What considerations should you make when setting your unit rates?

By AIA Contract Documents

March 31, 2024

AIA Contract Documents has written various articles on unit prices, which are linked below. This article will provide some considerations to make when setting a unit rate to ensure accuracy, competitiveness, and profitability. Beyond the typical considerations, such as labor, equipment, and material costs, overhead, and profit. The following are some other factors you may want to consider:

Market Rates. Research current market rates for similar projects in the same geographic area. Understanding what competitors are charging can help ensure that your rates are competitive.

Client Relationship. Consider the long-term relationship with the client and the potential for future work. Adjusting the unit rate to accommodate repeat business or referrals may be beneficial.

Production Rate. Assess the efficiency and productivity of your workforce, equipment, and processes. Understand how your resources will be allocated and how your equipment will be utilized. If you have partial resource allocations or equipment utilization, consider sequencing the work to capitalize on the most efficient use of your resources and equipment to ensure your unit rate is competitive.

Project Complexity. Assess the complexity of the project, including any unique construction methods or specialized skills required. Similarly, evaluate potential risks associated with the project, such as weather delays, supply chain disruptions, or regulatory requirements. You may want to consider including a detailed description of services, exclusions and inclusions, conditions and assumptions, and any rate adjustment mechanisms if certain conditions change during the course of the project. By incorporating these elements into the contract, you can promote transparency, reduce the risk of misunderstandings, and foster a positive relationships between you and your client.

By carefully considering these factors, you can develop a unit rate that is both competitive in the market and sufficiently profitable for your business.

Other Resources for Unit Rate Pricing

Construction Contracting Basics – Unit Prices

Four Things You Should Know About Unit Price Contracts

What are Unit Price Items in Construction Contracts?

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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.