In today's Ethiopian construction climate, there is increasing pressure to improve project performance in terms of completing projects faster, improving quality and reduce the cost of administering their construction programs. Agencies like Addis Ababa City Roads Authority (AACRA) shall have clear contracting strategy which basically comprises of three components; to have appropriate project delivery system (PDS), procurement procedure and payment provision to respond and meet the demands such as best-value performance to assure project quality and enhance performance. In Addis Ababa City, road projects were primarily built through a traditional Design-Bid-Build (DBB) delivery approach in which unit price construction contracts are awarded to the lowest bidder. While the traditional project delivery approach has served the City well, it has also received criticisms stemming from cost and time overruns and quality problems. Contract administration and entire relationship among parties has been ended up with litigious relationships. Innovative and alternative project delivery system for contractor selection process factors which along with price, seek to improve project performance or achieve other specific project goals is particularly important to implement road construction projects for Metro- Politian Cities like Addis Ababa. Therefore, the objective of this paper is to analyze practices and challenges of existing traditional project delivery method and recommend an alternative and innovative project delivery system for Addis Abba City Road Projects. The research paper includes extensive literature review for unique characteristics, advantage and disadvantage of the traditional DBB project delivery method, and other innovative and alternative project delivery methods. Samples from 21 projects which were built in the last 5 years and whose progress is more than 70% are taken for analysis to examine practice and challenges of existing delivery method and recommend alternative PDS. v Accordingly, questionnaire was designed to assess practices and challenges of AACRA based on important parameters distributed for client, contractors and consultant’s staff. Respondents were also requested to choose convenient PDS for particular project nature. In addition, case study was conducted also on six projects which were implemented through DBB delivery method. The finding of the research both from questionnaire and case study revealed that projects implemented by AACRA through traditional project delivery method have serious cost and time overrun and quality problems. The results of analysis have showed that variation orders were issued due design errors and scope changes. Pre- construction management including risk management practice and overall integration with Sub city administration and utility providing agencies is poor in AACRA. There is no clear decision matrix to suggest PDS which best fits of project goals for particular nature. In line with this, the researcher has learnt that contractors and consultant performance management system and clear accountability framework and system is not being practiced to avoid week performing designers, supervisors and contractors during the tender process. The result of this research is helpful for AACRA to establish PDS guideline to manage all possible risks better before project commencement for ease of successful completion of projects.