Construction
Unit Price Contract
A contract where the contractor is paid a fixed price per unit of work, with the final cost determined by the actual quantity of work performed.
What is a Unit Price Contract?
A unit price contract is a contract structure where the contractor bids a fixed price per unit of work (per cubic yard of concrete, per linear foot of pipe, per square yard of paving), and the total cost is determined by the actual quantities installed.
When to Use
- Work quantities are uncertain at the time of bidding
- Civil and infrastructure projects (roads, utilities, earthwork)
- Projects where significant quantities changes are expected
Advantages
- Fair pricing when quantities are uncertain
- Reduced risk for both parties
- Easy to adjust for actual conditions
Disadvantages
- Requires accurate quantity measurement
- Can incentivize over-measurement
- More administrative overhead
Key Considerations
- Unit prices must include all labor, materials, equipment, overhead, and profit
- The engineer's estimate of quantities is typically used as the baseline
Related Terms
- Lump Sum Contract
A contract where the contractor agrees to perform the entire scope of work for a fixed price, regardless of actual costs incurred.
- Cost Plus Contract
A contract where the owner pays the contractor for actual costs plus an agreed-upon fee for overhead and profit.
- Construction Contract
A legally binding agreement between the owner and the contractor that defines the scope, schedule, price, and terms of a construction project.
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