THESIS ABSTRACT

Abstract

Road construction projects in Nepal are highly affected by price adjustment due to volatility in raw material costs, inflation, and supply chain disruptions. Such cost increases often lead to project delays, disputes among stakeholders, and compromised quality of works, raising concerns about the adequacy of existing price adjustment practices. This study aims to identify key factors driving price escalation, assess its impacts on project outcomes, and evaluate stakeholders’ perceptions of the adequacy of current price adjustment clauses in Nepalese road projects. The study adopted a mixed-methods approach combining both qualitative and quantitative data. Primary data were collected through questionnaires from 86 stakeholders (clients, contractors, and consultants) and KII, while secondary data were drawn from case study road projects across Nepal. Tools such as Relative Importance Index (RII), Spearman’s Rank Correlation, Descriptive statistics and Thematic study were applied for analysis. The results indicate that raw material input costs, cartelling by manufacturers, and inflation are the most significant escalation factors, with bitumen, cement, and steel identified as the critical material components. Price escalation was found to contribute to cost overruns, cashflow issues for contractors, and frequent disputes. Furthermore, stakeholders perceived the current adjustment mechanism under PPA and PPR as inadequate, mainly due to limitations of Nepal Rastra Bank Indices, weak dispute resolution mechanisms and freezing practices of indices. The study concludes that a more transparent, standardized, and comprehensive price adjustment system is essential. Recommendations include developing region-specific indices, disintegrating material component, ensuring timely index publication, strengthening dispute resolution mechanisms, and adopting international best practices to promote fairness and sustainability in Nepal’s road construction sector.

Keywords

Price escalation, price adjustment, road construction projects, Nepal Rastra Bank index, contract management, Relative Importance Index