR/700/10
Research Advisors/Supervisors
1. Mr. Weredekal
2. Mr. Tariku Desu
June 16, 2022 G.C

Wolkite, Ethiopia
ASSESSMENT OF CONTRACT TYPE AND DELIVERY SYSTEM SELECTION IN
WOLKITE UNIVERSITY CONSTRUCTION PROJECTS
APPROVAL
Title: ASSESSMENT OF CONTRACT TYPE AND DELIVERY SYSTEM

SELECTION IN WOLKITE UNIVERSITY CONSTRUCTION
PROJECTS
Submitted by GROUP ONE __________ ____________

Name of the group Signature Date
Approved for submittal to a proposal/thesis/ assessment committee
1. _Mr. WEREDEKAL ___ ____ _ 15/06/2022 G.C

Major Advisor Signature Date
2. _Mr. TARIKU DESU __________________ _________________
Co- Advisor Signature Date
3. Mr. KELKIYAS ALEM __________________ _________________
Department chairperson Signature Date
WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page ii

DECLARATION
We declare that this final thesis entitle “ Assessment of contract type and delivery system
selection in Wolkite university construction project”, with responsible parties and
resolution methods are the result of our work, it contains no materials previously
published or written by another person except where due reference is made. This report
has not been previously submitted at this education institution.
NAME OF PARTICIPANT SIGNITURE DATE

1. Abdurehman Kedir _________________ ______________
2. Biruk Asefa _________________ ______________
3. Ebise Getachew _________________ ______________
4. Kaleb Seifu _________________ ______________
5. Mentesinot Dawit _________________ ______________
6. Natei Nigussie _________________ ______________
WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page iii
Acknowledgements
Approximately one months of work have led to this thesis. In this period of time, First of
all, we thank god, then we wish to express our gratitude to those who made this thesis
work to a success. We would like to express our deepest gratitude and appreciation to our
advisor, Mr. Weredekal and Mr. Tariku D. for your excellent advice and also for
spending your precious time for improving the quality of this research.
Next, we are very grateful for the comments and suggestions provided by our
coordinator’s Mr. Abdu N. and Mr. Cherinet S. & Department head Mr. Kelkiyas A.
Finally, We would also like to express our appreciation to Construction company works
in Wolkite university main campus and Mr. Admachew B. Wolkite university project
office vise project manager that contributed directly or indirectly to this thesis work and
provided the necessary support for the realization of this thesis.
WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page iv

Abbreviations
CM- Construction Management
DB- Design Build
DBB -Design Bid Build
GDP- Growth Domestic Product
MoWUD- Ministry of Works and Urban Development
MoE- Ministry of education
MoH- Ministry of house
MoWRs – Ministry of water and resource
BOT- Finance / Build Operate System
FM- Facility Management Consultancy
CE- Concurrent Engineering
NEDO-National Economic Development Organization
PDM-Project delivery method
WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page v

Contents
APPROVAL ....................................................................................................................... II
DECLARATION .............................................................................................................. III
ACKNOWLEDGEMENTS .............................................................................................. IV
ABBREVIATIONS ........................................................................................................... V
LIST OF TABLE ........................................................................................................... VIII
LIST OF FIGURE.......................................................................................................... VIII
ABSTRACT ...................................................................................................................... IX
CHAPTER ONE ................................................................................................................. 1
INTRODUCTION .............................................................................................................. 1
1.1 GENERAL BACKGROUND ....................................................................................... 1
1.2 STATEMENT OF THE PROBLEM............................................................................... 1
1.3 RESEARCH QUESTIONS .......................................................................................... 2
1.4 OBJECTIVES OF THE STUDY ................................................................................... 2
1.4.1 General Objective ............................................................................................. 2
1.4.2 Specific Objectives ............................................................................................ 2
1.5 SCOPE AND LIMITATION OF THE STUDIES .............................................................. 2
1.6 ORGANIZATION OF THE THESIS .............................................................................. 3
CHAPTER TWO ................................................................................................................ 4
2. LITERATURE REVIEW ............................................................................................ 4
THEORETICAL REVIEW ..................................................................................................... 4
2.1 BACKGROUND ....................................................................................................... 4
2.2 DEFINITION ........................................................................................................... 4
2.3 ESSENTIALS FOR A VALID CONTRACT .................................................................... 5
2.4 FORMATIONS OF CONTRACT .................................................................................. 5
2.4.1 Offer and Acceptance ....................................................................................... 6
2.4.2 Consideration ................................................................................................... 6
2.4.3 Capacity to contract ......................................................................................... 6
2.4.4 Legality of the object ........................................................................................ 7
2.4.5 Formalities........................................................................................................ 7
2.5 CONTRACT TERMS ................................................................................................ 8
2.5.1 Express terms .................................................................................................... 8
2.5.2 Implied terms .................................................................................................... 9
2.5.3 Statutory terms .................................................................................................. 9
2.6 CLASSIFICATION .................................................................................................... 9
2.6.1 Type of contract type ........................................................................................ 9
2.6.2 Type of project delivery methods .................................................................... 11
PRACTICAL REVIEW ........................................................................................................ 16
2.7 PROJECT DELIVERY METHOD SELECTION CRITERIA ........................................... 16
2.8 SELECTION CRITERIA OF CONTRACT TYPE ........................................................... 16
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SUMMARIZED REVIEW .................................................................................................... 19

CHAPTER THREE .......................................................................................................... 21
3. MATERIALS AND METHODS .............................................................................. 21
3.1 INTRODUCTION .................................................................................................... 21
3.2 RESEARCH APPROACH ......................................................................................... 22
3.3 SOURCE OF DATA ................................................................................................ 22
3.4 RESEARCH POPULATION ...................................................................................... 22
3.4.1 Population ...................................................................................................... 22
3.4.2 Sampling technique......................................................................................... 22
3.4.3 Sample Size ..................................................................................................... 22
3.5 THE RESEARCH INSTRUMENTS ............................................................................. 23
3.5.1 Questionnaires design .................................................................................... 24
3.5.2 Observation .................................................................................................... 24
3.6 DATA ANALYSIS .................................................................................................. 24
3.6.1 Frequency Analysis......................................................................................... 24
CHAPTER FOUR ............................................................................................................. 25
4. RESULT AND DISCUSSIONS ................................................................................ 25
4.1 PRESENTATION OF SURVEY RESULTS ................................................................... 25
4.1.1 The respondents .............................................................................................. 25
4.1.2 Profile of the questionnaires........................................................................... 25
4.1.3 Result regarding to criteria and challenges in selection of construction
contract and PDM ..................................................................................................... 26
4.1.4 Results regarding to factor that have influence in selection of contract type 31
4.2 DISCUSSION ......................................................................................................... 32
4.2.1 Discussion of criteria and challenges in selection of construction contract and
PDM………… ............................................................................................................ 32
4.2.2 Discussion regarding to factor that have influence in selection of contract
type.....…………………………………………………………………………………………35
CHAPTER FIVE .............................................................................................................. 37
5. CONCLUSION AND RECOMMENDATION ........................................................ 37
5.1 CONCLUSION ....................................................................................................... 37
5.2 RECOMMENDATION ............................................................................................. 39
5.3 FUTURE RESEARCH DIRECTIONS ......................................................................... 39
6. REFERENCE ............................................................................................................ 40
7. APPENDIX ............................................................................................................... 41
WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page vii
LIST OF TABLE
Table 1: Population, Sampling Techniques and sample size ............................................ 23
Table 2: Project delivery system experience of respondent.............................................. 26
Table 3: Tendency of delivery system to arise dispute ..................................................... 27
Table 4: contract type experience of respondent .............................................................. 28
Table 5: Efficiency of contract type In terms of Time...................................................... 29
Table 6: Effectiveness of contract type In terms of cost ................................................... 29
Table 7: Effectiveness of contract type In terms of quality control .................................. 29
Table 8: Effectiveness of contract type In terms of quality control .................................. 30
Table 9: Average for the answers to section 3 of the survey ............................................ 31
Table 10: Factors that have influence in selection of contract type .................................. 47
LIST OF FIGURE
Figure 1: Research design structure .................................................................................. 21
WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page viii
Abstract
The construction industry plays a significant role in a nation’s social and
economical development. The great growth in the expansion of construction projects in
the University that reduce project planning time and makes it difficult for the university
to make the right decisions, particularly in terms of the chosen delivery system and
contract type. The construction contract is a document which governs the business
relationship of Contractor and Employer for the duration of a construction project. A
project delivery system is the process by which a project is designed and constructed. It
defines the roles of the owner, architect, and contractor and / or construction manager
and sets specific responsibilities for each party. This paper aims identify the criteria and
challenges of different contract types and delivery system in selection and implementing
to Wolkite University construction building projects from the experiences and opinions of
contracting stake holders who are involve in Wolkite University construction building
projects and examining the factors influencing their selection. The analysis is based on
findings of the questionnaires and the answers to the survey are analyzed statistically, but
considering the reduced sample, a qualitative analysis is also performed. The analysis of
different construction contract types and associated project delivery methods indicates
that they establish different patterns of responsibilities and suitability for clients and the
various parties involved in Wolkite University construction building projects. From the
analysis studied, four factors were found to be related to contract selection: the
characteristics of client, particularly their experience and expertise in construction, the
level of performance and economy required by clients and the construction complexity of
projects or characteristics of project. This thesis shows that what are challenges in
selection construction contract types and how does Wolkite University select it for
construction building projects. In the case of Wolkite University the federal government
and regional government regulation and also different management team of client
influence are the criteria to select the type of contract. Time, cost, quality, risk and size
of project are the other main parameter which challenges the selection and
implementation of contract types and delivery methods for university’s construction
project. To make smooth relationship and complete the project as per the requirement, it
is necessary to assess the nature of construction contracts and delivery methods. It can
be recommended that stake holder should thoroughly identify the characteristics of
construction contracts and nature and site of the construction project and selects which
contract type is suitable for what type of construction project.
Key words: Contract document, Project delivery method, Wolkite University construction
WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page ix

