Construction Contracting Basics – Unit Prices

{"version":"0.3.0","atoms":[],"cards":[],"markups":[["a",["href","https:\/\/www.aiacontracts.org\/contract-documents\/25131-general-conditions-of-the-contract-for-construction"]],["i"],["strong"]],"sections":[[1,"p",[[0,[],0,"August 26, 2022"]]],[1,"p",[[0,[],0,"Construction contracting is complex, especially when\nprices, costs, and quantities are to be determined later in time. When you\u2019re\nsubmitting a bid or negotiating a construction contract, one way to tackle\nthese \u201cunknowns\u201d is through unit prices. Unit prices are often used where the\nexact quantity of items required for a contractor\u2019s work has not been decided,\nor cannot be determined with precision, at the time a bid or proposal is\nsubmitted. But what exactly does \u201cunit price\u201d mean? "]]],[1,"p",[[0,[],0,"Unit prices are items, such as portions of work or\ncertain materials, for which a contractor provides separate prices on a\nper-unit basis, typically based on an anticipated quantity stated in the contract\ndocuments. In practice, the specifications usually describe the mechanism by\nwhich the actual quantity of units will be measured. "]]],[1,"p",[[0,[],0,"Though unit prices are regularly quoted based on\nanticipated quantities, the contractor is to be compensated based upon the\nactual quantities used in the work in accordance with the owner-contractor\nagreement. For example, where a contractor\u2019s bid is based on an estimate of 5\nunits of finish material, but the work actually requires 10 units, the\ncontractor may be entitled to payment for those 10 units used and incorporated\ninto the project. This scenario is addressed in Section 9.1.2 of the "],[0,[0],1,"A201\u00ae-2017,\nGeneral Conditions of the Contract for Construction"],[0,[],0,",\nwhich states:"]]],[1,"p",[[0,[1],0,"\u00a7 9.1.2"],[0,[],1," If unit\nprices are stated in the Contract Documents or subsequently agreed upon, and if\nquantities originally contemplated are materially changed so that application\nof such unit prices to the actual quantities causes substantial inequity to the\nOwner or Contractor, the applicable unit prices shall be equitably adjusted."]]],[1,"p",[[0,[],0,"Thus, where the actual quantities of the unit price\nitem vary from the estimated quantities, causing the owner or contractor\nsubstantial financial hardship, the unit price is subject to an equitable\nadjustment. To account for material\nprice escalation, parties may agree to a specific percentage variation\nin the anticipated quantity in their agreement, to avoid disputes over what\nconstitutes a \u201cmaterial change\u201d under this section of the A201."]]],[1,"p",[[0,[],0,"In all, unit prices allow owners to receive the\nbenefit of competitive pricing, even when a fixed price cannot be initially\ndetermined. They allow contractors to submit a bid or proposal for a project even\nthough significant \u201cunknowns\u201d about the work and associated costs exist. Unit\nprices are helpful for creating transparency between the contracting parties,\nas they can be easy to measure and record throughout the construction phase of the\nproject."]]],[1,"p",[[0,[1,2],2,"AIA Contract Documents has provided this\narticle for general informational purposes only. The information provided is\nnot legal opinion or legal advice and does not create an attorney-client\nrelationship of any kind. This article is also not intended to provide guidance\nas to how project parties should interpret their specific contracts or resolve\ncontract disputes, as those decisions will need to be made in consultation with\nlegal counsel, insurance counsel, and other professionals, and based upon a\nmultitude of factors. "]]]]}