Many projects experience cost overrun and thereby exceed initial contract amount. In Ethiopia,rnthe number of public building construction projects is increasing from time to time. However, itrnbecomes difficult to complete projects in the allocated cost and time. Taking into account thernscarce financial resources of the country, cost overrun is one of the major problems in Ethiopia.rnTherefore, this research was carried out to dig-out information on the factors that cause costrnoverrun during construction and their effects on public building construction projects in Ethiopia.rnQuestionnaire survey together with desk study was used to collect data on cost overrun. A total ofrn42 questionnaires from clients, consultants and contractors were collected and a desk study of 70rncompleted public building construction projects in Ethiopia were investigated and analyzed usingrnboth descriptive and inferential statistics. From the results it was found that 67 out of 70 publicrnbuilding construction projects suffered cost overrun. The rate of cost overrun ranges from arnminimum of 0% to the maximum of 126% of the contract amount for individual projects. In thisrnresearch it was found that the rate of cost overrun decreases with the increase in contract amount.rnRespondents identified 39 causes of cost overrun for Ethiopian case. The most important causesrnof cost overrun were found to be inflation or increase in the cost of construction materials, poorrnplanning and coordination, change orders due to enhancement required by clients, excess quantityrnduring construction.rnSpearman rank order correlation analysis was used to evaluate whether consensus of opinionsrnexists between groups of respondents (client versus consultant, client versus contractor andrnconsultant versus contractor). From the analysis of the results it was found that consensus ofrnopinion exists between respondents on the factors that cause cost overrun and on their rate ofrnoccurrence.rnThe most common effects of cost overrun identified by this research were delay, supplementaryrnagreement, adversarial relations among stakeholders, and budget shortfall of project owners. It isrnhoped that these findings will guide efforts to improve the performance of the constructionrnindustry in the future.rnKey words: cost overrun, cause, effect, rate, public buildings.