Contract drafting can set the tone for your whole project. Knowing more about the kind of contract you’re signing is crucial to pricing and delivering the project. With unit pricing contracts, one mistake with the contract could make trouble for your business because of their repetitive nature. Jobs such as painting, installing flooring, and paving roads are an ideal fit for this kind of contract.
To help you get a better understanding, a Little Rock construction lawyer explains some key points of unit pricing contracts in part one of this two-part article.
Unit Pricing Contracts
A unit pricing contract is especially useful for repetitive projects using few materials. This type of contract is not generally used for a whole project, like a new commercial building, but for smaller sections of a project. Many subcontractors find themselves using these contracts for their contribution to larger projects.
The unit price is usually set during bidding and based on the necessary material quantity costs. To get the total cost of the contract, unit prices are multiplied by the number of units installed. That means that if the unit price was incorrectly calculated the price discrepancy would compound with the installation of each unit. Accurate estimation of material prices is key to making sure the contract is worth your while.
A contractor painting apartment buildings could make use of a unit pricing contract. The job would involve painting a number of buildings using a finite number of materials and would be measured by the square foot. The established cost of work per building would then be multiplied by the number of buildings that need to be painted.
Who Uses Unit Pricing Contracts?
Most often, unit pricing contracts are utilized by federal agencies on large projects like road construction. Clients who have large projects broken down into smaller components are more likely to use this type of contract.
Read part two of this article to learn about the benefits and downsides of unit pricing contracts.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.