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Unit Price Agreement Meaning

Using a unit price contract, owners can easily verify the price, calculate the contractor for goods and services. Similarly, contractors can easily monitor their property costs and variable costs associated with a given project. Sometimes a unit price contract for certain parts of the project is combined with a lump sum contract or mixed with other types of contracts. A bidder may only be asked to indicate flat prices for certain clearly defined items, such as the mobilization and demobilization of dredging facilities. On the other hand, complex projects that mix activities between different trades or materials may not be ideal for use with unit price contracts. Even if a discounted contract is not ideal for an entire project, it can still be an excellent tool for contractors and owners, which can be used for parts of a project that can be easily quantified. Many variables in construction projects are therefore directly incorporated into a unit price contract. If more work is required to do work than was initially estimated, the contractor or supplier`s profit margin (%) Should remain the same — the work supplement is included in the price as more units. That`s the fun part! All costs associated with completing this work unit can be included in the price. This includes not only the cost of materials, but also other less obvious ones. If you need more materials, that`s fine! It`s right there in the cost of the unit. Conversely, the percentage of profits remains the same for the contractor when less work is required, but the total cost is lower than the original estimate. A unit price contract makes a lot of sense if the work can easily be divided into identifiable blocks (units).

Therefore, if the projects are repeated or if the price is highly dependent on the materials and the final amount of work is not visible from the outset, the use of a unit price contract is very sensible. A unit contract is based on estimated quantities of materials for the project and their unit prices. The final price of the project depends on the quantities required to carry out the work. This means that before work and contract, the different materials are known, but the quantities cannot be identified. In a single-rate contract, the contractor offers a price for each material during the tender. The list of unit games per item can make it easier to calculate any changes or changes and avoid risks. In reality, however, this can be likened to a flat price. This is particularly the case when the proponent asks the contractor to accept the risk of a proper assessment of quantities, rather than allowing a reassessment of quantities in light of what happens on site during the work. Unit price contracts offer reciprocal benefits to the owner and contractor. If the owner has chosen a „good“ advisor, he can count on the collection of quantities and accurate estimates of the schedule.

With salaries set in advance, construction can begin before full planning is completed.