Construction firms, being project based organizations, have to develop their projectrnmanagement capacity in order to accomplish firm and project objectives successfully. Coparern(1990) stated that, the number of business failures in the construction industry is high and thernhigh failure rate is not because contractors do not know the techniques of construction butrnrather they have not developed their management skills. Among such skills one is the projectrncost management.rnThis research work presents several issues related to current project cost managementrnpractices of national contractors. The practice of 34 general and building contractors isrninvestigated via questionnaires. Existing practices related with estimating and tendering,rnbudgeting and cost controlling were assessed in view of identifying shortcomings andrnlimitations associated with each functions.rnThe research findings indicated that the success rate of tender offers is below 50% for 80% ofrnthe surveyed contractors and 67% among these, have a success rate less than 25%. Thernhighest ranking responsible factor is tough competition, which is also aggravated by absencernor lack of bidding strategy by the contractors. The results moreover indicated that most of thernsurveyed contractors are unable to obtain the profit they anticipate from their projects. 86% ofrnthe contractors have obtained below 75% of the amount they expected from most of thernprojects they have undertaken so far. Among these, 48% obtained less than 50% of thernanticipated amount. The major contributing factors, in the order of their influence are pricernescalation, delays caused by owners and/or consultants, inadequate financial planningrnpractices, lack of cost controlling system and inaccuracy of the estimates prepared during therntendering stage.rnAccording to the results of the research, factors contributing to the inaccuracy of costrnestimates are unfamiliarity with different estimating methods, lack of up to date estimatingrnmanuals or standards on resources consumptions and productivity, inadequate search forrninformation on project specific and contextual cost and non cost items, improper estimation ofrnoverhead costs, failures to evaluate and incorporate and/or difficulties in forecasting andrnxrnquantifying risk allowances and inadequate assessment of factors while determining mark uprnamount or profit margin.rnBill of quantity/ admeasurements and lump sum contracts types which are different versionsrnof the fixed price contract, which place the economic risks on contractors, are the most widelyrnused contract types in Ethiopia. The standard or traditional estimating method is the solernmethod used by the contractors for pricing construction contracts. None of the contractorsrnadapt recent estimating techniques, such as the range estimating and parametric estimatingrnmethods, which consider risks and uncertainties, primarily or in addition to the standardrnmethod.rnLack of standard estimating manuals by the construction industry, and absence of a systemrnwhich maintain records of actual on-site costs and productivities with in the contractors arernthe major causes for errors in estimating direct costs. Regarding overhead costs, even thoughrnthe average ratio of over head costs to the total direct costs is as high as 25% majority of therncontractors do not identify and estimate them properly. 52% of the contractors add onrnallowance arbitrarily to account for these costs. Only 38% of the contractors consider risksrnduring tender pricing. Qualitative items like project type, size, complexity, contract period,rnstatuary regulations and so on, which can affect the quality and accuracy of estimatesrnnegatively, receive little attention from the contractors, during estimation and pricing.rnThe results revealed that contractorsâ€™ cost controlling process is not integrated with the budgetrnprepared for the project. Budgetary control is not popular among the contractors. The processrnfocuses mainly on revealing the amount of profit and fails to indicate/identify activities orrnoperations which are being carried out uneconomically together with the underlying reasons.rnMoreover, it is not carried out in a way which provides feedback to the estimating process.rnThe survey results further revealed the very limited application of project works classificationrn/breakdown and works coding system for facilitating the cost management process.rnKey words: Project cost management, competitive tendering, bidding strategy, direct andrnindirect costs, overhead costs, mark-up, estimating methods, budget, project works breakdownrnand coding system, cost controlling.