Causes and impacts of public construction projects’ contract terminations

Purpose The purpose of this study is to assess the causes of construction projects’ contract terminations, and the impacts and potential mitigation strategies in the context of Ethiopian construction industry. Design/methodology/approach In this study a mixed method comprising a questionnaire survey and case study were employed. The case study examined 24 public construction projects that have experienced contract termination, where some of the projects had terminated multiple times. In analyzing the data, while descriptive statistics was employed for the quantitative data, thematic analysis was used in analyzing the qualitative data. Findings The identified client-related major causes are inadequate funding, improper budgeting and payment delays to the contractor. Contractor related major causes are weak contractor capacity, low profit margin, poor cash flow management and ineffective risk and claim management. The external major causes are political and economic instabilities, regulatory challenges and force majeure events. The major impacts of termination on the client are delay of the public service, quality problem and financial damage, whereas the identified impacts on the contractor are financial losses and reputation damage. The potential mitigation strategies are effective contract management, risk management and collaborative project management. Originality/value Public construction projects’ contract termination is among the persisting problems of construction industry; and the case is worse in developing countries with multiple causes and consequences. Hence, findings of this study are valuable inputs to the stakeholders to enhance the practice in reducing the likely occurrence and impact of contract terminations. Also, the study indicates the interdependent nature of the causes and the impacts.