Research Proposal

COLLEGE OF ENGINEERING AND TECHNOLOGY
DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND

MANAGEMENT
RESEARCH PROPOSAL ON:
ASSESSING THE IMPACT OF COST INFILATION ON BUILDING
CONSTRUCTION MATERIAL PRICE IN THE CASE OF BULE HORA TOWN
NO NAME ID NO
1 GEMECHIS DINGETA TI/0030/09
2 OLIYAD ABOMA R/1656/09
3 SENAF BIRATU R/2595/09
Advisor: SOLOMON T. (Msc)
May 7, 2021
BULE HORA, ETHIOPIA
Assessing the Impact of Cost Inflation on Building Construction Material Price in the Case of Bule Hora Town
DECLARATION
We, students from Bule Hora university College of Engineering and Technology Department of
construction technology and management, declare that the work which is being presented in the
proposal entitled “
” which is made based on our skill and knowledge and has not been presented for a
degree in any other University or Requirements. We highly declare this work is an original work
written by referring the different materials in addition to advice by our advisors.
Author name signature date

1. Gemechis Dingeta ___________________ ___________________
2. Oliyad Aboma ___________________ ___________________
3. Senaf Biratu ___________________ ___________________
Approved by
Name of Advisor……………………Signature……………………. Date……………
Construction Technolgy and Management May 2021 i

Summary
The major aim of the thesis is to deal with problems so, the main aim of the particular research is
to assess the impact of cost inflation on building construction material price in case of Bule Hora
Town. The methods that will be use for the thesis by collecting the data require for the study
through preparing questionnaires and desk studies. The investigation of factors that might
contribute to cost inflation on building construction material is significant in order to notice
attention to specific areas of improvement in Bule Hora Town. Accordingly, the research attempts
to assess the impact of cost inflation, sample size and sampling technique, to identify problems of
cost inflation on building construction material and adjustment and methods to
manage/administer cost inflation on building construction material in Bule Hora, which can serve
as the way forward for future work in coping with this inflation. Also, the budget and Time plan
for the research
Construction Technolgy and Management May 2021 ii

Table of Contents
DECLARATION ................................................................................................................................................ i
Summary ....................................................................................................................................................... ii
Lists of Figure ................................................................................................................................................ v
Lists of Table ................................................................................................................................................ vi
CHAPTER ONE ............................................................................................................................................... 1
1. INTRODUCTION ..................................................................................................................................... 1
1.2 BACKGROUND OF THE STUDY............................................................................................................. 1
1.3 STATEMENT OF THE PROBLEM ........................................................................................................... 2
1.3.1 General Objectives ....................................................................................................................... 3
1.3.2 Specific Objectives ....................................................................................................................... 3
1.5 RESEARCH QUESTIONS........................................................................................................................ 3
1.6 SCOPE OF THE STUDY.......................................................................................................................... 3
1.7 SIGNIFICANCE OF THE STUDY ....................................................................................................... 4
CHAPTER TWO .............................................................................................................................................. 5
2. LITERATURE REVIEW ................................................................................................................................. 5
2.1 INTORUDUTION .................................................................................................................................. 5
CHAPTER THREE ............................................................................................................................................ 7
3. METHODOLOGY .................................................................................................................................... 7
3.1 INTRODUCTION ................................................................................................................................... 7
3.2 STUDY AREA ........................................................................................................................................ 7
3.3 RESEARCH DESIGN .............................................................................................................................. 7
3.4 SOURCE OF DATA ................................................................................................................................ 8
3.5 DATA COLLECTION .............................................................................................................................. 8
3.6 DATA ANALYSIS ................................................................................................................................... 9
3.7 POPULATION AND SAMPLE SIZE ......................................................................................................... 9
3.8 SAMPLING METHOD ......................................................................................................................... 10
3.9 ETHICAL CONSIDERATION ................................................................................................................. 10
CHAPTER FOUR ........................................................................................................................................... 11
4. BUDGET AND TIME PLAN .................................................................................................................... 11
4.1 BUDGET PLAN ................................................................................................................................... 11
4.2 TIME PLAN......................................................................................................................................... 12
REFERENCES ................................................................................................................................................ 13
Construction Technolgy and Management May 2021 iii

Construction Technolgy and Management May 2021 iv

Lists of Figure
Figure 3.1 Methodology flow chart…………………………………………………………… 8
Construction Technolgy and Management May 2021 v