CHAPTER ONE
Introduction
1.1 General Background

The Ethiopian construction industry is expected to expand by 4.7% in real terms in
2021 - up from a growth rate of 3.1% in 2020. Construction activities held up relatively
well despite the outbreak of the Corona virus (COVID-19) pandemic. The government
did not impose a strict lockdown in response to the outbreak, and although it imposed a
state of emergency in early April 2020, construction activity was encouraged to continue
during the crisis, which helped industry output growth in 2020.
Construction industry involves procurement and contract system in order to insure fair
competition and distribution of obligation and right among contractual stake holders.
Construction projects are components of certain business development and demands
acknowledge their contribution and it is most the basic or strategy planning phase tool
used to implement construction projects according to contract planning. The contract
planning includes procurement method and contract types. Therefore, by exploring the
practical and identifying the process we hope that we will enhance the selection of
contract types is suitable as prior for sustainable construction project in Wolkite
University. In this we believe that we will clearly show selection of suitable and
sustainable contract types for construction building projects and examine away to
improve particular contract type requirement.
1.2 Statement of the Problem
The great growth in the expansion of construction projects in the Wolkite University that
reduce project planning time and makes it difficult for the university to make the right
decisions, particularly in terms of the chosen delivery system and contract type. It is
known that one of the most important criterions the success of the project is the
appropriate choice of contractual type and project delivery system. The choice of delivery
of the project depends on the objectives of the owner and the requirements of the project.
The projects usually long term, thus the expense of any choices is weak, unexpected
errors can lead to a huge negative impact that can last for generations.
Using one or the other contract type might be a matter of philosophy or personal
preferences by the management of the Employer and the regulation of regional and
federal government rather than a decision based on objective considerations about the
suitability of the contract for the project. It is unclear how a contract type is selected for a
certain projects in the university, but certain factors must exist which direct the parties
towards their decision to enter a contract type and not any other possible one. Therefore,
the criteria which are used to select the contract type depending on the project’s
WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 1

characteristics make up the solution which was sought in this thesis. New factors relevant
for the contract selection problems, which are still not dealt with in the literature, may
come up during the study. The ultimate question that study would like to answer in this
thesis is “Why a contract type why selected, i.e. which factors affect the selection of the
construction contract type, what are the challenges in selection and implementation
contract type and PDM ?”
1.3 Research questions
 What are challenges and problems in selection and implementation of different
construction contract types and delivery system?
 What criteria is use by the University for the Selection of contract type and PDM?
 Which factors have influence on the selection of the construction contract type?
1.4 Objectives of the Study
1.4.1 General Objective
The general objective of this paper is assessment on contract type and delivery method
selection in Wolkite University construction project.
1.4.2 Specific Objectives
 To identify challenge in selection of suitable delivery systems and contract for
Wolkite University construction projects.
 Identify factors that influence on the selection contract type in Wolkite University
construction project.
1.5 Scope and Limitation of the studies
The study was concerned with challenge in selection of suitable delivery system and
contract types for construction projects in Wolkite University construction project which
might helps to maximize work productivity by implementing suitable contract type and
delivery system. It intends to give a possible solution for contractual problem and
challenges in Wolkite University construction project.
Practice shows that it has become great growth in the expansion of construction projects
in the University that reduce project planning time and makes it difficult for the
university to make the right decisions, particularly in terms of the chosen delivery system
and contract type. Therefore, the significance of this thesis is to identify factors in
selection of some contract types weak in implementing university’s building projects, and
to point out the alternative contract types for particular construction project.
Limitations are encountered during conducting, processing and writing a research. Some
of them are Not enough time to conduct, process the study, The response of
questionnaires is no fully answered and untimely responded, Internet access are limited
because of lack of electricity in the university

1.6 Organization of the thesis

This research contains five chapters as described below;
 Chapter One is an introductory part in containing discussions on background,
research problems, aim and objective, significance, scope and limitation and
organization or layout of the study.
 Second chapter describes literature review on subject area of contract; construction
contract types and delivery system which had help us to point out different contract
types which may be good for university’s building projects.
 Chapter Three describes the research methodology which contains the way how the
research is conducted by including how the questionnaires are prepared and to whom
they are distributed.
 Chapter Four talks about the analysis of the collecting data from the concerned
parties.
 Chapter Five contains conclusions and recommendations of what discussed in the
previous chapters.
 Finally Reference and Appendices are included.

Chapter Two
2. Literature Review
Theoretical review
2.1 Background
A contract is an exchange of promise between two or more parties to do or refrain
from doing an act which is enforceable in court of law. It is where an unqualified offer
meets a qualified acceptance and the parties reach consensus and idem. The parties must
have the necessary capacity to contract and the contract must not be trifling,
indeterminate, impossible or illegal. Breach of contract is recognized by the law and
remedies can be provided. Some types of contract made in written form and others made
orally. The basic purpose of a written contract is to define exactly and explicitly the
rights and obligations of each part thereof (Clough, 2015).
Construction is a contracting business in which the rights and obligations of the parties
such as client mostly financer contractor, who contract, consultant who acts as clients
professional advisor is described. Those Participants takes on and manages the sequence
of interrelated activities of the construction project from beginning to the end. A
construction project to all intents and purpose is the production of capital goods and like
other capital investment, involves careful planning and decision making. Hence, its
production is the result of many months of processes that required briefing, planning,
Engineering, designing, funding, budgeting and negotiation. Conversely, unlike and other
capital investment, wrong decisions made earlier in the construction process are
expensive to change and therefore a careful definition of objective and responsibilities of
each participant at the pre- contract stage of each participant at the pre contract stage.
(Wubeshet Dr .ing., 2019)
2.2 Definition
Uniform commercial code defining “contract “is the total legal obligation which results
from the parties agreement and does not attempt to state which act is essential to create
legal duty to perform promise.
A contract is an agreement creating and defining the obligations between two or more
parties. (Winfield, 1927)
A contract is legally binding agreement between two or more persons. Legally binding
agreement means that the agreement will be enforced by the court. The breach of
agreement that is legally binding allows the injured parts to claim a legally enforceable
remedy from the party who commits the breach (Kwakye, 1997).

A contract is simply an agreement between two or more people in which a person agrees
to perform or provide as specific task or service to another person in exchange for
something in turn (Getaneh Gezaheny, 2008).
A project delivery system is the process by which a project is designed and constructed. It
defines the roles of the owner, architect, and contractor and / or construction manager and
sets specific responsibilities for each party (Wikipedia, 1990).
2.3 Essentials for a valid contract
Essentials of a valid contract are conditions and requirement that have to be fulfilled to
have a valid contract. On the above definitions we have seen that contract is a
commitment. It is an agreement between two parties which rise to obligation that are
enforceable by law. The basic purpose of a written contract is to define exactly and
explicitly the rights and obligations of each party thereof. (Clough, 2015)
These obligations more over should be distinct from those required by law.
No valid contract shall exist unless:
 The parties are capable of contracting and give their consent sustainable at
law.
 An offer of one party and its acceptance by the other party.
 It should not oppose to any policy of the government and companies.
 The object or the contract is sufficient defines and is possible and lawful.
 The contract is made in the form of prescribed by law, if any (civil, 1960;
article 1678)
2.4 Formations of contract
There are essential requirement with respect to the nature and circumstances of the
commitment that must be fulfilled for a contract to be valid. As a requirement the
following four are considered basic requirements and the last is used for certain type’s
contracts only.
 Offer and acceptance
 Consideration
 Capacities to contract
 Legality of the object
 Formalities

2.4.1 Offer and Acceptance

The most important feature of a contract is that one party makes an offer for an
arrangement that another accepts. This can be called a concurrence of wills or anidem’
(meeting of the minds) of two or more parties. There must be evidence that the parties
had each from an objective perspective engaged in contract manifesting their agreement
and a contract will be formed when the parties have met such a requirement. An objective
perspective means that it is only necessary that somebody gives the impression offering
or accepting contractual terms in the eyes of reasonable person not that they actually did
want to form a contract.
1. Offer: - An offer is an expression that one party is willing to be bounded by
specific terms which are set out in the contract. A contract is complete when
an offer by one party is accepted without condition by the other party and
hence the two parties are willing to be bound by their agreement. (civil,
1960)
An offer may be made in writing by sign or by conduct of parties and it terminates if:
 Death of the offeror or the offeree
 Failure of condition subject to which the offer was made;
 Failure to communicate acceptance within a reasonable length time or with the
offer time.
 Rejected by the party to whom the offer was made.
2. Acceptance: - An acceptance of an offer only becomes effective when it has
been communicated to the person made the offer. If the Offer prescribes the
form or manner in which the acceptance must be made in that manner, or
way which is at least as beneficial to the party making the offer. (Getaneh
Gezaheny, 2008).
An acceptance is a full acceptance by party to whom an offer has made. For an
acceptance to be deemed valid, it must be.
2.4.2 Consideration
Consideration is known as the price of a promise and is a controversial requirement for
contracts under common law. It is not necessary in all common or civil law systems, and
is considered by some to be unnecessary as the requirement of intention to create legal
relations by both parties meets the same requirement under contract.
2.4.3 Capacity to contract
Capacity refers to the legal states of the parties to make a legally binding contract. In
general, every citizen of the country has the status to enter in to contractual agreement.
This excludes minors (those under age 18, under the Ethiopian law), mentally ill and

incompetent individuals and those who enter in to contract under the influence of Alcohol
or other drugs.
1. Genuine consent
In construction contract it is essential that the agreement to be made with proper and
genuine consent by the parties to it. Therefore, a party is consent must not be induced or
caused by such circumstances as false statements, fundamental mistakes,
misapprehension and undue pressure exerted by the other party.
2. Intention to be legally bound
It is necessary that the parties can be deemed to have intended to create legal
relationships. This intention makes the agreement they have reached to be one which
would be legally enforceable.
2.4.4 Legality of the object
A valid contract must be legally enforceable in front of law. If a contract is made from
illegal purpose it is void. Illegal contracts can be illegal by statue or by law. (Civil code
of Ethiopia, 1960; article 1716)
Examples of contracts which are illegal by law are those:
 Agreements to commit crimes or civil wrongs
 Agreements which may injure the state promotion of corruption
 Agreements which limit a person’s ability to carry out their trade.
2.4.5 Formalities
Certain types of contracts require formalities. Some needs special forms while other
requires written evidence. Failure to execute a contract in a required form makes the
contract invalid. This best manifested on Ethiopian civil laws, as follows:-
 Unless otherwise provided on special form shall be required and a contract shall
be valid where the parties agree.
 Where special form is expressly prescribed by law such form shall be observed.
 The parties may stipulate that the contract shall be made in a special form (civil
code of Ethiopia 1960 Art 1719)
The civil code of Ethiopia, 1960 points out the following contracts that require written
evidence:-
 Relating to immovable
 Contracts made with a public administration
 Contracts of guarantee
 Insurance contracts
 Any other contract in respect of which such from is required by law.
 Parties agree to make in a special from not required by law.

