A Unit Price Contract is an agreement where the contractor sets a fixed price for each unit of work, such as “per mile” or “per square meter”. This type of contract is often used for projects with flexible scopes, where the total amount of work may vary but the cost per unit remains constant.

How Unit Price Contracts Offer Flexibility

Unit price contracts are useful for projects where the quantity of work is uncertain but can be measured in discrete units. The client pays for each unit completed, allowing the project to scale up or down without renegotiating the contract. This type of contract provides transparency in pricing, but it also requires accurate tracking of the number of units completed.

Best Practices for Managing Unit Price Contracts

Contractors should carefully track all completed units to ensure accurate billing. Clear definitions of what constitutes a “unit” should be established at the outset to prevent misunderstandings. Regular updates on progress and costs should be provided to the client to maintain budget control. Related Terms: Bill of Quantities (BoQ), Cost-plus Contract

FAQs

When are unit price contracts most effective?

A: Unit price contracts are most effective for projects where the scope is uncertain, but the work can be broken down into measurable units, such as road construction or landscaping.

How does a unit price contract ensure cost transparency?

A: By setting a fixed price for each unit of work, both the client and contractor have a clear understanding of costs, which can be easily tracked and monitored as the project progresses.

Unit Price Contract Definition

How Unit Price Contracts Offer Flexibility

Best Practices for Managing Unit Price Contracts

FAQs

When are unit price contracts most effective?

How does a unit price contract ensure cost transparency?

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