Lists of Table
Table 1 Time plan …………………………………………………………………………... 11
Table 2 Time plan …………………………………………………………………………………………………………
Construction Technolgy and Management May 2021 vi

CHAPTER ONE
1. INTRODUCTION
This chapter is explaining about the general idea and relevance of the study. It defines the
background, the problem statement, the objectives, the scope and limitation as well as the
organization of the project.
1.2 BACKGROUND OF THE STUDY

Construction is defined generally as an economic activity directed to the creation, renovation,
repair or extension of fixed assets in the form of buildings, land improvements of an engineering
nature, and other such engineering constructions as roads, bridges, dams, etc. (international
standardes industrial classification (ISIC) rev 3, 2017)
Construction industry makes significant contributions to the socio-economic development process
of a country. Its importance emanates largely from the direct and indirect impact it has on all
economic activities. It contributes to the national output and stimulates the growth of other sectors
through a complex system of linkages. It is noted that about one-tenth of the global economy is
dedicated to constructing and operating homes and offices. (UNEP, 2017)The construction sector
has significant contributions to the Ethiopian economy. The importance of the sector can be
assessed by examining in detail the overall performance of the sector.
Construction industry is an important sector of any national economy, since the capital investments
of any country, to the large extent, is based on efficiency of sector. Inflation became the chronic
problem whose effect permeates the entire construction industry. Owners are not only paying for
the increase cost of facility and capital but also for premiums on construction prices because of
uncertainties of inflation and its side effects. Inflation is a persistent increase in the level of
consumer prices or a persistent decline in the purchasing power of money.
Most countries experience inflation, i.e., an increase in the general price level. Rates of inflation
the percentage increases in the general price level per annum – differ widely between countries.
At best the rate of inflation will be 1–2% per annum, but in many countries rates of 10–15% per
annum have been regularly experienced. At the other end of the spectrum, we find always some
Construction Technolgy and Management May 2021 1

countries have experienced “hyper-inflation” – up to 100% per annum or sometimes more. (Harry
Campbell and Richard Browen, 2015)
1.3 STATEMENT OF THE PROBLEM

Muhammod Ali Musrate in 2020 Asses about the impact of inflation rate on construction projects
budget and find out the following conclusion that Inflation is one of the leading components that
have a major impact on the economy of countries. Every industry is either positively or negatively
impacted by inflation. It is noteworthy from the literature that not only does the inflation rate
impact the industry; often industrial elements even devastate the country’s inflation rate. The effect
of inflation is also having on the construction industry, where many studies have highlighted the
role of inflation in project cost overrun. Due to inflation the building material prices, labor wages
and machinery hire rates changes every year, resulting in the project’s initial budget being deviated
from the final budget. (Muhammad, 2020)
Today’s construction projects require modern construction technique, technological equipment’s,
qualified professionals and large amounts of modern construction materials. Therefore, so much
amount of money is required to invest and to implement the projects. As that time much money is
fall under risk until the activities on the projects are finished due to that project is not successfully
implemented in quality, cost and time, the failure of these may cause serious damage among the
contracting parties. Most of the time projects are not completed within the planned time, budget
and also sometimes within specified quality as that time cost inflation is considered as a big
problem, which hinders project's progress, since it decreases the contractor’s profit leading to huge
losses leaving the project in a big trouble. This problem is a result of weak economy, lack of
managerial skills, bad planning, increasing the prices of materials and others. For that it is the key
importance to exert the most effort to accomplish such study, to detect the previously mention
factors and to treat all the week points and from all sides and so giving specific priorities in order
to avoid cost inflation at construction projects. Therefore, the aim of the paper is to assess the
problems related to cost inflation on building construction material and its adjustment. Hence
assessing the impact of cost of inflation from the context of Bule Hora Town is important to
overcome challenges face related to material price inflation related problems.
1.4 OBJECTIVES OF THE STUDY

1.4.1 General Objectives

The general objective of the study is to assess the impact of cost inflation on building construction
material price in Bule Hora building projects.
1.4.2 Specific Objectives

1. To identify the main causes of inflation on construction material in Bule Hora building
construction projects.
2. To identify the impact of inflation on construction material in Bule Hora building construction
projects.
3. To identify methods to improve the administration of cost inflation on construction material
price of construction projects.
1.5 RESEARCH QUESTIONS

