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Short note: Unit price contract and disadvantages

Short answer

A unit price contract pays a fixed rate per unit of measured work, such as per cubic metre of concrete, so total payment equals unit price times actual quantity. Disadvantages are uncertain final cost, heavy measurement and supervision, unbalanced bidding, quantity-error disputes, and little incentive to reduce quantities.

Write a short note on unit price contract and its disadvantages.

A unit price contract is a contract in which the contractor is paid a fixed price per unit of work (per m3^3 of concrete, per m of pipe, per kg of steel), and the total payment is the unit price multiplied by the actual measured quantity. It is the same as the item-rate contract and is common for roads, earthwork, canals and building works in Nepal.

Features

The client gives estimated quantities in a BOQ; the bidders quote unit prices; and payment follows measurement of the work as done.

Disadvantages

  1. The final cost is uncertain, and may exceed the budget if quantities increase.
  2. The work of measurement, checking and billing is large, and calls for supervision.
  3. Unbalanced bids: the contractor may load high prices on the early or underestimated items.
  4. Quantity errors in the BOQ lead to disputes and claims for rate revision.
  5. The contractor has little incentive to reduce the quantity or to save the client's cost.
  6. The contractor may favour the items with high profit, and neglect the others.
  7. The comparison of bids can be misleading when quantities are uncertain.

✓ Answer checked by Claude Opus 5.5 (high effort)

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