Last edited 08 Nov 2020

Unit pricing contract

In the United States, a unit price contract is a commonly-used type of construction contract.

It may be entered into based on a price per unit, such as an hourly rate, specific item, amount of work, volume, and so on. This can allow a contract to be agreed based on approximate quantities, and then the actual payment determined by the number of units actually required. For example, a price might be given per kilometre of highway to be laid, based on an approximate estimate of the distance required, and then the actual payment calculated based on measurement of the final length of the highway that has been constructed.

This type of contract is suitable for big public works such as infrastructure projects which involve repetitive tasks and resources that are easily quantifiable. However, if a project involves multiple complex trades and activities, it is not particularly suitable as it can be difficult to accurately predict the quantities needed for each unit.

Unit pricing can benefit the client because it is quite easy to compare and benchmark prices, and it can allow an early start to works before their exact extent has been determined. It can be beneficial for the contractor because it largely removes the risk of inaccurate estimation of uncertain quantities.

This is similar to a measurement contract in the UK.

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