In order to achieve the objective of the study, the following research questions are will be finding
out in the study.
1. What are the causes of cost inflation on construction material price in Bule Hora town
building construction projects?
2. What are the impacts of cost inflation on construction material price Bule Hora building
construction projects?
3. How to identify methods to improve the administration of cost inflation on construction
1.6 SCOPE OF THE STUDY

The scope of this research is limited only on assessing the impact of inflation in Bule Hora building
construction projects. This research will focus on the cause and effect of inflation in Bule Hora
building construction projects. The study will be limited to building projects which are under
construction in Bule Hora Town.
The scope of this study is bounded by three main characteristics such as location, Sector and
project management.
In terms of location this study is covered only a single town in Bule Hora. But only Contractors
(project manager, site engineer & office engineer) side who work in this country are participated
in the survey. None of the questionnaires was conduct in other locations. Among the sectors this

study focuses on building construction sector particularly in Bule Hora and it does not include all
other types of construction sectors.
1.7 SIGNIFICANCE OF THE STUDY

This study will describe the cause and impact of cost inflation on construction material price in
Bule Hora building construction projects. The important of this research paper is it helps to
contractors to know cost inflation problems mainly occur in building construction projects and to
take remedial measures to reduce its impacts once the problems occur. It identifies the factors
which lead to the occurrence of cost inflation problems and the methods to manage cost inflation
on construction material price in building construction projects. Generally, the study serves as a
benchmark for further studies that take similar or related development challenges

CHAPTER TWO
2. LITERATURE REVIEW
2.1 INTORUDUTION
The basic objective of this chapter is to get inside into the previous findings so that it will help to
know the gap in earlier studies and to justify the research problem selected by the researcher for
the study purpose. The literature is reviewed on inflation, cause and effect of inflation.
The construction industry is the total through which physical development is achieved and it has a
special role in our country's development. It plays a key role in construction economic
infrastructure like building, roads, railways etc. Construction Industry is the branch of
manufacture and trade based on the building, maintaining, and repairing structures. This includes
drilling and solid mineral exploration. The construction industry is generally responsible for the
physical development or the transformation of the environment which makes the built environment
very vital to social-economic development of a nation. It comprises of building, civil and heavy
engineering works. (Ajanlekoko, 2016) according to (T.asie, O. Lela, and Tamar, 2018) One of
the factors that affect construction industry Unemployment rate, GDP, and inflation were the main
indicators influencing the determination and predicting of correlation of macroeconomic indicators
on credit risk. According to (M. M. Kembe and A. A. Onaja,, 2017) Public finance, fixed asset,
private investment, net export, consumption, external reserve, net savings, and inflation rate,
balance of payment, net import, fore rate, and public debt as influential factors.
Performances for public construction projects in developing countries: Federal road and building
projects in Ethiopia. Construction project is a mission, undertaken to create a unique facility,
product or service within the specified scope, quality, time, and cost. Construction projects define
as a temporary endeavor undertaken to provide a unique product or service. Cited (Mohammed,
2020)
(Wubishet, 2004) Cited in (Mohammed, 2020) that the construction industry in Ethiopia has
been in the process of transformation. This transformation is based on improving the
competitiveness of the construction industry and enhancing its ability to fulfill the national
development demands. To reveal such transformation is vital to understand the contextual
realities and the development trends of the Ethiopian construction industry. Construction is

booming in Ethiopia, accounting for 18% of the country’s GDP. However, there are many
challenges facing the construction industry.one of the factor that affect Ethiopian construction
industry is inflation.

CHAPTER THREE
3. METHODOLOGY
3.1 INTRODUCTION
This chapter discusses the methodology adopted for the study. Project methodology involves the
systematic rule and procedure up on which the project agenda is based. It covers study area and
period, the research design, research approach, source of data, sampling method, data collection
procedure and methods of data analysis in relation to cost inflation on construction material price.
3.2 STUDY AREA