Any contract required in writing shall be supported by a special document signed by all
the parties bound by the contract.
It shall be no effect unless it is attested by two witness’s civil code of Ethiopia 1960 Art
1727.
2.5 Contract Terms
A contractual term is any provision forming part of a contract. Each term gives rise to a
contractual obligation, breach of which can give rise to litigation. Not all terms are stated
expressly and some terms carry less legal weight as they are peripheral to the objectives
of the contract.
In construction contract we use different terms to make the contract agreement easy and
understandable .The terms of contract are provisions or stipulation in availed contract
describing some aspects of the agreement between the parties to contract. They define the
right and obligations of the parties to each other and the extent to which they are in
agreement. Typically provisions tell the parties how to govern their relationship and
administer the contract. Although often thought to be of secondary importance, those
provisions have significant business and legal consequences. Common provisions include
the governing law, venue, assignment and delegation provisions, office provision, and
force majored provisions. The contract terms may be express, implied or statutory and are
prevalent in all construction contracts.
2.5.1 Express terms
Express terms are expresses agreed by the parties to contract and by which they intended
to be bounds. They are words expressed orally or recorded in hand writing, typing or
printing by the parties. In most construction contracts express terms usually take the
following forms:
 The agreement: this is the written details of the project and the agreed sum
payable for its completion.
 The condition or warranty: these are the detailed provision governing the
execution and administration of the project. Conditions are terms which go to the
very root of a contract, allowing the other party to discharge the contract. A
warranty is not so imperative so the contract will subsist after a warranty breach.
Breach of either will give rise to damages.
 Drawings: this is a document delineating the plan shape of the project as well as
its design details.
 Specification or bill of quantities: A document describing the quantity of the
materials (works man ship as well as the quantity of works required).

2.5.2 Implied terms

Implied terms are contract terms which are not written down in a contract or opens
expressed at the time the contract is made, but which the law implies. For instance, in the
absence of express terms, the following term will be implied in a construction contract.
 That the building contractor will execute the workers in work man like manner
and compute within a reasonable period of time
 That any materials and goods supplied by him will be of good qualities; and
 That any materials and work will be reasonable fit for their purpose
2.5.3 Statutory terms
Statutory terms are contract terms which are imparted in to contract by legislation. This
term is important as a part can on take legal action for the no fulfillment of a term as
opposed to representations. Legally speaking only statements that amount to a term create
contractual obligations.
2.6 Classification
2.6.1 Type of contract type
A construction contract serves means of pricing construction, which allocates a risk to the
various parties involved. The owner has a sole power to decide what type of contract
should be used for specific faculties to be constructed and to set for the terms in a
contractual agreement.
Factors influencing the selection of different types of contracts are;
 The size and type of project
 Technical feasibility’s
 Economical feasibilities
 Financially support
 Capacity of operational resource
In Construction Industry, the following eight contract types are so far practiced:
(Wubeshet Dr .ing., 2019; Beshir M & Birhanu M., 2021)
1) Lump Sum Contract,
2) Bill of Quantities or Unit Rate Contract,
3) Cost plus Fixed Fee Contract,
4) Cost plus Percentage of Cost Contract,
5) Item Rate or Schedule of Rates Contract,
6) Labor Contract,
7) Hybrid Contract, and
8) Special Contract

Lump Sum Contract: When the Project or Tender price is determined and quoted as a
total sum of money without individual ratings to execute the whole of the works and / or
services according to the drawings and specifications, it is called a Lump Sum Contract.
In such contracts:
- It is difficult to administer changes and amendments but experiences of similar projects
are used as a basis to this effect,
- Works or services are checked based on the specifications, the conditions of contract or
terms of reference and drawings if any for acceptance and closing of accounts, and
- Payments are agreed at different stages of works or services.
A Lump Sum Contract is more suitable for works of smaller in size and where the
contracting parties have prior experience of similar projects. But it is not advisable for
projects with considerable uncertainties such as; difficult sub surface situation, unusual
projects, maintenance projects, etc. A Lump Sum Contract mainly includes Contract
Agreement, Conditions of Contract, Drawings and Technical Specification.
Bill of Quantities Contract: When the Project or Tender price is determined and quoted
from unit rates assigned to detailed bill of quantities, it is called a Bill of Quantity
Contract. The Bill of Quantity includes short description of specifications, unit of
measurement, quantities and columns for pricing the unit rate and its total amounts. In
such contracts:
 It is relatively easy to administer changes and amendments because actual and
assigned quantities can be compared,
 Works or services are checked based on the specifications, the conditions of
contract or terms of reference, drawings if any and the priced bill of quantities
for acceptance and closing of accounts, and
 Payments are made based on measurements of executed works and material
on site provided on site.
Cost Plus Fixed Fee Contract: When projects are fast – track and required to be
completed expeditiously and where it is difficult to estimate the project cost before, the
project expenses called costs will be recorded and a fixed amount which is agreed upon
by the contracting parties will be added as payment to the contractor. A contract that
stipulates to reimburse cost together with an additional fixed fee, it is called a cost plus
fixed fee contract. Such a contract is desirable when the scope and nature of the work can
at least be broadly defined and for important structures such as monumental buildings
which are Time and Quality driven than Cost driven. In such contracts:
 The work is executed in the best interest of the owner with regard to the project
quality and time,
 There is no way that the contractor can lose,

 Changes and Amendments can be accommodated amicably,

 The amount of the fixed fee is determined as a lump sum from a consideration of
the scope of the work, its approximate cost, nature of work, estimated time of
construction, manpower and equipment requirements, and
 The owner could not easily anticipate the final project price and can cause
budgetary problems.
Item Rate or Schedules of Rates Contract: A different form of fixed contract but priced
based on the unit rate approach for individual or groups of activities, not the whole
project. When accurate specifications and quantities of work or services could not be
determined before executions, provisional quantities together with acceptable
specifications can be included to determine Provisional sums using unit rates. This type
of contract is Item Rate or Schedules of Rates Contract.
Labor Contract: When the Project owner is responsible for the provision of major
resources such as materials and Equipments other than labor, small tools and equipments
and their management, it is called a labor contract.
Hybrid Contract: A contract that combines two or more contract types is called Hybrid
Contract. This type of contract is designed to meet the special requirement of certain
classes of works to suit their particular needs.
2.6.2 Type of project delivery methods
The ability to deliver and different construction delivery systems is more important now
than ever before in the construction industry. Clients and projects have different needs.
Part of the process of the construction professional is to identify those needs and provide
away to deliver a completed project that satisfies both the needs of the client and
objectives of the project.
Generally, there are six types of Procurement and Contract Delivery systems (Wubeshet
Dr .ing, 2019; Beshir M & Birhanu M., 2021). These are:
1) Force Account,
2) Design Bid Build (DBB),
3) Design Build (DB) or Turnkey,
4) Finance / Build Operate System (BOT),
5) Construction/Facility Management Consultancy, &
6) Alliances and Outsourcing.
Force Account: When the Project Owners engage themselves to undertake the project, it
is called a force account delivery system. Often such a system is promoted if the Project
Owners believe that there is a comparative advantage in Cost, Time and Quality issues.
Besides, when there is a lack of capacity from the private sector to undertake very large

and technologically new projects, public companies do undertake such projects using
Force account delivery systems.
These days this type of delivery system is often used when projects are small and places
are remote such that reaching them is difficult and in general they are not attractive
enough to call the attention of Bidders. Besides when projects are spatially scattered and
maintenance are to be done for schools, colleges, health centers etc., such cases can be
applied.
Design Bid Build (DBB): This is the most practiced type of delivery system in the
Construction Industry of Ethiopia since the 1987. After project owners did prepare the
Basic Planning that identifies construction project programs, they call upon the
participation of Design and / or Supervision Consultants either by tender or by negotiated
contracts. This consultant will carry out the design together with the necessary tender
documents which will be the bases for tendering to select contractors. These process is
called Design - Bid - Build and hence the name for such delivery system.
In this type of delivery system, projects are divided into different packages interfacing to
each other. Though the design and supervision consultant will be the prime professional
on behalf of the owner and largely the administrator of the construction contract; the
employer takes the responsibility of coordinating the various project packages and their
respecting interfaces.
Besides, designers have not been required to guarantee results but rather methods. That
is, they are held accountable on the basis of their superior knowledge and sufficient
competency and ability to design with a reasonable degree of technical skills. As a result,
contracts and courts focused on professional duty of care, not results or project goals.
Contractors are also responsible to construct works with due care and diligence and
complete them in accordance with the contract, but they are not held responsible for
design deficiencies.
Since the 1980s, this traditional approach becomes less popular due to the following
factors:
- Severe Adversarial relations between the design and contract administration
consultant and the contractor
- Fragmented contract for the project owner
- Project owner responsibility for risks associated with the design and contract
administration
- Non - Impartiality of the Design and Contract Administration services
- The inability of design and contract administration consultants to cope up with
new construction technologies and constructability issues of their designs
- Severe adversarial relationships between Urban Planners and Architects on the
one hand; and Architects and Engineers on the other hand on building projects

- The indirect contractual obligation assigned for the Design and Contract
Administration consultants
- The incompatibility of consultancy fee to the desired activities they are required
to provide, etc.
The following standard forms of DBB Conditions of Contract are known for use for such
delivery system:
- FIDIC White Book for Consultancy Services (Design and Supervision) and Red
Book for Construction Works
- Standard Conditions of Contract for Construction of Civil Works, 1994; MWUD
Design Build (DB) / Turnkey: is a response to problems associated to the last two types
of delivery systems. These were promoting privatization and its businesslike approach to
enhance the Force Account System and reducing fragmentation, adversarial relations and
Project Owners’ risk which are recurrent manifestations in the DBB delivery system.
Design Build or Turnkey by principle reduces numbers of procurement processes
engaged in the fragmented process and employ only one procurement process and a
single contractor to provide the entire Construction Implementation Process (Design and
Construction Implementations). In the 1970s, large firms began to offer both design and
construction services in order to provide project owners with a single source for project
delivery. At the beginning, this delivery system was limited to complex projects such as
industrial, big plants and big infrastructural constructions.
DB delivery system is common worldwide specifically for Private projects. This led lead
contracting firms to form a team or consortium of designers and specialty contractors
who work together to meet the entire demand. Such services are initiated after the Project
Owner built the project concept during the basic planning phase and brought to the DB
Contracting Firms. The project concept should clearly define the performance criteria
such as output, input, waste and any other performances the employer may desire. This
makes an additional responsibility to the contractor which is ¨fitness to purpose¨
according to the Orange Book of FIDIC. Fitness to purpose is beyond the professional
duty of care and places liability on the contractor for any failure of the design to perform
the standards required.
Typical advantages of this system include:
 reducing fragmentation and adversarial relations between designers and
constructors; minimizing Project owners’ risk transferable due to Designers’
faults;
 accountability and entire responsibility for both design and construction which
entitle the employer to receive completed project is onto a single contractor;
 employers’ responsibility to co-ordinate interfaces between different project
elements is avoided;

