2. Unit Price Contract – Unit price contracts typically emphasize the types of tasks being carried out in addition to the materials used on those tasks. This categorized style of pricing makes it easier for owners to evaluate each cost and allows builders to more accurately charge for each category. This type of construction contract is not typically used for major construction projects and is more often used for smaller jobs like repair or maintenance work. With unit price contracts, it’s easier to adjust prices when the scope of work changes.
|Pros of Unit Price Contracts||Cons of Unit Price Contracts|
Easy to evaluate costs of different categories Easy to adjust prices when scope changes
Difficult to estimate costs for large projects Final cost isn’t defined in the beginning
What are the different types of construction contracts?
Types of contracts, construction, include lump sum contracts, unit price contracts, cost-plus contracts, incentive contracts, guaranteed maximum price contracts, design-build contracts, and integrated project delivery contracts.3 min read 1. What Is a Construction Contract? 2.
Why is it important to know the different types of contracts?
The five main types of construction contracts are lump sum, time and materials, cost-plus, unit price, and guaranteed maximum price (GMP). Because there are so many different types of construction projects, each type of construction contract exists to satisfy the varying needs of all parties involved.
Which type of contract is best for your project?
4. Unit price contracts – Unit price contracts divide the total work required to complete a project into separate units. They are also known as measurement contracts, measure and pay contracts, or remeasurement contracts, The contractor provides the owner with price estimates for each unit of work, rather than an estimate for the project as a whole.
|Simplified invoicing: Owners can easily understand each cost that goes into the final price of the contract because the price of each unit is predetermined.||Difficult to predict total volume: Owners may pay more than expected if the amount of units needed to complete the project isn’t immediately known.|
|Consistent profit margin: Any extra work that’s needed is simply added on as another pre-priced unit, making it easier to manage change orders and other alterations to the scope of work.||Remeasurement can delay payment: The owner’s ability to compare the price of each unit with the total cost of the project can slow down payment.|
When it comes to unit price contracts, the majority of the risk lies with the owner because they must reimburse the cost of unexpected units that are added. However, the transparency they afford is a massive benefit to all parties involved. Best for: Projects with repetitive tasks without a clear estimate of the amount of work required.
Is a construction contract document a valid document?
2. Unit Price Construction Contract – The total price of the project in the unit price contract is based on the price of each item’s unit. The contractor is paid as per the rates of items specified in the bill of quantity. The risk is shared with the contractor and the owner.