The primary areas focus for the study implementation were Bule Hora Town. Therefore, a
methodology is set to collect information from different set of people that has direct relation to the
building construction project been included for the present day. It is located in eastern part of
Ethiopia, which is about 467 Km far from Addis Ababa, which lies 950 – 1250 meter above sea
level with an estimated area of 1,213.20 square kilometers (CSA, 2005). The climatic condition of
seems to be greatly influenced by its topography, which is characterized by warm and dry climate
with a relatively low level of precipitation.
Our special research areas will be building projects in Bule Hora Town. The site is chosen because
of get better accesses for data gathering.
3.3 RESEARCH DESIGN

Non experimental descriptive research is used to systematically explore current impact of material
cost inflation on the construction industry. Descriptive research will be use to obtain information
concerning the current status of the phenomena and to describe "what exists" with respect to
variables or conditions in a situation. Thus, Descriptive design enables using flexible research
approach by using multiple sources of data involving document review, interview, questioner and
case studies to use both qualitative and quantitative analysis techniques

3.4 SOURCE OF DATA

In this research both primary and secondary data sources are used. Internet, magazines, journals,
and books that relates to material cost inflation in construction industry are used as secondary data
sources in the preparation of the literature and questionnaire. The primary data source on the thesis
will be obtained from research questionnaire. The data will be gathered from different building
construction professionals that engaged in building projects in Bule Hora Town. Finally, the
collected data will be analyzed, identified and ranked.
problem literatior setting data analysis conclutions &

identification review methodology & desions recomandation
Figure 3.1 Methodology flow chart
3.5 DATA COLLECTION

For successfully conduction we have used both primary and secondary data source. Primary data
are data which the researchers used for the purpose of study at hand. Primary data is collected
directly from the population by using self-administered questionnaire and as a secondary data
literature review from other sources is used.
a. Preparation of Questionnaire
Questionnaire design is a key part of survey research methodology. It is important that the
questionnaire is clear and has no mistakes or differences in its design. In our research it had been
an important tool or mechanism of gathering data towards the research problem and objective.
The questionnaires had consisted three sections that have three sections. The first part was prepared
in order to know the general terms on project cost inflation. The second- and third-part deals with
ranking of the factor causing price inflation and effects on price inflation in construction project.
b. Desk study
The purpose of the desk study is to supplement the gap not covered by the survey so, one projects
were selected as a desk study from Bule Hora projects. The projects are located at Bule Hora
University construction.

3.6 DATA ANALYSIS

We will design questionnaires to the construction organizations. The questionnaires are design for
contractors. These questions will focus on the impact of cost inflation of construction material in
Bule Hora building projects. The data analysis methods are relative important index and SPSS.
I. Relative Importance Index (RII)
The collected data will be analyzed by using the relative importance index (RII).
∑w 1
𝑅𝐼𝐼 = A∗N (0 ≤ 𝑅𝐼𝐼 < 𝐴) … …Equation 1 Relative importance index
Where: Ranging
W - Is the weight given by the respondents 0 ≤RII < 0.4 = Low
A - Is the highest weight 0.4 ≤RII < 0.7 = Medium
N – is the total number of respondents
0.7 ≤RII < 1 = High
3.7 POPULATION AND SAMPLE SIZE

The population for this research will be employers and employee who participates on Bule Hora
building construction projects select from construction firms. The research intended to have 39
number of population size from the projects in Bule Hora Town.
Though, we have determined our respondent size for the data collected through the questionnaire
by using Yamane (1967:886) formula for population sample size determination.
N
𝑛=
1 + N(𝑒)2
Where, n = corrected sample size
N = population size
e = Margin of error
To generalize validity of the findings from a sample to all area of the research, samples were drawn
from the building construction projects in Bule Hora Town. For the distribution of the
questionnaire data is will be gathered from the respondents by random sampling techniques over
the above project employees.

3.8 SAMPLING METHOD

Judgmental or Purposive sampling: it is the one in which the person who is selecting the sample is
who tries to make the sample representative, depending on his opinion or purpose, or they think
would be appropriate for the study, thus being the representation subjective. The target groups in
this study will be contractors. Their sufficient experiences are a suitable indication to find out the
perceptive of the relative importance of project performance.
We will be selecting the respondents based on the following criteria: -
✓ Participate on Building construction
✓ The respondents are on work progress
✓ Willing to give response for questioners and interview
✓ Answer the questions with in their profession
The reason we select purposive sampling is to participate all levels of respondents to collect
accurate and precise information that help to do reliable research.
3.9 ETHICAL CONSIDERATION

Due to ethics the research to consideration the morals of the investigation or intervention as regards
the minimal abuse, disregard, safety, social and psychological well-being of the person,
community and /or animals i.e., how the principles of consent, beneficence and justice are handled
in the study.