 single point responsibility minimizes the opportunity to claims by the contractor

due to design related issues; o coordination between design and construction
processes will also be enhanced (both in communication for constructability as
well as in fast tracking); and
 The client budget or financial requirement is defined early enough in the
development process.
The disadvantage of this delivery system is loss of control, cost of tender and cost of
risks.
Projects carried out using DB delivery system are often called Turnkey Projects because
a single contractor is responsible to hand over the completed facility and let the Project
owner to turn the key and gets in. Often Turnkey projects use Lump-Sum contract type.
The following standard forms of DB Conditions of contract are known for use for such
delivery systems:
- FIDIC Orange Book
Finance / Build Operate Transfer (BOT): is a form of procurement and contract delivery
system that promotes Public Private Partnership (PPP) in which a private company is
contracted to finance, design, construct, and operate for a certain period (usually 10
years) and transfer. BOT contractors look to project financiers for the realization of
projects through equity contributions or credits. Such provisions are different from
budgetaized finances such that they involve no or limited recourse which means the
project owner is not responsible for any liability other than force majeure and agreed
upon claim adjustments. This obliges that projects should first be viable for revenue
generation in order to payback its depts.
The Typical BOT contract is the process whereby a government grants a concession to a
project development company to develop and operate what would normally be a public
sector project, for a given period of time known as the concession period. BOT project
involves a potentially complex contractual structure. The Operation period between
completion and transfer gives the contractor an opportunity to verify the quality of the
output of the services and works, and train the employer personnel on how to manage the
facility afterwards. In some BOT contracts, defect liability period will be included in
order to ensure the quality of the facility during transfer. This is because, operators in an
attempt to save costs, may decrease operating and maintenance expenditures towards the
end of the concession period.

This delivery system is advantageous because of three major factors:

 it minimizes owners’ scarcity of financial resources;
 It devoid of considerable risks from the project owners and lesson regulatory
activities; and
 The facility is well operated and transferred with free of charge or minimum
compensations to project owners.
Such delivery system requires appropriate packaging of projects and their definition
clearly. It is advisable to start with small projects and tries to develop experience and
expertise to make such delivery system successful. Most BOT projects failed because of
their built up and engagement in very large projects which is an extremely risky business
for contractors. Consortium of contractors is used to carry out such projects. The
increasing popularity of the BOT project is largely due to a shortage of public funding
and the opinion that the facility will be more efficiently managed by a private entity. The
standard forms of BOT Conditions of Contract are known for use for such delivery
systems is FIDIC Yellow Book.
Construction / Facility Management Consultancy: is a response to problems associated
with DB and BOT where the Project Owner was not well represented for its benefit and
the problem of fragmentation between Planning and Implementation.
Construction Management service in such delivery system include the management
activities related to a construction program carried out during the Basic Planning, Design
& Construction Implementation and its completion process that contributes for the
successful completion of projects. The main difference of this delivery system is that,
while all the others involve only during the implementation phase after major decisions
was made during the Basic planning phase of the construction process, it is involved in
the whole construction processes.
Construction Management Consultancy service are particularly attractive to organizations
that involve in construction physical infrastructures such as MoE, MoH, Real Estate
Organizations, MoWRs, etc. Construction Management Consultants then represents
Project Owners to carry out the following services:
- Feasibility studies of Construction related services
- Plan and Monitor the Triple Constraints of Project Performances
- Lead and Organize regulatory systems of the Construction Industry
- Valuation, Quantity Surveying and Procurement and Contract Management
Services

Practical review
2.7 Project Delivery Method Selection Criteria
The selection of an appropriate PDM is the basis of success in every construction project
and has never been an easy job due to the characteristics of procurement systems. Besides
having several PDMs available to choose from, each one varies in several aspects. A
PDM that can lead a project to success in some aspects may lead a project to failure
under different circumstances, thus one PDM will not fit for all projects. The PDM
selection process requires consideration and analysis of different, complex and dynamic
factors.
Mostly meet their planned point of selection as a procurement selection decision;
generally they suffer from a lack of consideration of the implicit interrelationships
between the various procurement selections criteria. A structured review of relevant
literature reveals that the first step in PDM selection methods is to establish the
procurement selection criteria (PSC) and interrelationship between them. The
procurement selections criteria should mirror the clients’ requirements, project
characteristics and external environment (Kumaraswamy, 2001).
As M. M. Kumaraswamy and Dissanayaka, (2001) stated, procurement selections
criteria can be used preliminary as a guide to assist decision makers with understanding
the attributes of particular PDMs. However, it cannot be a single basis for selecting one
PDM due to the intricacy of matching one PDM with the clients’ requirements, project
characteristics and external environment.
The National Economic Development Organization (NEDO, 2002) listed nine generic
criteria for the public sector to priorities their projects: time, certainty of time, certainty of
cost, price competition, flexibility, complexity, quality, responsibility and risk of the
project. In last few decades, several studies have used NEDO criteria, or modified version
of that, in-order to develop a PDM selection model.
2.8 Selection criteria of contract type
The use of one or the other contract types and the adaptations to be performed are a
matter of negotiation between the parties. However, it is unclear why some kinds of
contracts are used in certain projects, as there does not seem to be clear rules or
sophisticated methods for selecting the contract (Badenfelt, 2008).
The selection of the contract type seems to be rather complicated to explain, because it
may be influenced by many factors. Factors include the preferred risk allocation (relative
risk aversion of the parties, ability to control risks), the Employer’s preferences
(importance of schedule and quality, the desire to avoid moral hazard attitudes), the
Contractor’s characteristics, the project’s characteristics (project complexity and
definition) and the relationship between parties (desire to cooperate and be fair).

Nevertheless, additional, less researched factors may influence the choice: the relative
financial strength of the parties, the belief of the parties that the actual costs will be above
or below the target costs, the degree of capacity utilization by the Contractor, the
familiarity of the managers with the contract types, the amount of information
asymmetry, the simplicity of implementing the contract and secondary costs, such as
monitoring costs, financial costs and dispute costs. The contract type influences the
project outcome (Russell, 2002)
Thus, the question of the contract type selection is essential for a project. In fact, the
contract type can shape the relationship between the parties, as well as the quality, budget
and timely delivery of the outcome (Bajari, 2001)
Selecting a contract which is not suitable for the project may have undesirable
consequences, e.g. ending up in unnecessary legal procedures or delivering an untimely
or defective product. The risk distribution may be a determinant factor: the risk aversion
of the Employer may incline him to issue a tender with a certain type of draft contract.
The Employer can choose between taking all the risks himself or paying the Contractor to
transfer some or even all of the risks to him. Intuitively, it seems that an involved
Employer, who is comfortable taking more risks and having a partnering relationship
with the Contractor would probably select the framework of a target-cost (Tserng, 2014)
or cost-reimbursable contract, because in this case the Employer will be less prone to pay
for transferring risks to the Contractor.
The literature tends to conclude that there is no contract type that stands out as the most
suitable in all the different criteria (Fuller, 1937). This implies that different contract
types are probably more suitable than others depending on the project characteristics, but
no contract type can be said to be better than others in general.
Some Selection factor
Economic Risk
1. Relative risk aversion of Employer and Contractor (Contractor and Employer
diversification and size, project size for the Contractor) (Chan, 2011; Al-Harbi, 1998)
2. Public Owner, probably risk neutral, or private (risk averse) Owner (Fuller, 1937)
3. Relative financial strength of the parties (ability to bear risks if materialized) (Sancho
Calderón, 2017).
4. Expected profit by the Contractor in the Project (more profit implies more risk
tolerance by Contractor) (Badenfelt, 2008; Sancho Calderón, 2017)
5. Contractor’s ability to foresee and control costs (the Contractor should bear cost risk if
he can control the costs) (Sancho Calderón, 2017; Al-Harbi, 1998)
Employer’s preferences and characteristics

6. Value for money (no significant difference between contracts) (Sancho Calderón,
2017).
7. Schedule criticality (the more critical the schedule, the more likely some kind of cost
plus or unit price contract is to be used) (Antoniou, 2013; Sancho Calderón, 2017)
8. Quality criticality (the more critical the quality, the more likely is that some kind of
contract with quality incentives or with lower economic incentives is chosen) (Antoniou,
2013)
9. Owner in-house capabilities (the Owner needs more resources to be involved in a
target cost contract than in a lump-sum contract) (Suprapto et al., 2016; Sancho Calderón,
2017).
10. Belief by the Employer that the Contractor’s Bid price is under/above the future
actual costs (if the Employer believes the bid price is under the actual costs, he will tend
to lump-sum, in the opposite case he will choose cost-plus or target-cost contracts) (Al-
Harbi, 1998; Sancho Calderón, 2017)
11. Desire to influence the Contractor’s motivation and avoid moral hazard attitudes (e.g.,
a cost-plus contract does not motivate the Contractor to lower the costs) (Badenfelt, 2008;
Sancho Calderón, 2017)
Contractor’s characteristics
12. Qualification of the Contractor (Fuller, 1937; Sancho Calderón, 2017)
13. Negotiation power and degree of capacity utilization of the Contractor (if the
Contractor has no work, he has to take whatever contract type the Employer proposes)
(Sancho Calderón, 2017)
Project’s characteristics
14. Unclear definition of the project scope and methods (this is a reason for using cost
plus or admeasurements contracts) (Antoniou, 2013; Sancho Calderón, 2017)
Knowledge and implementation of contract type
15. Familiarity and previous experience with the contract type (managers may be biased
towards known contracts) (Antoniou, 2013; Sancho Calderón, 2017)
16. Simplicity to implement contract (lump sum contracts and unit price seem easier to
implement) (Antoniou, 2013; Sancho Calderón, 2017)

Summarized review
A contract is an exchange of promise between two or more parties to do or refrain from
doing an act which is enforceable in court of law.
Some types of contract made in written form and others made orally. The basic purpose
of a written contract is to define exactly and explicitly the rights and obligations of each
part thereof. (Clough, 2015)
A project delivery system is the process by which a project is designed and constructed. It
defines the roles of the owner, architect, and contractor and / or construction manager and
sets specific responsibilities for each party (Wikipedia, 1990).
There are essential requirement with respect to the nature and circumstances of the
commitment that must be fulfilled for a contract to be valid. (Wubeshet Dr .ing., 2019;
Beshir M &Birhanu M., 2021)
 Offer and acceptance
 Consideration
 Capacities to contract
 Legality of the object
 Formalities
Factors influencing the selection of different types of contracts are;
 The size and type of project
 Technical feasibility’s
 Economical feasibilities
 Financially support
 Capacity of operational resource
In Construction Industry, the following seven contract types are so far practiced:
(Wubeshet Dr .ing., 2019; Beshir M &Birhanu M., 2021)
1) Lump Sum Contract,
2) Bill of Quantities or Unit Rate Contract,
3) Cost plus Fixed Fee Contract,
4) Cost plus Percentage of Cost Contract,
5) Item Rate or Schedule of Rates Contract,
6) Labor Contract,
7) Hybrid Contract

