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Item rate contract

Short answer

An item rate contract pays the contractor's quoted rate for each BOQ item multiplied by the actual measured quantity. The BOQ quantities are estimates, so the final price changes with measurement. It suits uncertain quantities and is common in Nepalese public works, but needs much measurement and risks unbalanced bidding.

Explain the item rate contract.

An item rate contract (unit price contract) is one in which the contractor quotes a rate for each item of work listed in the Bill of Quantities (BOQ), and payment is made on the actual measured quantity of each item multiplied by its rate. The BOQ quantity is an estimate; the total contract price is the sum of (estimated quantity x rate) and may change after the final measurement.

Features

  • A detailed BOQ with the items, units and estimated quantities is given by the client; the bidder fills in the rates and amounts.
  • Payment: running bills by measured work; the final bill by the final measurement.
  • Variations in quantity are paid at the same rates (with limits, often +/- 15-25%, beyond which rates are adjusted).
  • Bids are compared on the total of the quoted amounts.

Merits

Fair payment for the real quantity; suits works where quantities are uncertain (earthwork, roads, foundations); variations are easy; bids are easily compared; wide use in public works in Nepal.

Demerits

Final cost is not known at the start; it needs a lot of measurement and checking; risk of unbalanced bidding (very high rates for early items and very low for others); it requires a complete BOQ and good supervision.

✓ Answer checked by Claude Opus 5.5 (high effort)

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