· Capital Ethiopia · Eyasu Zekarias
Surging heavy machinery rental rates threaten fixed-price contracts
Topics:ConstructionMarket
Summary of the Capital Ethiopia report
Local contractors say heavy machinery rental rates have moved far above domestic levels, partly because foreign firms with international finance pay more. The gap puts fixed-price contracts at risk and contributes to suspended projects. The warning came at the launch of a national standard that measures the physical progress of construction projects with local benchmarks.
Key points
- Industry leaders said rising heavy machinery rental rates threaten fixed-price contracts and squeeze local contractors.
- Participants said foreign contractors with international finance set rental benchmarks far above domestic levels.
- A new national framework sets local baselines with man-hour and machine-hour benchmarks for progress reports.
- The Ethiopian Construction Authority, the Construction Management Institute and MIDROC Investment Group organised the launch.
Real.et analysis
Capital reports that rental rates for heavy machinery are rising and put fixed-price construction contracts at risk. Industry leaders raised the problem at the launch of a new Physical Performance Measurement Standard for the construction industry. The Ethiopian Construction Authority, the Construction Management Institute and MIDROC Investment Group organised the event.
Participants said foreign contractors, often with international finance, pay machinery rates far above local levels. Those rates then become the market ceiling. Small, lower-grade contractors make up most of the industry and have little capital to absorb the difference. The weaker birr adds to the load, because imported materials, spare parts and equipment cost more. Attendees named machinery rental increases as one cause of project suspensions and delays.
Girma Habtemariam spoke for the Ethiopian Contractors Association and the Association of Ethiopian Architects. He said performance reviews look only at contractors, while failures by clients and consultants often go unchecked.
The new framework
The National Construction Projects Physical Performance Measurement and Reporting Framework sets local baselines. It uses man-hour and machine-hour benchmarks and aims for accurate progress reports and better control of time and cost. Organisers plan more sessions to apply it across the country with regional administrations and professional associations.
What this means for builders
If you hire a contractor for a house or a small building, machinery cost is part of your price. Points to check before you sign:
- Who carries the price risk. A fixed price protects you only if the contractor can finish. Ask how the contract treats large changes in machinery, fuel and material costs.
- Progress reports. Ask for progress measured in physical work done, not only in money spent.
- Equipment. Ask if the contractor owns the excavators, mixers and trucks or rents them.
What this means for buyers
Off-plan buyers face the same risk at one remove. A developer whose contractor loses money may deliver late or ask for more. See our article on a Supreme Court ruling that lets developers reprice.
Compare firms in our contractors directory and follow input costs on the construction materials pages. Our guide to construction material prices in Ethiopia gives more detail.