Generally, there are six types of Procurement and Contract Delivery systems. (Wubeshet
Dr .ing, 2019; Beshir M. &Birhanu M., 2021) These are:
1) Force Account,
2) Design Bid Build (DBB),
3) Design Build (DB) or Turnkey,
4) Finance / Build Operate System (BOT),
5) Construction/Facility Management Consultancy, &
6) Alliances and Outsourcing.
As M. M. Kumaraswamy and Dissanayaka, (2001) stated, procurement selections criteria
can be used preliminary as a guide to assist decision makers with understanding the
attributes of particular PDMs. However, it cannot be a single basis for selecting one PDM
due to the intricacy of matching one PDM with the clients’ requirements, project
characteristics and external environment.
The National Economic Development Organization (NEDO, 2002) listed nine generic
criteria for the public sector to priorities their projects: time, certainty of time, certainty of
cost, price competition, flexibility, complexity, quality, responsibility and risk of the
project. In last few decades, several studies have used NEDO criteria, or modified version
of that, in-order to develop a PDM selection model.
definition) and the relationship between parties (desire to cooperate and be fair). (Russell,
2002)
Thus, the question of the contract type selection is essential for a project. In fact, the
contract type can shape the relationship between the parties, as well as the quality, budget
and timely delivery of the outcome. (Bajari, 2001)
The literature tends to conclude that there is no contract type that stands out as the most
suitable in all the different criteria like Economic Risk, Employer’s preferences and
characteristics and Contractor’s characteristics (Fuller, 1937). This implies that different
contract types are probably more suitable than others depending on the project
characteristics, but no contract type can be said to be better than others in general.

Chapter Three
3. Materials and methods
3.1 Introduction
This chapter deals with description of the study area, study population and sampling
techniques, data sources, method of data collection and method of data analysis for
assesses the challenges of major contract types and delivery system selection for Wolkite
University construction project. A questionnaire survey was formulated to discover the
opinions from concerning bodies. Here the study concern was Construction project
contractors in Wolkite University and University’s project office.
2.1. Research Design
Identify the problems
Identify the Objectives
Literature reviewed
Secondary data
Collecting Data
Primary data
Getting information from

previous documents, books
and websites (literature)
Getting information
through questionnaire and
observation Data analysis and discussion
Conclusion and Recommendation
Figure 1: Research design structure

3.2 Research approach

The researchers used quantitative approach for the study which is a means for testing
objective of the research by examining the relationship among variables. These variables,
in turn, can be measured, typically on instruments, so that numbered data can be analyzed
using statistical procedures.
3.3 Source of data
The data for the research collected from primary and secondary source which includes
the actual data that was collected from individuals who have a role in construction
projects in the study area. Primary data will be collected by distributing formulated
questionnaires to randomly selected contractors and University’s project office.
3.4 Research population
3.4.1 Population
The populations for this thesis were different professionals both in client side and
contractor side who worked in project office in Wolkite University as a client side.
The contractors were selected purposively who worked in small and huge projects in
Wolkite University construction project in order to discover the contract type and PDM
used for both size of project which is the main criteria for selection in university’s
projects.
3.4.2 Sampling technique
Among different tools or techniques of data gathering method the researchers used
structured questionnaire to collect data from respondents.
3.4.3 Sample Size
The required sample size for the research for each parties involved in the survey was
determined statistically using the following expression (Kish, 1965 cited in Tadesse
Ayalew, 2009).
 no = p x q/v2 ………………….. [Eq. 3.1]
 n= no / [1+ (no /N)]………………. [Eq. 3.2]
Where:
 no: First estimate of sample size
 P : The proportion of the characteristic being measured in the target population
 q: Complement of p or 1-p
 v: The maximum standard error allowed
 N : The population size
 n: The sample size

To maximize, p was set at 0.5.To account for possible error in the respondent answers
from the questionnaire, the maximum standard error was set at 10% or 0.1. The target
populations were construction projects in Wolkite University which are 30 and
administered by project office of the University. The study was using those numbers as it
populations for the above formula and had got 15 sample sizes.
Table 1: Population, Sampling Techniques and sample size
Population Size Low Medium High
21-50 5 7 13
51-90 5 13 20
91-150 8 20 32
151-280 13 32 50
281-500 20 50 80
501-1200 32 80 125
1201-3200 50 125 200
3201-10000 80 200 315
10001-35000 125 315 500
35001-45000 200 500 800
The required sample size for the research was a population involved in Wolkite
University current construction projects. The population size was determined by finding
out the total number of construction projects in Wolkite University which were 30 in
number and the university’s construction and project office.
According to (Carvalho, 2018) sample size dettermination indicated in above, the taking
to account a small size population size variance and cost of taking samples and time
consuming for large sample size small size population was applied in according with his
given population size. There fore the sample size selected for this study under
consideration was 5 samples.
3.5 The research instruments
The data ware collect from both primary and secondary sources. The primary data will
observe by direct contact and through questionnaires and some interview from different
construction participants. The secondary data will collect from different literatures that
have related studies and reviews with our study. The methods adopt in conducting the
research are:
 Questionnaire design
 Observation

3.5.1 Questionnaires design

Based upon a review of current literature and research objectives, structured
questionnaire was prepared and self-administer to the various respondents and some
questions were left open-ended, to obtain numerical data or to request some written
comment. For the purpose of the study, the questions were grouped under three main
sections. (1)General Information, (2) Criteria and challenges in selection of construction
contract and PDM, (3) factors that have influence on selection of construction contract.
The General Information dealt with the demographics with respect to firms, profession
and name of respondents, and years of experience in building construction, organizational
categories, and positions of respondents. The second section, indicates that criteria and
challenges in selection of construction contract and PDM and indicated by scale (1-5) of
where1= Very low, 2= low, 3= medium, 4= high, 5= Very high and yes or no questions
as well open ended questionnaires.
The third section is to indicate factors affecting selection of construction contract and
they also indicated by scale (1-5) of where1= Very low, 2= low, 3= medium, 4= high, 5=
Very high
3.5.2 Observation
Observation was conducted along with the questionnaire survey from the literature that
was reviewed in the chapter 2 and from some opens ended questionnaires.
3.6 Data analysis
The answers to the survey are analyzed statistically, but considering the reduced sample,
a qualitative analysis is also performed. The answers are compared among themselves
and contrasted with the predictions of the literature, confirming or denying the literature
sources.
The results of the open end questioners are compared and conclusions are extracted from
them, supporting and completing the results from the survey.
Finally, the information from the survey and the observation research is put together to
strengthen the basis for the discussion and comparison with the literature.
3.6.1 Frequency Analysis
Under frequency analysis, a descriptive statistical method, arithmetic mean
used and tables was used to analyses the responses from the questionnaire.
X=∑W/N
Where;
X: arithmetic mean
W: the weights given to each factors by the respondents (Ranging from 1 to 4-5),
N: the total number of respondents.

Chapter Four
4. Result and Discussions
4.1 Presentation of survey results

4.1.1 The respondents
A total of five responses were received from five respondents. It has a response rate of
100%. The respondents were contractor’s employees and project office of the University.
This is done deliberately to obtain direct and related answers for the questionnaires. The
questionnaires were forwarded for professionals that work on the construction industry as
a 2 of the respondents are Site manager, 2 of the respondents are Office manager for
contractor side and vise project manager of the University for Client Side to give their
opinion. 100% of the respondents are male in gender and all have degree and above
holder. So, it is possible to conclude that most of the respondents have the ability to
understand the objective of the study and able to understand the questions designed and
asked about their project contract type and PDM and it has a great contribution on quality
of study.
Majority of professionals’ experience of working in construction industry in Wolkite
University ranged between 1-5 years. This implies that most of the respondents have
better understanding about the construction industry and about construction contract
condition in Wolkite University.
The replies from the respondents have been analyzed statistically with arithmetic mean
and the analyses are shown in table formats. All the opinions and questionnaires are
included for analysis. And the responses persons are sign in the name of respondent 1,
respondent 2, respondent 3, respondent 4 and respondent 5 according to their positional
level (site managers, office managers and via project manager) and (
4.1.2 Profile of the questionnaires
The results of the investigations performed are presented in this chapter. The statistical
analysis of the survey has been limited to the evaluation of only a few statistical
parameters of the sample answers. If a larger sample were available, an approach
involving the calculation of the confidence intervals may have been useful. As explained
in subchapter 3.6, there are three sections in the survey with different questions. In order
to be able to apply statistics to the results, the answers to section 3 were codified with
ciphers as follows: Very Low was substituted by 1, Low by 2, Moderate by 3, High by 4
and Very High by 5. The arithmetic average was calculated for the answers of the five
respondents of the sample.
Section one is related to the profile of the construction firms and their experience in using
different kinds of construction project delivery system.

Section two is related to the stakeholders experience towards different construction

contract types. It also tries to assess suitable construction contract type regarding to
quality, cost, time and risk allocation between contracting parties. . In order to be able to
apply statistics to the results, the answers to section 2 were codified with ciphers as
follows: Very Low was substituted by 1, Low by 2, High by 3 and Very High by 4, none
by 0. Frequently by 2, sometime 1, not by 0: very fast 3, fast by 2, time taken by 3. The
arithmetic average was calculated for the answers of the five respondents of the sample.
4.1.3 Result regarding to criteria and challenges in selection of construction contract
and PDM
The main aim of selecting suitable project delivery system is to minimize disputes which
are caused by different dispute initiating factors.
From the response obtained, this thesis organizes causes of disputes in many parts such
as.
 Disputes due to improper delivery systems and contract type
 Disputes during the execution of the work like budget, unstable market price,
weather condition and other may factors that could occurs a despite
 Disputes due to delivery systems
In the questionnaire four types of delivery systems were presented for the respondents.
The purpose was to know what delivery system they were experienced for those projects
they were involved and to rate the tendency of delivery systems to arise a disputers.
Table 2: Project delivery system experience of respondent
Note: not at all = 0, sometimes = 1, frequently = 2
PDM Responde Responde Respond Responde Responde Average
nt 1 nt 2 ent 3 nt 4 nt 5 mean
Force account 0 0 0 0 1 0.2
DB 1 0 2 1 1 1
DBB 2 2 1 2 1 1.6
CM 1 1 2 0 2 1.2
The table indicates that most of the respondents were experienced with design- bid- build
delivery system and some of them are experienced with construction management
consultancy system.
This indicates that the most experienced delivery systems by Contractors and consultants
as well by project office of Wolkite University which were found in Wolkite university
construction project are design -bid –building and some construction management
consultancy system respectively.