CHAPTER FOUR
4. BUDGET AND TIME PLAN
4.1 BUDGET PLAN

Table 1 Budget plan
S. Items Quantity Duration Unit cost Total cost

No in days (birr)
1 Stationary
materials
Paper 200 0.5 100.00
Pen 5 10 50.00
Binder 1 30.00 30.00
2 Personal cost
Transportation 5 days 10 50.00
3 Miscellaneous 100.00
expense
4 Print- cost 200.00
Secretary cost 100.00
Total 630

4.2 TIME PLAN

Table 2 Time plan
I. Activity Two weeks Two Two Two Two Two weeks

weeks weeks weeks weeks
Collection of One
Literature week
Study of One
Literature week
Analysis of Two
proposed model weeks
Preparation of one
model week
Implementation One
of model week
Analysis and One
simulation week
Result One
formulation week
Final One
write-up & week
Thesis
submission

REFERENCES
Ajanlekoko, E. (2017). The rise in cost of building material and the structural adejestment program.
Harry Campbell and Richard Browen. (2003). Benfit cost analysis. United State of America,New York:
Cambride university press.
international standardes industrial classification (ISIC) rev 3. (2016). United nations statical division .
M. M. Kembe and A. A. Onaja,. (2017). "cluster analysis of microeconomic indices.
Mohammed, G. (2013). assessment of price escalation and adjestement problems on federal road
construction projects.
Muhammad, A. a. (2020). impact of inflation rate on construction project budget.
T.asie, O. Lela, and Tamar. (2018). "determining and predicting correlation of microeconomic indicators
on credit risk caused by overdue credit".
UNEP. (2018). the construction industry and the enviroment. industry and enviroment volume 19 no 2.
paris.
Wubishet, J. (2004). performances for public construction projects in developing countries.

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COLLEGE OF ENGINEERING AND TECHNOLOGY

DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND

Advisor: SOLOMON T. (Msc)

Author name signature date

Construction Technolgy and Management May 2021 i

Construction Technolgy and Management May 2021 ii

Construction Technolgy and Management May 2021 iii

Construction Technolgy and Management May 2021 iv

Construction Technolgy and Management May 2021 v

Table 1 Time plan …………………………………………………………………………... 11

Table 2 Time plan …………………………………………………………………………………………………………

Construction Technolgy and Management May 2021 vi

1.2 BACKGROUND OF THE STUDY

Construction Technolgy and Management May 2021 1

1.3 STATEMENT OF THE PROBLEM

Construction Technolgy and Management May 2021 2

1.4.1 General Objectives

1.4.2 Specific Objectives

1.5 RESEARCH QUESTIONS

1.6 SCOPE OF THE STUDY

Construction Technolgy and Management May 2021 3

1.7 SIGNIFICANCE OF THE STUDY

Construction Technolgy and Management May 2021 4

Construction Technolgy and Management May 2021 5

Construction Technolgy and Management May 2021 6

3.2 STUDY AREA

3.3 RESEARCH DESIGN

Construction Technolgy and Management May 2021 7

3.4 SOURCE OF DATA

problem literatior setting data analysis conclutions &

Figure 3.1 Methodology flow chart

3.5 DATA COLLECTION

Construction Technolgy and Management May 2021 8

3.6 DATA ANALYSIS

3.7 POPULATION AND SAMPLE SIZE

Construction Technolgy and Management May 2021 9

3.8 SAMPLING METHOD

3.9 ETHICAL CONSIDERATION

Construction Technolgy and Management May 2021 10

4. BUDGET AND TIME PLAN

4.1 BUDGET PLAN

S. Items Quantity Duration Unit cost Total cost

Construction Technolgy and Management May 2021 11

4.2 TIME PLAN

I. Activity Two weeks Two Two Two Two Two weeks

Construction Technolgy and Management May 2021 12

M. M. Kembe and A. A. Onaja,. (2017). "cluster analysis of microeconomic indices.

Muhammad, A. a. (2020). impact of inflation rate on construction project budget.

Wubishet, J. (2004). performances for public construction projects in developing countries.

Construction Technolgy and Management May 2021 13

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