Dec 27, 2021 | Kinjal Shah
A construction project is a collection of complex processes. one among the various ways in which construction contracts might vary is the method used to determine the price for the work. Among different methods, the most common method used is Unit Price Contract.
Unit pricing is a unique way of comparing similar products to find the best value. It breaks down and prices of an entire project into quantifiable “units,” rather than determining a fixed project price.
Costs included in Unit Price Contract
Labor costs
Material costs
Overhead costs
Profit
Taxes
Permit and Inspection Costs
When to use Unit Price Contract
It can be used where projects are repetitive or the price is heavily dependent on materials
Commonly used when a design is incomplete and execution is to be done
Can be helpful in complex projects that involve blending activities between different trades or materials
Use when total quantity is not clear like public construction projects
Advantages
Unit price contracts need a lot of work from consultants and contractors however will be beneficial in several ways throughout the bidding part and the construction of the project. Some of its advantages are,
Great for comparing bids
Additions or Deletions are easy and fair
Increased Transparency and Fairness
Progress Billing and Invoice Certification
Conclusion: A unit price contract estimates costs based on quantifiable, predetermined units of work. A unit price includes costs of labor, material, equipment, and overhead, with profit also built-in.