Contract documents

October 26, 2023

In construction contracts, “unit prices” refer to the cost per unit of a particular item that is to be provided as part of the contractor’s work. Unit prices are often specified in the contract to provide standardization when accounting and estimating for various materials during construction. Here are some key points to understand about unit prices:

Standardized Measurement: Unit prices are typically expressed in terms of a standard unit of measurement, such as per square foot, per linear foot, per cubic yard, or per piece.

Flexibility: Unit prices provide flexibility for contractors because they allow for adjustments based on the actual quantities needed during construction. This can be helpful when quantities are unknown or undetermined at the time of entering the contract.

Change Orders: Unit prices are particularly useful when change orders are issued during a project. If additional work is required or the quantity of a particular item changes, the contract can be adjusted based on the unit prices in the contract.

Payment Calculation: When work is performed, the contractor measures the actual quantity of a particular item used on the project and calculates payment by multiplying the quantity by the unit price. Though unit prices are regularly quoted based on anticipated quantities, the contractor is to be compensated based upon the actual quantities used during the work, even when that price may differ from the unit price specific in the contract. A201^®-2017, General Conditions of the Contract for Construction, Section 9.1.2 addresses this situation, as follows:

9.1.2 If unit prices are stated in the Contract Documents or subsequently agreed upon, and if quantities originally contemplated are materially changed so that application of such unit prices to the actual quantities causes substantial inequity to the Owner or Contractor, the applicable unit prices shall be equitably adjusted.

Under this section of A201, where the actual quantities of unit price items vary from the estimated quantities, causing the owner or contractor substantial financial hardship, the unit price may be equitably adjusted. For material price escalation, parties may agree to a specific percentage variation in the anticipated quantity of unit price item in order to avoid disputes over what constitutes a “material change” under this section of the A201.

Overall, unit prices are a useful tool for parties to use when contracting for construction services. Parties should ensure that unit prices are well-defined and that the unit of measurement is clear to avoid disputes and misunderstandings.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.