Cost is among the three project parameters and a project cost overrun is a situation when thernactual project cost exceeded the planned amount. There are many studies conducted to identifyrnthe causes of cost overrun. The purpose of this study is to identify factors causing project costrnoverrun in construction sector in case of Mekasha Ambaw building contractor. The study used arndescriptive research type and data collection technique used is quantitative. Both primary andrnsecondary data were used, primary data through structured an open ended and closed endedrnLikert type questionnaire and secondary data from reports of previous studies and literatures.rnThe research adopted a purposive sampling technique and the sample size of 32 employees wasrntaken to distribute the questionnaire. The data obtained from the questionnaire was analyzed byrncomputing their frequency, severity and importance indexes by using SPSS version 20. Thernfindings from the analysis were ranked based on their level of importance index and the fivernfactors which have high level of importance index are unpredictable weather condition, lack ofrncoordination with sub-contractors, lack of experience of technical consultants, the rise of pricernof materials and complexity of the construction project. The factors which have high frequencyrnindex are poor quality management, the rise of price of materials, unpredictable weatherrncondition, lack of coordination with sub-contractors, lack of experience of technical consultants,rnlack of training program and poor planning. Factors with high severity are wrong costrnestimation technique, lack of training program, lack of coordination, lack of experience ofrntechnical consultants, lack of coordination with sub-contractors, unpredictable weatherrncondition, complexity of the construction project, poor communication with sub-contractors andrndamage of materials. Finally based on these findings the researcher concluded that, therncompanyâ€™s most significant factors causing the project cost overrun comes from the constructionrnphase of the project andthe three measurements, frequency, severity and importance are relatedrnin that factors which have high frequency and severity indexes have high importance index, sincernimportance index is the product of the two. Finally it is concluded that, factors which arernsignificant to the companyâ€™s cost overrun are interrelated and had an impact on the project timernthat the contractor cannot accomplish the project work within a specified time and therncontractor is obliged to incur additional cost beyond the initial contract amount due to the risernof price of materials. In the recommendation part of the research, it is recommended to therncompany that to employ experienced technical consultants in order to minimize the cost incurredrnto rework of unsatisfactory work which is a result of poor quality management, to hire a personrnwho had better knowledge in the area of cost estimationand provide adequatetraining programrnto improve the capacity and productivity of the labor force, to focus on factors which can bernminimized in order to minimize the effects of cost overrun factors that are beyond the companyâ€™srncontrol, to plan properly before the beginning of any activity and for the project manager to bernwise in his/her leadership style in order to create good coordination and communication withrnsub-contractors and the employeesenvolved.Finally the government is recommended to solve thernproblem of water and electricity fluctuations to minimize the problem of cost overrun.