Figure 21 typical interactions between parties in

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Dinku 2003]. Figure 2.1 Typical interactions between parties in civil engineering projects. 2.2 Price in Relation to Contractors The construction industry is a business sector which carries out a huge amount of turnover. Among the parties involved in civil engineering works, contractors and consultants are purely of business organizations. The others may or may not be of business organizations. And from the contractors and consultants, it is the contractors that are mainly involved in diversified activities that are directly affected by the prevailing market situation. With this respect, the overall business environment comes into picture in affecting the contractors in many aspects; performance and capacity being the crucial ones. This research, however, takes only the capacity aspect for consideration. User(s) CLIENT(S) CONSULTANT(S) Financer(s) Public Authorities CONTRACTOR(S)
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Study on the Effects of Unpredictable Price Fluctuation on the Capacity of Construction Contractors MSc Thesis, Construction Technology and Management 12 Market price fluctuations at all levels directly affect contractors, since they are the front line role players in the construction business. Contractors are subject to procure and deliver all the necessary labor, material and equipment, the cases depending on the type of contract, required for the completion of the works. This makes them to directly be linked with suppliers, sub contractors and the labor force. In principle contractors need not sustain and suffer permanently from price fluctuations on the market. Such fluctuations shall be sustained by the project owners or clients. 2.3 Price Fluctuation Price fluctuation can generally be defined as the rise or fall of price of goods, materials and services on the markets. Price fluctuation can occur at any market, i.e at international markets, local market and/or at the labor market. The reasons for fluctuation are several, the major ones being [Stukhart 1982]: Government’s regulation on oil price, shortage or excess supply at market and increase or decrease in demand of a certain item. Government’s regulation on oil price : the price of oil governs the cost of materials since oil is related to production or transport of materials. When the government changes the price of oil, the price of materials also changes accordingly. Shortage or excess supply at market : the availability of certain item on market has an inverse relationship with the price of the same on the market. If an item is supplied in excess amount on the market, its price will reduce from its normal price, and inversely, if there is a shortage of the same item, then its price will rise.
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Study on the Effects of Unpredictable Price Fluctuation on the Capacity of Construction Contractors MSc Thesis, Construction Technology and Management 13 Increase or decrease in demand of a certain item : the price of a certain item has a direct relationship with the demand of that particular item. If the demand for certain item rises, then its price will also rise and vise versa.
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