Despite their contribution to the economy of the country, Micro and Small-Scale Contractors (MSSCs) are faced with several problems bordering on poor performance and criticized for having limited knowledge in the application and use of basic Performance Measurement Systems (PMSs) which hinders their growth, profit and competitiveness. Performance Measurement (PM) is crucial to MSSCs in identifying weakness, clarifying objectives and strategies, improve management process, and identify the need to monitor and understand their performance. Whereas, many theories on PM have been developed for organization over the past three decades, few have been tailored to MSSCs, and very few companies systematically measure their performance in a holistic way. Thus, this study aims at formulating suitable PM model for MSSCs in the Debre Markos construction industry. A conceptual model was formulated based on extensive literature review and was validated using qualitative research approach. A questionnaire survey was conducted as a medium for sourcing primary data on randomly selected MSSCs in Debre Markos town located in Eastern Gojjam zone; and analyzed using descriptive through MSExcel and SPSS tool. The sample size was 66, where 64 responded to the survey representing 97% of sample size. Relative importance index was used to determine the importance level of performance dimension. Moreover, qualitative data was collected using structured open-ended interview on purposively selected ten (10) owners-managers of MSSCs to validate the performance determinants; and a focus group discussion conducted with selected six experts to validate the resulting conceptual model. The result revealed that most MSSCs measure their performance only using financial measures. MSSCs lack effective and efficient methods for measuring their performance; they don‘t understand the need to measure their performance and the potential benefits that come from this measurement. Findings also revealed the use of established PMS is rather low in MSSCs firms and no one adopts well known PM models in their business. Research results show that an effective PMS for MSSCs can help to formulate right strategies that can mainly manage the uncertainty of the external environment in their development. Importantly, a PMS can be constructed which aligns with the MSSCs‘ day to day operations. PMS can involve a balanced, flexible, clear and simple PM model that can be adapted ardently to suit the changes in the PMS. Also the model helps MSSCs to identify customer needs, measure and manage customer satisfaction. A performance measurement model that meets the above requirements can be built based on the structure of businesses excellence models. The performance indicators shall be incorporated in the PMS to help design the PM model. The model identified involves measuring both performance determinants and results. The performance determinants, including both internal (such as: leadership, technical competency, capability, resources, strategies, internal process, work culture, innovation and learning, and information and analysis) and external determinants (external environment). The performance results` dimension shall include profitability, customer, employee and community satisfaction and delivering quality services/products to the end user to meet the needs and requirements and reflect competitive advantage.