Infrastructure projects, such as road constructions, are one of the most important projects inrnEthiopia. Growth in this sector is critical for growth in national income as it is among thernlargest sectors that generates employment within the country as well as a key driver forrneconomic development of Ethiopia. Like many other developing countries, Ethiopia is alsornfacing critical project management related problems among which cost overrun is quiternprominent. The assessment of the accomplishment of the 12 years Road Sector DevelopmentrnProgram (RSDP I, II and part of RSDP III) revealed this. There are several factors that arerncontributing to these cost overruns. Hence, identification and analysis of these factors forrneffective cost control in Ethiopian road infrastructure project needs to be done in order tornbetter support the economic development.rnAccordingly, this research attempts to identify the extent of cost overrun, the major riskrnfactors leading to cost overrun and its consequential effects in the Ethiopian Federal roadrnconstruction sector; which can serve as the way forward for future work in coping with thesernoverruns. A thorough literature review and desk study was done, through which a number ofrncost overrun risk factors were identified in global and local construction industry scenarios.rnTo obtain expert opinions from the sector, in total fifty four (54) factors and 16 possiblerneffects were identified and made part of the survey questionnaire and the survey wasrnconducted with stakeholders from contractors, client, construction professionals andrnconsultants. In addition other questions which enable to achieve the objectives of the researchrnwere developed; and the research design was based on exploratory survey, desk study, andrndescriptive approaches for open ended questions.rnThe result of the desk study indicated that out of 30 upgrading and rehabilitation roadrnconstruction projects investigated, 24 projects (80%) suffered cost overrun in their execution.rnThe average rate of cost overrun in these projects was 26.95% of the contract amount. Andrn100% of the respondents to the questionnaire have recognized cost overrun as one of thernmajor problems in Federal road construction projects.rnUnexpected inflation/ material price escalation, delays on completion time, scope changes,rnunstable cost of manufactured materials, inadequate site investigation and right of wayrnproblems (access to site and quarry) are identified as major factors leading to cost overrun inrnRisk Factors Leading to Cost Overrun in Ethiopian Federal Road Construction Projects & its ConsequencesrnEthiopian Federal road construction projects. Findings revealed that both internal and externalrnaspects of risk factors contribute to cost overruns in local road construction projects.rnConsultants and clients/employers were identified to be more responsible in initiating most ofrnthe factors. The study also identified: reduction in planned increase of road network, damagernprofessional relations, inability to secure project finance/securing it at higher costs, loss ofrnclientsâ€™ confidence in consultants, for professionals inability to deliver value to clients andrndecreased rate of national growth as a major effects and client as the most affected contractingrnparty as a result of effects of cost overrun.rnResults indicated that the majority of cost overrun risk factors (65%) lie in the mediumrnseverity impact range, indicating that major attention should be paid to these factors as theyrncollectively cause considerable increase in the cost of the project initially estimated. It wasrnalso found that the cost estimating practices in local road construction industry varies greatlyrnand needs standardization and proper database; this shows that the estimating practice itself isrncontributory to the problem of cost overrun.rnMajor recommendations include: Establish consistent guidelines for price escalationrncomputation and forecasting, set adequate contract durationâ”€ providing for potential delays,rnstabilizing cost of materials, providing appropriate contingency allowances, more involvedrncost estimation processes, careful project planning, proper documentation of cost escalationrntrends in the sector and the country for better knowledge transfer, standardization ofrnestimating practices among stakeholders and institutional capacity building.