Table 3: Tendency of delivery system to arise dispute

Note: Very Low = 1, Low = 2, High = 3, Very High = 4,
PDM Responde Responde Respond Responde Responde Average
Force account 1 1 1 1 2 1.2
DB 3 3 3 1 3 2.6
DBB 3 3 3 2 4 3
CM 3 3 1 1 2 2
From the above table the majority of the respondents indicated that DBB delivers system
has a higher tendency to arise a dispute between parties in construction project with 2.6
averages to arise a despite; DB delivery system has relative moderate tendency to arise a
dispute; Force account delivers system has almost no tendency to arise a dispute and also
CM delivery system has relatively low tendency to arise a dispute.
 Identify how often the stake holders different project delivery

methods in terms of time, cost and quality.
The stake holders experience towards highest performing construction project delivery
method from those who response four of the respondents were selected design- build
project delivery methods as the highest performing project delivery method and they
weighed by three parameters (Time, cost & quality.) and they putted the reason:
Design bid build method in terms of quality and cost there will be review of
the projects during design phase to maximizing the quality and reduce the
project cost.
It is common and good for quality control, project time regulation and cost
effective construction
One of the respondent select construction management and it has a reason because
especially cost affected port for construction at this time CM has a vital role for
construction.
 How often respondent use different alternative construction
contract types?
This was to identify that the respondent was use of different construction contract types
to minimize contractual problems and challenges during implementation. In the
questionnaire four types of contract type were presented for the respondents.

Table 4: contract type experience of respondent

Note: not at all = 0, sometimes = 1, frequently = 2
Contract type Responde Responde Respond Responde Responde Average
Lump sum 2 1 1 1 1 1.6
Unit price 2 2 2 2 1 1.8
Cost plus fixed 0 0 0 0 0 0
fee
Cost-plus 0 0 0 0 0 0
percentage
As the table indicates, the two types that are cost plus fixed fee and cost plus percentage
are not performed in the university project and mostly the unit price type is performed by
the entire respondent most frequently and also lump sum type was used by respondent.
 The respondent recommendation for contract type for the

university’s projects
From the 5 respondent, four of them recommended only the unit price type of contract as
per its contract administration is preferable then the other contract type, one respondent
select it as per it quality control is preferable than other. And one respondent
recommended both lump sum and unit price types as per there economic point view,
mode of payment, quality, contract administration and time perspective.
They also add some point why unit price is better than others, during bidding process
mostly university use 70% of technical evaluation and 30% of list bidder evaluation. So,
there will be better bidders to win the procurement and the client will achieve better
quality. It also good for proper management, equal benefit for all parities and activity
based there addition or subtraction of activities of the project and there cost also.
 Merits of using different construction contract types

Here the respondents were presented with different construction contract types together
with the methods of selection to implement on construction projects. Based respondents
knowledge and experience rating those contract types in terms of the factors that used in
time, cost, and quality and risk management.

a) In terms of time
Table 5: Efficiency of contract type In terms of Time
Note: time taken = 1, fast = 2, Very fast= 3
Contract type Respon Respond Responde Responde Responde Average
dent 1 ent 2 nt 3 nt 4 nt 5 mean
Lump sum 3 1 3 1 2 2
Unit price 2 3 3 3 2 2.6
Cost plus fixed fee 1 1 1 1 1 1
Cost-plus 2 2 1 1 3 1.8
percentage
As the above table indicated, the highest average of the respondents was agreed on unit
price contract is very fast track in the construction projects. Lump sum and cost plus
percentage contract type are fast tracks in construction and cost plus fixed fee is the time
taken type of contract.
b) In terms of cost over run
Table 6: Effectiveness of contract type In terms of cost
Note: Very Low = 1, Low = 2, High = 3, Very High = 4
Contract type Respond Responde Responde Responde Responde Average
ent 1 nt 2 nt 3 nt 4 nt 5 mean
Lump sum 4 1 4 4 3 3.2
Unit price 1 3 2 3 3 2.4
Cost plus fixed fee 2 1 4 1 1 1.8
Cost-plus percentage 3 1 3 4 4 3
As the table shows, the respondents had chosen lump sum contract to carry out project
within low cost and secondly the respondent denied cost plus fixed fee due to its
requirement of very high cost overrun it has less average by respondent, this is the reason
due to escalation in contraction cost and inefficient use of resources.
c) In terms of quality control
Table 7: Effectiveness of contract type In terms of quality control
Note: dissatisfactory = 1, fair = 2, satisfactory = 3, very satisfactory = 4,
Contract type Respon Respond Responde Responde Responde Average
dent 1 ent 2 nt 3 nt 4 nt 5 mean
Lump sum 2 3 3 3 3 2.8
Unit price 3 3 4 3 3 3.2
Cost plus fixed fee 2 1 1 2 4 2
Cost-plus percentage 1 1 2 2 2 1.6

From the table shown above, interims of quality management most of the respondents
were averagely above satisfied level by unit price contract and the respondents chosen
lump sum contract at most satisfactory level. The respondents’ shifts to wards at
dissatisfactory level with in cost plus percentage fee contract and fair level with in cost
plus fixed fee.
d) In terms of risk management
Table 8: Effectiveness of contract type In terms of quality control
Note: Very Low = 1, Low = 2, High = 3, Very High = 4
Contract type Responde Responde Responde Responde Responde Average
nt 1 nt 2 nt 3 nt 4 nt 5 mean
Lump sum 3 1 2 4 3 2.6
Unit price 4 3 4 4 3 3.6
Cost plus fixed 2 2 1 2 3 2
fee
Cost-plus 3 3 1 2 1 2
percentage
From the table shown above, interims of risk management most of the respondents were
seen very high management level by unit price contract and the respondents chosen lump
sum contract relatively high level of risk management. The respondents’ shifts to wards
at low risk management level with in cost plus percentage fee contract and cost plus fixed
fee.
 The unit price payment made based on actual work so, this
advantageous for whom?
The entire respondent said it is advantageous for both employer and contractor with their
own different reason.
 Contract type selection, how the respondent select specially the

university project office?
The project office select the contract type based the size of the project. For small project
they select lump sum contract and for large size projects they select unit price contract
type. The other respondents chosen the all choose that were written on the questioner but
one respondent add methodology of the work with his own reason.
But, mostly the university use unit price contract type for the project that was executed.
The respondent was recommended also unit price contract type for the successful
completion of the project besides selection of suitable contract type.

4.1.4 Results regarding to factor that have influence in selection of contract type
Table 9: Average for the answers to section 3 of the survey
Note: Very Low = 1, Low = 2, Moderate = 3, High = 4, Very High = 5
Averag Averag Average Average
e Lump e Unit Cost plus Cost-plus
sum price fixed fee percentage
1. How is the degree of fairness of the risk 3.8 4.2 2.8 2.2
distribution between Employer and Contractor in
the contract?
2. In which degree the use of this contract tends to 4.2 3.8 2.6 2
speed up project completion?
3. In which degree the use of this contract tends to 3.6 4.6 2.4 1.8
improve the quality of the project outcome?
4. To which degree is this contract suitable for 3.4 4.2 3.2 1.6
projects with technical/organizational
complexity?
5. How high/low are the required trust and 3.2 4.4 1.8 2.6
commitment between the parties before signing
this contract?
6. To which degree are adjustments to this 1.8 4.8 3.4 2.8
contract easy?
7. To which degree is this contract easy to 3.8 1.8 2.8 2..2
implement?
8. How high/low is the percentage of the total risk 2 2.8 3.6 4.4
assumed by the Employer in this contract?
9. How high/low was your knowledge of this kind 1.6 4 2.2 1.8
of contract before being involved in the project?
10. How high/low is the probability the parties 2.2 3.2 1.6 4.2
entering a legal process and how high/low would
legal costs be in case of dispute when using this
type of contract?
11. How high/low are financial costs (costs of 4.4 2.6 2.8 3
interest and fees of advance-payment bonds,
performance bonds, retention bonds, off-site
materials Bonds…) when using type of contract?

Each question of the section 3 in the survey had to be answered for each of the four
contract types. That is the reason why there is statistical parameter (e.g. averages) for
each question. The statistical parameter is presented in Table 4.8. In general, unit price
contract tend to be answered more similarly than any other three contracts. Many of the
averages are stepped, increasing or decreasing from the lump-sum contract to unit price.
However, there are also quite a lot of answers in which the unit price contract received
the highest rating on average, which is usually the most positive one, so the respondents
seem to agree more on that contract.
4.2 Discussion
4.2.1 Discussion of criteria and challenges in selection of construction contract and
PDM
One of the challenges to select project delivery systems in projects are the occurrence of
disputes during the implementing of that PDM, which were caused by improper selection
of delivery system for particular type of universities construction projects. From the
sample we observed that majority of the respondent had using the design- bid -build
(table 4.1) and the respondents indicated that also DBB project delivery system is high
tendency to arise deputes (table 4.2). This is the reason why the contractor generally
selected through the bid process and it has great tendency to unbalanced tender.
Although, through a process of DBB system there are many discipline and sectors
evolved in the project. Therefore there are many disputes between the owner, consultants,
contractor and other stakeholders. Relatively less number of the respondents was
indicated that DB project delivery system had low tendency arise dispute as its single
point of responsibility. In this type of delivery system the owner enters in to a contract
with a single entity that will assume the obligation of furnishing design, supervision and
construction service during the project. So, the first challenge to select PDM is the
occurrence of dispute on implementation of the project.
Also majority of the respondents were chosen DBB project delivery methods in terms of
time, cost and quality control. In DBB delivery system:
 There is sharing responsibilities of each stockholder that could provide the
control chain over time, cost and quality of the project.
 There will be review of the project during design phase to maximize the
quality and minimize the project cost.
In this type of delivery system, projects are divided into different packages interfacing to
each other. Though the design and supervision consultant will be the prime professional
on behalf of the owner and largely the administrator of the construction contract; the
employer takes the responsibility of coordinating the various project packages and their

respecting interfaces. (Wubeshet Dr .ing., 2019) The second criteria and challenges to
select PDM are the project time, cost and quality.
According to the result of table 4.1 & 4.3, majority of the respondents use the DBB and
unit price contract frequently respectively. For the analysis we understand that unit price
contract experienced with many contractors, consultants and owner the university. The
respondents were chosen the unit price contract as very good in contract administration,
mode of payment as well quality of work. By its nature construction industry is not free
from uncertainties in such circumstances the unit price contract highly manage such
problems, meaning the total quantity of the work measured in the field may somewhat
vary from the quantities measured from the design or drawings. The respondent had
chosen DBB as sharing of responsibilities during implementation of the project.
Unit price is relatively easy to administer changes and amendments because actual and
assigned quantities can be compared, Works or services are checked based on the
specifications, the conditions of contract or terms of reference, drawings if any and the
priced bill of quantities for acceptance and closing of accounts, and Payments are made
based on measurements of executed works and material on site provided on site
(Wubeshet Dr .ing., 2019). So, experince also becomes a challenge to select and perform
the contract type delivary system.
In question 14 in section 2 the contract type in the university selected based on the
regulation of procurment process for federal government institution suggested to listed
bidder bidding process in unit price contract type.
As indicated on analysis part based on respondent experience
Cost plus percentage fee contract
The majority the respondents said that cost-plus percentage fee contract is a very high
cost overrun by nature. A contractor may increase total cost of the project to get apple
profit. In quality control the respondents shifted at fair level. This due to work is executed
in the interest of the owner. In risk management, the respondents chosen this contract
type next to unit price and lump sum; this is because of changes and variations can be
accommodated amicably.
Lump sum contract
The respondent’s chosen as this contract as fast project implementing contract. Since, the
time taken for preparation of tender document minimized and it is greatly applicable for
previously known projects. In terms of quality management the respondents were at
satisfactory level. In terms of tendency of cost over run the respondents chosen as low
tendency to cost overrun for owners because the project tender price is determined and
quoted as total such of money with individual rating.

