In a unit price contract, the bid lists items with estimated quantities, and the contractor quotes a price per unit for each. The contract value is just an estimate. Payment is based on measured quantities actually installed. Heavy civil, highway, utility and site work use unit pricing heavily because quantities like rock excavation or unsuitable soil removal aren’t knowable until the work is underway.
Contracts often include a variation in quantities clause: if an item’s actual quantity moves more than a set percentage from the estimate (15% to 25% is common, and the federal clause uses 15%), either party can ask to reprice the units outside that band, since fixed costs spread over a very different quantity no longer fit the original price.
Why it matters
The owner carries quantity risk, and the contractor carries unit cost risk. Job cost has to track installed quantities by bid item, not just dollars, or you can’t bill accurately or see whether a unit is making or losing money.
Worked example
Illustrative: a bid item for rock excavation is estimated at 2,000 CY at $85/CY, so $170,000. Actual measured quantity is 2,600 CY, a 30% overrun. Under a 15% variation clause, the first 2,300 CY (115%) are paid at $85, so $195,500, and the remaining 300 CY may be repriced.
Common mistakes
- Unbalanced bids that load early items, which owners may reject.
- Tracking cost by dollars without installed quantities.
- Weak measurement records that the owner’s inspector disputes.
- Missing the window to request repricing after a large overrun.
How os.construction handles it
We’re building job cost that can track quantities alongside dollars by cost code, so unit billing and unit cost come from the same field data. It’s in development.