Construction industry in developing countries is reported to be insufficiently developed tornmeet the national development objectives and demands. Literatures show that constructionrnprojects are often subjected to long delays and increased costs. In these countries, thernpublic sector is the main employer of the sector and most formally constituted contractorsrnand consultants rely on the public sector for work. From the many other inter-relatedrnproblems, use of inappropriate and inequitable contract conditions is one of the problems ofrnthe industry for lack of any appreciable development.rnThe objective of this study is to identify drawbacks and shortcomings of the localrnconstruction conditions of contract adopted for public works in Ethiopia and to find outrnprovisions that have negative implication for the development of the sector. The studyrnfocuses on provisions related to finance, risk allocation, claim substantiation & disputernsettlement procedures, and the practice of contract administration.rnQuestionnaire and interview survey together with desk study provide the main strategy forrndata collection methods. Samples for the study have been randomly selected from publicrnemployers, domestic consultants, and domestic contractors who are actively participatingrnon public construction works. In this thesis, a descriptive statistical method has been usedrnfor the analysis of the data that provides a general overview of the results in that some kindrnof interpretations and discussions are made on the results.rnThe study has determined the potential contract provisions that hinder the development ofrnthe sector and the findings of the study reveal that: the financial provisions adopted forrnpublic works are not suitable and need much further improvement; the risk allocationrnbetween public employers and domestic contractors need to address price escalation andrnunforeseeable shortage of materials fairly; the claim substantiation & dispute settlementrnprocedure should adopt modern methods and practices; and contract administrationrnpractices & attitudes should be improved. This study further provides recommendations onrnhow to improve the existing situations.rnKey Words: Contract Problems, Financial Contract Provisions, Risk Allocation, Claims,rnDisputes, Contract Administration