Changes and variations are the major causes of risk in Wolkite university building
projects. The respondent had seen lump sum contract has incapable of administers this
kind of risks at very high level.
A Lump Sum Contract is more suitable for works of smaller in size and where the
contracting parties have prior experience of similar projects. But it is not advisable for
projects with considerable uncertainties such as; difficult sub surface situation, unusual
projects, maintenance projects, etc which can occur changes and variations. (Wubeshet
Dr .ing., 2019)
Unit price contract
The respondents said unit price contract fast contract to implement. Effective control of
quality is one criterion in selecting contract type. The respondent’s shifted to very
satisfactory level in quality management with in this type of contract. The supervision is
carried out based on detail drawings and design.
When the Project or Tender price is determined and quoted from unit rates assigned to
detailed bill of quantities, it is called a Bill of Quantity Contract. The Bill of Quantity
includes short description of specifications, unit of measurement, quantities and columns
for pricing the unit rate and its total amounts. (Wubeshet Dr .ing., 2019)
The respondents chosen unit price contract as moderate tendency to initiate cost overrun
due to uncertainties (change orders and variations and unbalanced tender). In construction
industry uncertainties are the major causes of risk. Most of the respondent’s chosen unit
price contract a very high effective risk management changes and variations are easily
administered because actual and assigned quantities can be compared. Payments are
made based on measurements of executed works and material on site provided on site
(Wubeshet Dr .ing., 2019). So, it face the cost over run high becouse of deils with
acctivities which can requrie a change in actual work but it help to manage this kind of
risks at early stage when donot covert to desputes.
In general from the analysis there was discovered several types of challenge and criteria
to select the contract type and PDM. Such as:
 For PDM: tendency of a raise dispute, terms like time, cost and quality control
and also the experience of the firm in the past works. These three things are the
main challenges to select PDM which had stated in this study. The National
Economic Development Organization (NEDO, 2002) listed nine generic criteria
and challenges for the public sector to priorities their projects: time, certainty of
time, certainty of cost, price competition, flexibility, complexity, quality,
responsibility and risk of the project.
 For contract type: experience of parties on selected type, advantage in terms of
time, cost, quality and risk management on the project execution, it administration

capability, mode of payment, size of the project and methodology of the work. In
the case of Wolkite University the federal government and regional government
regulation and also different management team of client influence are the criteria
to select the type of contract.
The selection of the contract type seems to be rather complicated to explain,
because it may be influenced by many factors. Factors include the preferred risk
allocation (relative risk aversion of the parties, ability to control risks), the
Employer’s preferences (importance of schedule and quality, the desire to avoid
moral hazard attitudes), the Contractor’s characteristics, the project’s
characteristics (project complexity and definition) and the relationship between
parties (desire to cooperate and be fair). (Sancho Calderón, 2017)
4.2.2 Discussion regarding to factor that have influence in selection of contract type
The influences of different criteria for the selection of contract type are studied
according to the results of the survey. The influence of the risk allocation is examined
first. It was confirmed that the desired risk distribution by the parties is an essential point
when choosing the contract type, as expected from the literature (Al-Harbi, 1998).
As the respondent of the survey might be based on the financial strength is a sensitive
subject. Nevertheless, this did not seem a primary concern, but rather the concern seems
to be the ability of the own party (the Contractor) to withstand a project failure.
Generally, the results of the survey match the literature regarding the risk allocation: unit
price should have the more efficient risk allocation, as they allocate more risks to the
Employer, who is the party with the least risk aversion. Finally, the Contractor’s ability to
control the costs does have an influence.
Regarding the Employer’s preferences, it does not seem like the value for the Employer’s
money would be a highly important factor for the selection.
The probability the parties entering a legal process and legal costs are in case of dispute
when using this type of contract, very high cost plus percentage, moderate in unity price
and relatively low for lump sum. Knowledge of this kind of contract before being
involved in the project unit price and lump sum contract are highly performed by the
respondent.
The percentage of the total risk assumed by the Employer is high in cost plus fixed fee
and percentage and relatively low in unit price and lump sum as the respondents
answered. Although lump sum is very easy to implement from the other and also had
have high degree of adjustment to the contract according to the respondent response.
However, frequent claims and change orders can render its implementation inefficient.
This is in line with the literature, which claims that cost-plus and target-cost contracts are
more difficult to implement (Bajari, 2001; Antoniou, 2013).

The most respondent believes lump sum and unit price had required high level trust and
commitment between the parties before signing the contract. Unit price contract had very
high suitability for projects with technical/organizational complexity but lump sum had
low suitability.
In which degree the use of this contract tends to speed up project completion? Unit price
contracts seem to lead to a quicker completion of the project, because there are incentives
for the Contractor to be faster and the project can start with a preliminary design, which
is in concordance with the findings of (Antoniou, 2013; Fuller, 1937). Regarding the
other two contract types, the respondents have quite different opinions, but the lump-sum
is slightly quicker on average. However, it could be explained by the Contractor’s
incentive to reduce costs in the lump-sum contract, which directly depend on the duration
of the works (Badenfelt, 2008)

Chapter five
5. Conclusion and Recommendation
5.1 Conclusion
This thesis shows that what are challenges, criteria and factor influence to select them in
Wolkite university projects. Time, cost quality, risk and size of project are the main
parameters which affect the selection of contract types and delivery methods for
particular construction project. To make smooth relationship and complete the project as
per the requirement, it is necessary to assess the nature of construction contracts and
delivery methods.
There is much away in which one can avoid problems and challenges in implementation.
Thus the other issue would be “how to minimize”. To minimize the dispute proper
selection of contract type and PDM are the common thing to consider so, tendency of
dispute is challenge to select them. A dispute should be resolved in such a manner that it
should not take higher cost and longer time with a win-win solution for the parties under
the dispute.
Finally, the finding result compared with the stake holders experience towards delivery
methods and construction contract types. The result indicates that;
 Most of the respondents were experienced with design- bid- build delivery system
and unit price contract type both are common and good for proper management.
 In general from the analysis there was discovered several types of

challenge and criteria to select the contract type and PDM. Such as:
 For PDM: tendency of a raise dispute, terms like time, cost and quality control
and also the experience of the firm in the past works. These three things are the
main challenges to select PDM which had stated in this study. The National
Economic Development Organization (NEDO, 2002) listed nine generic criteria
and challenges for the public sector to priorities their projects: time, certainty of
time, certainty of cost, price competition, flexibility, complexity, quality,
responsibility and risk of the project.
 For contract type: experience of parties on selected type, advantage in terms of
time, cost, quality and risk management on the project execution, it administration
capability, mode of payment, size of the project and methodology of the work. In
the case of Wolkite University the federal government and regional government
regulation and also different management team of client influence are the criteria
to select the type of contract.

 In general from the analysis there was discovered several types of

factors that have influence to select the contract type:
definition) and the relationship between parties (desire to cooperate and be fair). (Sancho
Calderón, 2017)
Regarding the Employer’s preferences, it does not seem like the value for the Employer’s
money would be a highly important factor for the selection. The most respondent believes
lump sum and unit price had required high level trust and commitment between the
parties before signing the contract.
Factor influence the selection of contract types are put in four main factor parts. Those
are;
 Economic Risk
 Employer’s preferences and characteristics
 Contractor’s characteristics
 Project’s characteristics
Generally, the results of the survey match the literature regarding the risk allocation: unit
price should have the more efficient risk allocation, as they allocate more risks to the
Employer, who is the party with the least risk aversion. Finally, the Contractor’s ability to
control the costs does have an influence.

5.2 Recommendation
The purpose of the following recommendation is not to deeply address areas that
challenge and problem in selecting contract type. The intention is only to point out some
major issues that need consideration Wolkite University can learn from issues that affects
the selection of construction contract types Wolkite university construction project. Both
the analysis of the questionnaires has identified time, cost, quality and risk are the major
challenge of criteria in selecting different construction contract types to Wolkite
university construction project. Hence the following recommendations are focused to
wards in selecting construction contracts.
Based on the findings of the research, the following suggestions and recommendations
are made:
For Wolkite university (Client of the projects)
 To be flexible in using different Contract types based on the main
objectives of projects. That is if better quality and to better manage risks
using Unit price contract, if the projects are small to use lump sum
contract, and for urgency is needed to use cost plus fixed and or
percentage contract.
 The university selects the type based on only size and nature of the project
but it needed to consider its financial capacity prior to selecting contract
type.
 To select the proper contract type and delivery system that better controls
quality, timely completion and risk management aspects that are basic for
public projects..
Generally stake holder should thoroughly identify the challenges of construction
contracts and nature and site of the construction project and selects which contract type is
suitable for what type of construction project.
5.3 Future Research Directions
This study owes few limitations or discussible issues, which may be taken into account
when conducting similar studies in the future. First, the data were collected from much
smaller number sample size of the professionals. Also the focus of this study lies on
challenge, criteria and factor influence the selection and implementation of contract type
and PDM in which data are collected from professionals. However future researchers
may change the sample size into considerable amount and also include more
professionals in the sample size.

