Definition:
A contract where payment is based on agreed-upon unit prices for specific work items, with the total cost determined by the actual quantities completed.
Key Components:
- Itemized Pricing: List of tasks or materials with corresponding unit prices.
- Quantity Measurement: Accurate tracking of the quantities of work performed.
- Payment Calculation: Multiplying unit prices by the actual quantities to determine total cost.
Use Cases/Industries:
- Civil Engineering Projects: Road construction where quantities may vary.
- Utility Installations: Laying pipelines or cables with uncertain lengths.
Advantages:
- Flexibility: Adjusts to variations in quantities without renegotiating unit prices.
- Simplified Bidding: Contractors can price individual items without estimating total quantities.
Challenges:
- Quantity Risk: Owners may face higher costs if actual quantities exceed estimates.
- Measurement Disputes: Disagreements can arise over the accurate measurement of work completed.
Related Terms:
Rate Contract, Bill of Quantities Contract
Example:
A municipality contracts a company to pave streets at $50 per square yard, with the total payment based on the actual area paved.
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Synonyms:
Measurement Contract, Schedule of Rates Contract