6. Reference
Al-Harbi, K. M. (1998). Sharing fractions in cost-plus-incentive-fee contracts.
International Journal of project management , 16(2), 73-80.
Antoniou, F. A. (2013). Complexity in the evaluation of contract types employed for the
construction of highway projects. Procedia-Social and Behavioral Sciences. greece.
Badenfelt, U. (2008). The selection of sharing ratios in target cost contracts.
Engineering, Construction and Architectural Management.
Bajari, P. &. (2001). A theory of procurement contracts. Rand journal of Economics ,
387-407.
Carvalho, H. B.‐F.‐U.‐M. (2018). Assessment of physical activity intensity and duration
in the paediatric population:.
Chan, D. W. (2011). Risk ranking and analysis in target cost contracts: Empirical
evidence from the construction industry. International Journal of Project Management ,
29(6), 751-763.
Clough, R. H. ((2015)). Construction contracting: A practical guide to company
management. John Wiley & Sons.
Fuller, L. L. (1937). The reliance interest in contract damages. 2. The Yale Law Journal, .
Kumaraswamy, M. M. ( 2001). Developing a decision support system for building project
procurement. Building and Environment.
Kwakye, A. A. ((1997).). Construction project administration in practice. Longman.
NEDO. (2002). Decision criteria and their subjectivity in construction procurement
selection. Construction Economics and Building. Ng, T., Luu, D., & Chen, S.
Russell, T. B. (2002). Guidelines for warranty contracting for highway construction.
Journal of Management in Engineering , 18(3), 129-137.
Sancho Calderón, D. (2017). Selection of contract type in construction contracts: Lump-
Sum, Target-cost and Cost-plus contracts.
Tserng, H. P. (2014). Prediction of default probability for construction firms using the
logit model. Journal of civil engineering and management , 20(2), 247-255.
Winfield, S. S. (1927). Principles of the Law of Contracts. The Cambridge Law Journa ,
310-312.
Wubeshet Dr .ing., 2. (2019). ALTERNATIVE AND INNOVATIVE PROJECT DELIVERY
SYSTEM FOR ADDIS ABABA CITY ROAD PROJECTS. DESTAYE, H. T.

7. Appendix
Survey Questionnaires
APPENDIX – A
Dear sir or madam -------
We are graduating class student of the department of construction technology and
management currently working on graduation thesis on topic , “ Types of delivery system
and construction contracts selection, challenges and problems in implementation to
Wolkite university building project.” Construction is contracting business by which
different form of contacts, condition of contracts, delivery systems are used, to construct
specific projects. The selection of suitable type of contraction contract for particular type
of construction project is important point to minimize the occurrence of disputes. Hence
these questionnaires are designed to investigate the problem and challenges faced in use
of different types of construction contracts to Wolkite university construction project.
The information you provide will help to better understand these aspects and
enhance smooth relationship and minimize dispute among contracting stake holders.
Hence, we kindly request you to respond to the questions frankly and honestly.
Your response will be kept strictly confidential. . It will be used for educational purpose
only.
Thank you very much for your time and cooperation greatly appreciate your help
in furthering this research endeavor and your timely response.
Yours faithful,

Section 1: General information

Name of respondent___________________________________
Date__________________________ profession______________________
Name of company /organization______________________________
Title or position of respondent_______________________________
1. After you are establishing your company in what type of construction projects mostly
you have involved?
□ Public □ Private □ Nongovernmental
organization
□ Others,
Please specify _________________________________________________
2. Do you have worked by all construction contract types?
□ Yes □No
3. In your company how often do you use construction contract type in the University?
Rate them in rate of implementation.
Lump sum □frequently □sometime □not at all
Unit price □frequently □sometime □not at all
Cost plus fixed fee contract □frequently □sometime □not at all
Cost plus percentage fee □frequently □sometime □not at all
____________________________________________________________
__________________________________________________________________
_________________________________________________
4. What type of contract do you use for previously known similar types of project?
□ Unit price □ Cost plus percentage fee contract
□ Lump sum □ Cost plus fixed fee contract
Why?_____________________________________________________________
________________________________________________________________________
________________________________________________________________________

Section 2: challenge and criteria for selection of contact type and PDM
1. Mostly what type of project delivery system was used to these projects in Wolkite
University which you were involved? And rate them in rate of implementation.
Force account □frequently □sometime □not at all
The design and build delivers system □frequently □sometime □not at all
The design – bid – build □frequently □sometime □not at all
The construction management □frequently □sometime □not at all
2. From your experience rate the tendency of project delivery system to arise
dispute?
Force account □ very high □ high □ very low □ low □none
The design and build □ very high □ high □ very low □ low □none
The design –bid- build □ very high □ high □ very low □ low □none
The construction management build □ very high □ high □ very low □ low □none
Why?__________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
3. From your experience which project delivery system were the highest performing
project delivery system (in terms of time, quality and cost)
□ Force account □ Design and build
□ the design –bid- build □ The construction management.
Why?________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________
4. Usually what were the challenges that occur of into those projects in which you were
involved? Please prioritize them by giving number.
□ Improper contract type □ price escalation
□ Improper project delivery system □ change order and variation
□ All

5. Do you recommend contract type for the university’s projects?

□ Lump sum □ Unit price □ Cost plus fixed fee contract □ Cost plus percentage fee
□ other
WHY (Reason for your answer?)
__________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________.
6. What made it preferable than others?

□ Economic point of view □ Quality □ Time
□ Mode of payment □ Contract administration
7. among contracting parties to whom lump sum contract allocates risk?
□ Contractor □ Owner
8. From your experience how do you describe the merits of the following contract types
for the university’s project?
A. In terms of time
Unit price □ very fast □ fast □ time taken
Lump sum □ very fast □ fast □ time taken
Cost plus percentage fee contract □ very fast □ fast □ time taken
Cost plus fixed fee contract □ very fast □ fast □ time taken
B. In terms of cost over run
Unit price □ very high □ high □ very low □ low
Lump sum □ very high □ high □ very low □ low
Cost plus percentage fee contract □ very high □ high □ very low □ low
Cost plus fixed fee contract □ very high □ high □ very low □ low
C. In terms of quality control
Unit price □very satisfactory □satisfactory □fair □dissatisfactory
Lump sum □very satisfactory □satisfactory □fair □dissatisfactory
Cost plus percentage fee contract □very satisfactory □satisfactory □fair
□ dissatisfactory

Cost plus fixed fee contract □very satisfactory □satisfactory □fair

□dissatisfactory
D. In terms of risk management
Unit price □ very high □ high □ very low □ low
Lump sum □ very high □ high □ very low □ low
Cost plus percentage fee contract □ very high □ high □ very low □ low
Cost plus fixed fee contract □ very high □ high □ very low □ low
9. You know that in unit price contract type the payment made based on actual work
executed... This is advantageous for
□ Contractor □Employer □ both
10. If your answer for question number 14 contractor or employer or both contractor and
employer. How?
__________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
______________________
11. What is the weakness of unit price contract over lump sum contract?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
__________________.
12. How do you choose construction contract type?

□ Cost □ All
13. If your answer all what are their impacts in selection of contract types?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
14. Mostly what type of project contract is used in Wolkite university construction
project, why?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

________________________________________________________________________
__________________.
15. What do you recommend for successful completion of the project besides selection of
suitable contract type?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
16. Unexpectedly the cost of project higher than the estimate at the end in case of
selected contract is lump sum contract. What would happen in those projects? How can
we administer it?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
__________________.

Section 3: factor that have influence in selection of contract type?

Table 10: Factors that have influence in selection of contract type
Choose your preferred answer for each contract type (lump-sum, unit price, cost plus
fixed fee, cost-plus percentage, if you have experience with them) between: Very High,
High, Moderate, Low and Very Low. If you are answering on paper, you may abbreviate
the answers as VH, H, M, L, VL
Lump Unit Cost Cost-plus
sum price plus percentage
fixed fee
1. How is the degree of fairness of the risk
distribution between Employer and
Contractor in the contract?
2. In which degree the use of this contract
tends to speed up project completion?
3. In which degree the use of this contract
tends to improve the quality of the project
outcome?
4. To which degree is this contract suitable
for projects with technical/organizational
complexity?
5. How high/low are the required trust and
commitment between the parties before
signing this contract?
6. To which degree are adjustments to this
contract easy?
7. To which degree is this contract easy to
implement?
8. How high/low is the percentage of the total
risk assumed by the Employer in this
contract?
9. How high/low was your knowledge of this
kind of contract before being involved in the
project?
10. How high/low is the probability the
parties entering a legal process and how
high/low would legal costs be in case of
dispute when using this type of contract?
11. How high/low are financial costs (costs
of interest and fees of advance-payment

bonds, performance bonds, retention bonds,

off-site materials Bonds…) when using type
of contract?
Table 7.1: questioner for factor influence the selection
These are open answer questions; please answer them in the space provided below the
questions.
1. Do you wish to add any other factors which may be relevant to the selection of the
contract type that are not included in this survey yet?
2. Which is the order of the priorities in the project: budget, schedule and quality?
(Answer ordering the three, answer below)

Group One Final Thesis

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Group One Final Thesis

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ASSESSMENT OF CONTRACT TYPE AND DELIVERY

SYSTEM SELECTION IN WOLKITE UNIVERSITY

Sub. Date: June, 16/2022 G.C

June 16, 2022 G.C

Title: ASSESSMENT OF CONTRACT TYPE AND DELIVERY SYSTEM

Submitted by GROUP ONE __________ ____________

1. _Mr. WEREDEKAL ___ ____ _ 15/06/2022 G.C

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page ii

NAME OF PARTICIPANT SIGNITURE DATE

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page iv

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page v

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page vi

SUMMARIZED REVIEW .................................................................................................... 19

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page ix

1.1 General Background

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 1

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 2

1.6 Organization of the thesis

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 3

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 4

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 5

2.4.1 Offer and Acceptance

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 6

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 7

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 8

2.5.2 Implied terms

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 9

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 10

 Changes and Amendments can be accommodated amicably,

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 11

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 12

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 13

 single point responsibility minimizes the opportunity to claims by the contractor

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 14

This delivery system is advantageous because of three major factors:

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 15

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 16

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 17

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 18

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 19

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 20

Identify the problems

Identify the Objectives

Getting information from

Conclusion and Recommendation

Figure 1: Research design structure

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 21

3.2 Research approach

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 22

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 23

3.5.1 Questionnaires design

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 24

4.1 Presentation of survey results

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 25

Section two is related to the stakeholders experience towards different construction

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 26

Table 3: Tendency of delivery system to arise dispute

 Identify how often the stake holders different project delivery

WOLKITE UNIVERSITY, CET, CoTM Department 2022 GC | BSc THESIS Page 27

Submitted by GROUP ONE __

1. _Mr. WEREDEKAL _ __ _ 15/06/2022 G.C